Feb 20


By Nathan Rose, Assemble Advisory

Centralised Finance, Decentralised Finance

The world of finance is undergoing a seismic shift, the likes of which hasn’t been seen since the advent of banking itself. We may still be in the early days, but the trend is unmistakable; the investing culture is changing, and we are moving to place the power of economic participation back into the hands of the people.

Our current financial system is so natural to us that many of us have never stopped to think what an incredible innovation it was, when the first banks arrived on the scene around 600 years ago. People at last had a place where borrowers and lenders could go, and conduct business without personally knowing one another.

Centralised finance unleashed all kinds of efficiencies, but the unfortunate side-effect was that it made the financiers who controlled these flows of capital incredibly powerful. Restricted access to investment opportunities means the public are shut out of some of the most attractive investments, which get reserved for brokers and their wealthy clients.

Bringing Ownership Back To The People

In SyndicateRoom’s recent report Bridging The Equity Divide, it was shown that Britons have strong interest in direct ownership, but lack access to opportunities. According to their report, 65% of those surveyed said that making their own investments was an enticing idea, but almost two-fifths of those attracted to this said DIY investing was difficult.

“80% of equity offers on the London Stock Exchange in 2015 didn’t include any form of access to ordinary investors – it all went to institutional investors” says SydnicateRoom’s Tom Britton. “A traditional broker doesn’t have the means to efficiently include retail investors in a raise. But, by taking the technology we designed for efficient private raises and repurposing it for the public markets, we open the door for retail investors to get back into these public market offers.”

The Role Of Equity Crowdfunding

Equity crowdfunding is moving to bring the efficiencies afforded by the internet to the world of investing. When subscriptions for investment no longer need to be signed, physically posted, and stamped by a human broker, then opening up access to large numbers of small investors starts to become economic.

SyndicateRoom has worked to enhance access and has recently partnered with the London Stock Exchange as an approved intermediary to play a part in initial public offerings and share placements.

The online technology of equity crowdfunding is able to facilitate two key pillars of changing the investing culture:

  • The first of these is direct ownership. Due to the internet, information can be distributed more efficiently for investors to evaluate, and financial institutions become less and less necessary as a place for investor and fund-raiser to meet.
  • The second is through syndicated investing. An investment syndicate sees a party (or parties) investing in some proposition. Because their own money is at stake, syndicate leaders have skin in the game and are more careful with the money – investors can follow the smart money and invest alongside the angels.

More Opportunity, More Responsibility

The risks need to be managed, of course - crowdfunding platforms have a role to play in curating the opportunities on offer, and conducting appropriate background checks on the companies on offer – particularly at the start-up end of the spectrum.

Crowdfunding is part of a larger cultural change towards a more open, more technologically-based, more decentralized economy – cutting out the middlemen and giving worthy companies the access to investors who want to back them. It tears down the barriers. It opens up investment beyond deals made the bar and the boardroom. We are in the midst of forging more direct relationships between companies and investors – and changing the investing culture irrevocably in the process.

Get the very best insights from successful crowdfunders from around the world. My book "Equity Crowdfunding" is out now on Amazon.

Need results fast? You can work with me one-on-one. Whatever stage you are at - investigating crowdfunding as an option, forming your strategy, or even if your campaign is already live, there's a package to suit you and supercharge your results.

About the Author

Nathan Rose is the founder of Assemble Advisory, a consultancy for equity crowdfunding. We help busy company founders get their information memorandums and financial models in order, and provide advice on structuring a successful equity crowdfunding campaign.