Mercia EIS Funds

MFM mentioned in FT on why crowdfunding isn’t right for many start-ups

Jonathan Moules’ recent FT article on crowdfunding took a look at three platforms involved in the industry, both in the US and here in the UK – Kickstarters, Seedrs and Indiegogo – some of their successes and failures, upcoming regulations for the industry and finished with comments from Mercia Fund Management’s Mark Payton.

Moules cited New York City Opera’s failed attempt to raise $1m through crowdfunding which ended in them filing for Chapter 11 bankruptcy a couple of months ago and the failure of other companies to realise the work involved in the crowdfunding process and their subsequent struggles with the platform. Experts in the field, John Mullins, associate professor of management practice in entrepreneurship at London Business School and Danae Ringlemann Kickstarter’s co-founder were both quoted commenting on the challenges ahead for this platform.

The positive experience of Jeffrey Woolf, who sees crowdfunding as a useful tool was noted and finally Mark Payton of Mercia Fund Management was quoted succinctly summarising the challenges of crowdfunding for both the investor and the start-up itself, “Crowdfunding platforms may help the lucky few raise money, but start-ups need more than just money,” Mark Payton, managing director of Mercia Fund Management, notes.

“Start-ups need active investment – that is partners, skills and support that will nurture the business through growth over the medium to long term. With crowdfunding, you get a cheque. Period.

” Business growth often requires additional funding, which can substantially dilute the shareholding of the early crowdfunding investors, who seldom hold the appropriate levels of protection, Mr Payton adds. “Who looks after the investors’ interests and who accelerates the growth of the company?”

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