We were pleased to see the letters page of this morning's Times includes a letter from Peter Baeck, a full-time crowdfunding reseacher with Nesta, pointing out the shortcomings of yesterday's 'Crowdfunding is a scandal waiting to happen' article.
Nesta (formerly NESTA, the National Endowment for Science, Technology and the Arts) has been responsible for some leading-edge research into crowdfunding, collaborating with the University of Cambridge and UC Berkeley, among others. The opinions of its researchers are very well respected.
"All finance involves risks", Dr. Baeck's letter begins, "and crowdfunding or peer-to-peer lending is no different. But Harry Wilson’s article... risks being too alarmist."
The full text of Dr Baeck's letter is behind The Times paywall, but he draws on articles he has previously published on the Nesta website. 'A bust funded by the crowd' was one of Nesta's ten predictions for 2015. It hasn't happened so far, but we commend the article to investors and anyone interested in crowd finance, because it discusses risk and reward in a rational manner, with examples of things that have gone wrong and might go wrong.
"The ups and downs of alternative finance are played out in public. This means that everyone knows if a project fails. By contrast, if a business loan made by a bank goes bad, most people will never find out. This might lead to patches of bad PR for alternative finance. But it’s surely a good thing for society: we’ve all seen the problems caused when big financial institutions keep quiet about their failures until it’s too late."
This, to our way of thinking, is responsible reporting of peer-to-peer finance as a worthwhile activity for intelligent adults. We'll say what we've said before, that the most comforting feature of all the "New Things Are Bad: Be Afraid" stories is that people who don't understand crowdfunding are not putting their money into it.
We do hope, however, that more people want to understand crowdfunding, including you, and you find our site helps you. We also hope you will follow @PeterBaeckand @nesta_uk on Twitter, as well as @AnotherCrowd.