CrowdBnk’s attempt to bridge the crowdfunding divide

Ayan Mitra, founder of crowdfunding business CrowdBnk, tells GrowthBusiness about the platform's ethos and why he thinks social investing could be the solution to start-up and growth company finance.

What is CrowdBnk, and how does it work?

CrowdBnk is essentially a crowdfunding platform that allows anyone to raise funding for their ideas or business in return for rewards or equity in the company.

Anyone in the UK (as long as they are over 18) can submit their idea to raise funds to start or grow their idea whether they are a charity, a community group or a business.

We view the market differently to others. There are two sorts of players at the moment:  donation and rewards based platforms like Kickstarter; and the equity-based platforms like Crowdcube and Seedrs. 

Existing equity players such as Crowdcube and Seedrs have largely extended what is the traditional angel market and digitized it – essentially talking to the same demographic (professional investors), who were looking for deals elsewhere, and making it easier for them to find the deals. 

At the other end Kickstarter is centred around emotive support for projects that a particular person is passionate about. But it has no structural accountability for any money that flows through its system. 

We believe that the true power of crowdfunding is somewhere in the middle. So our target demographic is similar to people who support projects through Kickstarter but opens them up to any sort of idea looking for funding, as opposed to the professional investors. But we wanted to give them the added accountability and structure of an investment platform with the trust and transparency of appropriate regulatory approval.

We feel that this will benefit both the investors and the entrepreneurs. For the entrepreneurs they can find supporters for their idea, get feedback through a rewards raise and then come back to the same supporter base and raise an equity investment round on the same platform. For the investors they can support ideas they are passionate about but can then benefit if the idea becomes a business by owning shares. All of this is done through an accountable and regulated framework (for equity).

How did you come up with the idea?

Following 15 years in the corporate world, designing and delivering large consumer platforms for banks (First Direct), retailers (Marks & Spencer) and telco companies (Orange), I was looking for a new challenge.  I thought an MBA would scratch this itch but it was clear I needed to build something bigger.  

You can read my egg story at CrowdBnk: How it began. In short, in spite of doing my homework, I didn’t find any investors willing to fund me but I had a community of like-minded individuals who shared my vision who had no structured way to support me.

Every great idea deserves a chance and great ideas can come from anywhere. Everyone deserves to play the game. It’s no longer the realm of the gatekeepers. We just need to de-mystify the processes around fundraising, what it entails to incorporate a company, investor agreement, investor relations, tax etc. – things that currently are perceived to be complex, expensive to understand and things that put people off.

We need to ensure there is a trusted and transparent ecosystem where adequate checks protect the interests of both the investor and the entrepreneur so that they can concentrate on execution and engagement rather than lawyers and accountants and knocking on doors for funds. We need a system where any idea is entertained regardless of who you know and how much money you have and indeed even if your idea and motivation isn’t about just making money. CrowdBnk aims to provide all these things for the aspiring and hidden entrepreneurs in the UK.

What differentiates CrowdBnk from other platforms?

In our view an idea should be judged on its merits and the passion it draws from supporters. An idea should not be limited or judged by just financials such as ROI. An idea should be about engagement, value creation and a fair distribution of the value to the people who take the risk, even if their contribution is small. All of this has been proved by the growth of rewards based crowdfunding platforms such as KickStarter.

We believe that equity is a better tool to reflect the relationship between supporters and entrepreneurs. But currently equity investing is the domain of the high net worth individuals and the sophisticated investors, not the person on the street who is making rewards based crowdfunding successful.

So we want to build a brand that is open to everyone to participate in and have built a platform that matches this aspiration with the capability of handling regulatory and governance requirements to deal with anyone (retail investors in FSA parlance). 

To our knowledge we are the only player currently that offers entrepreneurs an opportunity to pitch to the retail investor without needing regulatory changes. We have appropriate permissions in place to do so. We are also the only player that allows supporters to top up their CrowdBnk account using their credit or debit cards and then allocate money to a rewards project, charitable donation or an equity investment.

We want to have the feel and ease of use of KickStarter but the regulatory structure and governance that a FSA regulated firm has, and still be affordable to anyone where they don’t have to pay before they pitch.

More on crowdfunding:

Why do you think crowdfunding can be so powerful?

I think there are two key reasons for this. One is that there is a general malaise about how banking and financial institutions work and how businesses are funded. 

Secondly, I think the next generation of people who are growing up with social media and internet behave slightly differently in that they do care where their money is put and how it is used. So there is a concept of democratising finance, which has not happened so far as it has long been held by intermediary financial institutions.

Crowdfunding is the next evolution for the way finance works, in terms of giving accountability and transparency to the marketplace.

Is there a kind of business which you think CrowdBnk will be suited to?

There is no doubt that consumer facing products and services lend themselves very well to crowdfunding platforms in general as not only do you get supporters and money, you get advocates and customers. So you get validation for you idea at an early stage for a low cost. 

The same applies to creative arts, music, films, and tech ideas.

You would think B2B businesses and R&D companies aren’t as well suited simply because a consumer may not see an immediate benefit unless they are an investor. But our deal pipeline is a healthy mix of all kinds of businesses and charity raises which highlights the fact every idea has its own crowd as long as you can find it.

Apart from what you hope will be a rise of crowdfunding what else is in store for the future of growth company financing?

Growth company financing is a topic which has been heavily debated and discussed in terms of how to do it best. There has been a lot of focus from the government in terms of the funds it is setting up to help.

There are clear signals from the government that they are making capital available for growth companies. The challenge lies in the fact that searching for viable companies that meet the risk appetite of the people making the decisions is difficult. And more often than not, the risk appetite and the agenda of the gatekeepers do not match the general industry need. Initiatives like SEIS and EIS are helping but more could be done with regards to communicating the benefits to the public.

Proportional regulation will be important to the future of growth financing to ensure that all the valid alternative financing markets, and by that I include peer-to-peer lending, crowdfunding and factoring, can operate within an accountable structure but controls tailored to the risk they carry.

Hunter Ruthven

Hunter Ruthven

Hunter was the Editor for from 2012 to 2014, before moving on to Caspian Media Ltd to be Editor of Real Business.

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