The Crowd and the IPO

With the introduction of legislation and new players in the market, this innovative form of finance is evolving from consumer-led to funding business. As more SMEs opt for peer-to-peer lending, will the traditional stock market launch (IPO) fall behind?

The Crowd and the IPO

12th November 2018

Until recently, crowdfunding was led by the likes of Kickstarter, Indigogo, and Gofundme. These are all websites where early-stage businesses with an individual idea or prototype can be given donations by members of the public who want to see the product realised. But now, with the introduction of legislation and new players in the market, this innovative form of finance is evolving from consumer-led to funding business. As more SMEs opt for peer-to-peer lending, will the traditional stock market launch (IPO) fall behind?


In 2015, the government officially recognised the UK’s deep-seated problem of failing to deliver capital to growing SMEs by legislating the Bank Referral Scheme. This encouraged traditional banks to pass rejected business-loan applicants onto alternative finance providers. Following this in 2016, the Innovative Finance ISA was introduced, giving consumers a tax-free incentive to invest in these SMEs via crowdfunding platforms. It’s clear that peer-to-peer lending platforms are filling a gap in the market. Between the start-up funds for new ventures and IPOs for mature businesses, they are there for the “scale-ups”, and the demand for them is skyrocketing.


Previously, investment opportunities in businesses who were young but profitable were off limits to “the crowd”. Now, any member of the public can lend money to these new, disruptive companies, meaning the average investor can make significant returns. For example, at Crowd2Fund, 80% of investors make a return of at least 8.5% APR, compared to the 1-2% they might expect with a traditional savings account. Moreover, they can lend directly to the businesses they choose, rather than having to trust a fund manager with their portfolio.


Since the 1990s, there has been a decrease in the number of IPOs globally, which could be attributed to the rise in private capital markets. There are several advantages for the business owners likely contributing to this shift. For example, when “the crowd” lends finance to a company, they don’t take control over how the business is run or focus solely on the immediate dividends return. Without the “shareholder steerage” of a standard equity raise, the company is able to invest more in research and development, leading to greater innovation and advancement. Additionally, the cost of a crowdfunded loan is significantly less than that of an IPO or even other alternative finance options such as cash advances, invoice finance, revenue loans and working capital loans. However there are limits to what crowdfunding can offer to businesses further along in their lifecycle. For large-scale infrastructure projects and international expansion requiring millions of pounds, IPOs are still the only way to raise the necessary capital.


It remains to be seen if crowdfunding can grow into the large-scale investment space occupied by IPOs. Perhaps crowdfunding platforms themselves may even turn to IPOs to cater their burgeoning customer demand, combining two great forces as the sector continues to evolve.

Related Posts

Our Silver Bullet Revenue Loan

Our Silver Bullet Revenue Loan

Posted: 15th Apr 2020

Our revenue loan is a completely unique financial product, perfectly suited to small businesses that undergo seasonal revenue fluctuations. Capital at risk.

Get your Business into Shape for 2019

Get your Business into Shape for 2019

Posted: 24th Jan 2019

The New Year presents an opportunity to set and track your business goals. Brexit and the year ahead does not have to equal uncertainty: learn from your growth in 2018 and get ahead of the game for 2019.

Press Release - Chinese investors help boost Crowd2Fund valuation to £10M

Press Release - Chinese investors help boost Crowd2Fund valuation to £10M

Posted: 25th Mar 2015

Crowd2Fund, the world's only directly FCA regulated five-model crowdfunding platform, has raised £2m from a range of UK and international investors, placing a notional market value of £10m on the business which launched in August 2014.

Risk warning

Past performance and forecasts are not reliable indicators of future results. Your capital invested is not covered for compensation in the event of a loss by the FSCS. Tax treatment will depend on the individual circumstances and may be subject to change.

Top