Member Article

New 'pre-crowd' investment platform to help firms reach the pivotal 30% funding mark

Investment firm, Crowdfinders, has launched a new ‘pre-crowd’ equity crowdfunding platform that is looking to democratise crowdfunding by helping businesses seal the crucial 30% of funding upon which many investment rounds are won or lost.

The new platform, launched in partnership with private equity house IW Capital, is attempting to level the playing field when it comes to crowd investment, by giving businesses the chance to raise 30% of its target before the campaign has even opened up to the public.

It is driven by the idea that the supposedly democratic, level-playing field of crowd investment is anything but, due to the fact that the all-important initial investment which helps to build momentum relies on entrepreneurs having well-connected, deep-pocketed associates.

Businesses who lack the ability to raise that first 30% are more likely to fail in their efforts due to the simple fact that nobody wants to be the first to take a risk on an investment, meaning the crowdfund never develops the necessary momentum.

Explaining the thinking behind the new platform, Luke Davis of IW Capital told Bdaily that the psychology of the crowd is a key component of any crowdfunding campaign.

“They just don’t have that initial group of contacts to get the money on there and because of the psychology of it if that first bit hasn’t been invested in then no one is going to follow in because no one wants to be the first investor,” explained Luke.

“That first 30% is key. It’s all to do with the psychology of the herd mentality and if you can get that initial inertia going, people can see that people are actively investing in it.”

Leveraging Crowdfinders and IW Capital’s network of investors, the new pre-crowd platform allows interested businesses to apply to the platform and, following due diligence and other checks, are given the opportunity to pitch to investors at one of Crowdfinders’ events.

The first event, which took place last week, saw five firms pitch their business plans to a panel of investors and included on-demand luggage startup Portr which recently announced a partnership with British Airways.

Equity crowdfunding platform Seedrs has been announced as the first platform partner, and Luke says he hopes to have other platforms lined up shortly, and was keen to stress that the new platform would see Crowdfinders working ‘in conjunction with the rest of the industry’, not competing with it.

For now, the platform intends to host around six events a year but, if demand for their first event is anything to go by, this is likely to increase depending on how successful the initiative proves to be.

“I was quite surprised at the uptake, going by how the first event went there’s definitely a need in the market for it,” Luke concluded.