News Briefing - Crowdfunding, SME And Alternative Finance

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The essentials are here and will be regularly updated. If you want to be well-informed about the investment crowdfunding scene, and you're short of time, this is the place to visit.

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1.UK – FinTech

Global Banking & Finance carries an SME funding primer.

“Boasting some of the world’s leading disruptive companies, including digital bank Revolut and food delivery service Deliveroo, the country was recently ranked the fourth most promising market for disruption, technology and innovation by KPMG[i]. And the so-called ‘start-up revolution’ shows no signs of slowing down – between 2012 and 2017 there were 3.5 million start-ups launched across the country.

While there are many reasons why the UK has been able to nurture entrepreneurs and start-ups into becoming fully-fledged SMEs, one of the key factors has been access to finance. In particular, the exponential rise of the UK’s alternative finance sector has been vital;the alternative finance market grew by 43% in 2016 to an estimated value of £4.6 billion. Importantly, nearly three-quarters of this capital ended up being used to fund SMEs.

For newly-launched and scaling businesses, one of the first hurdles they face is securing investment to cover both their initial operational costs and long-term growth prospects. Stringent lending measures imposed by high street banks can often make traditional avenues of credit particularly difficult to access. However, for those with only a basic understanding of alternative finance, seeking funds from this sector can seem overwhelming.

So, what do start-ups need to be aware of when looking to alternative finance to help fund their business?"

 

2. UK – P2P

 

The Herald reports a £2 million raise:

“GLASGOW private equity firm Maven Capital Partners has led a £2 million financing round for London-based peer-to-peer (P2P) lender Lending Works.

The investment house, which was founded by former Aberdeen Asset Management investment head Bill Nixon nine years ago, was joined in the deal by English counterparts NVM Private Equity and Pollen Street Capital as well as a number of business angels.

Maven put up the bulk of the cash, with the other investors contributing £800,000 between them.”


 

3. US – FinTech

Crowdfundinsider on an ICO conference.

“2017 was the breakout year for Initial Coin Offerings (ICOs).  ICOs were covered by mainstream media. Many conducted ICOs simply to raise capital for a business or idea, essentially seeking investment capital.  Though they would pretend that these were unregulated capital raises, the reality is that a good number of them conducted raises that were illegal under multiple jurisdictions around the world.

So the regulators came, and they did so in force in 2017. All around the world, regulatory bodies took their stances. Some were extreme and banned all ICOs. Others tried to apply their existing regulatory regime to the industry.  Some adopted a wait-and-see approach.

The enterprising adopted favorable regulation to encourage businesses to relocate to their jurisdictions. Though multiple regulatory issues can arise in connection with ICOs, most people focused on securities regulations.  In particular, the US Securities and Exchange Commission (SEC) became this dreaded agency even though they actually exist to protect capital markets through efficient regulations that ensure a healthy and safe environment.

Somewhere along the line, “ICO”, became a dangerous acronym, and “Security Token Offerings” (STO) became the new kid on the block.

The industry has a bad habit of classifying all token offerings by one term, and that’s not helped by everyone rushing to take street credit for coining a new acronym or “inventing” a new structure. In reality, nothing is new.

People are just coming up with fancy names for structures that have existed before ICOs were around. Frankly, it all just boils down to the fact that you have token sales, some of which may be considered “offerings”, of which a portion may involve “securities”.  If you have an offering of tokens that involve securities, then you have an STO or whatever name you prefer to call it.

 

Governments usually regulate securities offerings, so the STO is a regulated offering.  This is important because the anonymous, decentralized, and freely transferable nature of most decentralized ledger technologies makes it difficult for companies to comply with regulatory requirements.  It’s part of the reason why many ICOs have been illegally conducted. It’d be ideal to have more favorable legislation that is understanding of the new realities of decentralized ledger technology, but until that comes around, we need a way to legally conduct STOs within existing legal frameworks and in anticipation of what future legal frameworks might look like.  STOs are here to stay, and many expect that all capital raises will eventually be tokenized.”


4. International – P2P

A state announcement from China:

“Tighter scrutiny by financial regulators could lead to another shakeout in China's fiercely competitive peer-to-peer (P2P) lending sector and delay the issuing of formal business licenses by a year or two, experts said.

The number of P2P firms, the fastest growing business in the internet finance sector, has decreased to nearly 1,800 by June from a peak of more than 5,000 in 2014, after a two-year rectification storm to curb illegal lending.

A special working group organized by the country's banking regulator had set a deadline, from August 2016 to the end of June this year, to crack down on unconventional and risky internet finance companies, or especially the peer-to-peer online lending companies. During that period, no new online lenders got the green light for starting the business.

When the investigation process ends, qualified participants are suppose to be placed on the regulator's supervision list after a thorough probe on cash flows, financing risks and compliance.

The scrutiny will continue, possibly until 2020, said a recent statement released on the website of the People's Bank of China, the central bank.”

5. International – P2P

 

Medianama reports a move in India.

“Lending platform Cashkumar has received its NBFC-P2P certification from the Reserve Bank of India (RBI), the company said in a statement. The RBI issued those guidelines last October, to register and accredit P2P lending firms that resell loans from individuals who have money to invest.

Started in 2016, the Bengaluru based company essentially connects lenders with spare money with borrowers. The platform facilitates these transactions through background checks using factors like CIBIL, and CRIF scores. On its website, the company writes that it undertake the entire credit evaluation process, legal documentation and collections.”

6. International – FinTech

 

Coin news from Switzerland, via Crowdfundinsider.

 

“The #MetaHash team has announced that is has successfully been examined by the Swiss Financial Market Supervisory Authority (FINMA) which has officially concluded that the #MetaHashCoin (#MHC) will be recognized as money of general utility with payment functions. This is the first cryptocurrency to be reviewed by FINMA to receive such a qualification. MetaHashCoin is in the midst of a public sale.

In early 2018, FINMA published initial coin offering (ICO) Guidance. The effort was part of an initiative to provide clarity in a sector of finance that is booming in Switzerland. A presentation from March that was delivered in partnership with the Crypto Valley Association, helps to better understand the FINMA regulatory process.

#MetaHash explains that the process to receive approval took several months due to the relatively new nature of the regulatory structure. To aid in the process, MetaHash worked with legal, regulatory and tax advisors such as KPMG AG, Wenger & Vieli AG, Sadis & Goldberg LLP, etc.

#MetaHash said this recognition is a “big step towards a more transparent, standardized and trustworthy public sales practice, as it clearly indicates the preference to have the product live before the start of the ICO, as in the #MetaHash case.”