Crowd Funding: Market Scenario, Investment and Credit Risk Profile, Platform Operators Approach, Recommendations

Running Head: Crowd funding
0
Crowd Funding
Report
Student Name
2/14/2019

Crowd Funding 1
Table of Contents
Introduction.................................................................................................................................................2
Market scenario..........................................................................................................................................2
Investment and Credit Risk profile..........................................................................................................3
Platform operators approach..................................................................................................................3
Recommendations.......................................................................................................................................4
References...................................................................................................................................................5

Crowd Funding 2
Introduction
Crowd funding is a method of acquiring money in smaller amount from large group of people through
online source whether from family, friends and individual investors to fund the projects initiated by the
people or organizations [1]. There are various types of options available in crowd funding depend on the
product and services offer by the business and future growth plans of the business. The three primary
types are donation, reward and equity crowd funding.
When an investor contributing to business in exchange of some reward by the company it can be there
product or services they are offering is called reward based crowd funding and when an investor
become a part owner of the company by trading capital for equity shares and receive a share of the
profits in the form of dividend is termed as equity crowd funding [2].
In India, crowd funding is still in its nascent stage even though the potential is incredibly high. This
report focuses on the evolving crowd funding market in Ireland, the U.K and the U.S. and the
opportunities available in markets for future investment.
Market scenario
In United Kingdom, crowd funding industry has been growing spectacularly and seen as the most
disruptive and innovative force within finance. Mainly three parties are involved namely entrepreneur,
website plat former, and crowd or investor as to constitute the business of crowd funding and the role
of plat former is bring both the parties on same platform. Small entrepreneurs with great ideas decided
to put them forth and consumers are responding positively; they had the choice to create and financially
support the companies they believe in.
According to the UK finance report, it can be analyzed that from 2014 to 2015 the finance market grows
by £ 1.46 million and a spontaneous growth of 43.3% to £ 4.58 billion was saw in 2016 which indicates
the strong scenario of the finance market in the UK due to the win-win method of crowd funding. Peer
to peer lending models captured £ 1.23 billion of market share and reward based crowd funding pushed
£ 48 million in investments, a 14 % annual increase in 2016. The funders in the UK finance market also
increases and shown an astounding 130.8 % rise from 1.089.577 individual funders in 2015 to 2.515.665
in 2016 [3].
Financial Conduct authority (FCA) a regulatory body in UK is concerned with the protection of the
investors who do not have knowledge in assessing the insecurity of the investment. The policymakers
also supported the activity of crowd funding through two tax incentive policy: Firstly, the enterprise
investment scheme assist entrepreneur to get finance by giving tax relief to investors. Secondly, the
seed enterprise investment scheme proposes tax relief to those investors who buy shares in new
companies. These policies help in the expansion of UK market of crowd funding and also benefits the
investors by higher return on investment [4].