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Equity Crowdfunding Overseas
Posted on 17th August 2012 By syed


Looking forward to 2013 when equity based crowdfunding becomes legal in the United States as a form of financing small businesses and startups, it would be beneficial to look behind at the industry in the United Kingdom where it has been legal for over a year now.

Crowdcube.com, which claims to be the very first equity based crowdfunding platform in the world, has been operating for over a year helping entrepreneurial businesses in the UK secure investment. As of February of 2012, the portal has successfully raised £2,562,000 or $4,028,540 at an exchange rate of £1/$1.57.

Over the course of a year 766 pitches were submitted, 188 were approved and published and out of those only 14 were successfully funded by crowdsourced investors. This results in Crowdcube publishing 24.5% of their pitches and a success rate of 7.45% of those published pitches. That makes the success rate 2% for all pitches submitted.

Symbid.com is another equity based crowdfunding platform that originates from the Netherlands and has helped startups successfully raise €1,100,000 or $1,359,050 at an exchange rate of €1/$1.24.

Unlike Crowdcube, Symbid.com does not have a formal validation process. The only requirement is that the entrepreneurs make an initial investment as well as fill out their complete idea page. The platform has published 113 pitches, 8 of which have been successful. (7.08% success rate)

Comparing the two platforms, one statistic seems blatantly clear. Out of all published pitches, there is a success rate of about 7%. Although that may seem a dismal amount, it validates the fact that not just anyone with an idea will get funded. Only the ideas with a workable business model and potential will.

Crowdfunding for equity has been shown to work where it is legal, and gives entrepreneurs and small businesses access to a line of capital and investors that is be a huge boon. Looking at the data, on average crowdfuding seems to provide about $250,000 to successfully validated businesses. That amount can mean the difference between success and failure for a new venture.

Moving from the analytical to an opinion, it seems that regardless of the screening process, the crowd at large is able to intelligibly determine which ideas are worthy of success, and which onesare not quite ready. From the entrepreneur’s standpoint, this process serves as a validation phase. If the idea has merit, the masses will make it known by investing and starting the business. If there is not enough of an investment, the entrepreneur knows that the value proposition needs work before it becomes a workable business.


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