Crowdfunding Grows In Popularity Amongst Entrepreneurs But Concerns About Protection Persist

Irwin Mitchell Hosts Alternative Funding Event At Made Festival

25.09.2014

David Shirt, Press Officer | 0161 838 3094

One third of entrepreneurs claim that crowdfunding will be the most likely option for raising finance within their business in the next 12 months - according to a survey by law firm Irwin Mitchell.

The national law firm conducted the survey at its MADE Festival fringe event this morning analysing the benefits of alternative funding. The panel debate, which took place at the Memorial Hall at Sheffield City Hall, was attended by over 75 entrepreneurs and business leaders.

During the session, attendees debated the benefits and potential pitfalls of alternative forms of funding such as angel investment, P2P lending and crowdfunding and shared first hand experiences of using it within their business.

Following the debate, 32% of attendees said that they were likely to use crowdfunding to raise money for their business in the next 12 months.

This compares to 17% for P2P lending and 13% for angel investment. Thirty eight percent said they would use more traditional means such as bank loans, grant funding or funding from VCs.

Over three quarters (77%) said that they would consider investing through an equity crowdfundng site. Seventy three percent said that they would use a P2P lending portal and 69% said they would invest as an angel investor.

Central to the growing popularity of alternative forms of finance is accessibility. According to the survey, sixty three percent said the growth of crowdfunding and P2P lending stems from issues and difficulties in accessing finance elsewhere. Twenty nine percent said flexibility was the key to its success.

Despite crowdfunding appearing to be moving into the mainstream, almost one third (31%) agreed with its ‘wild west’ reputation and said they felt in certain situations it offered little protection to investors.

When asked specifically about angel investment, the vast majority said they believe angel investors have an appropriate amount of control over the business they invest in.

Andrea Cropley, Corporate Partner at Irwin Mitchell, said:

Expert Opinion
It was a very interesting debate and certainly illuminating in terms of understanding in more detail the perceptions around alternative funding and the appetite amongst entrepreneurs for using it in the future.

“What was clear from the discussion was that although many entrepreneurs have not yet used alternative forms of funding, it looks like many are happy to do so and will in the next year.

“Although there are many misconceptions about some forms of funding, it is clear that there are concerns about the protection that it provides businesses. As with all finance options, whether mainstream or less traditional, it is vital that businesses explore all options and take the appropriate advice from specialists.”
Andrea Cropley, Partner

In addition to the live voting, the event included a panel discussion which included Mike Royston from Crowdcube and David Belford, an angel investor and Chairman at Konnectiv Technology Ltd. They were joined by Scott Haughton from Envestors,  Rob Passmore, the founder of online retailer Jewel Street, Chris Sellars, who is Director at Mackenzie Spencer and Nick Moules from the Rebuilding Society.