1.
DEMOCRATISING FINANCE
AGGREGATING DIGITAL INVESTING MARKETS
Alternative Finance Demystified
July 2015
Volume 1 (Digital Equity Investing): An Overview of the Key Players, Investors andTrends that
are Shaping the New Model of Online Collaborative Funding
Prepared in Collaboration with Leading Alternative Finance Players Globally

2.
About This Research
While researching and analysing the key players and drivers underpinning the digital investment
landscape, the DealIndex team uncovered a whole ecosystem of players that have transitioned into the
online investment space. We realised that these players and how they interrelate with one another have
not been covered before in a comprehensive manner. As such, we have attempted to capture the
interlinkages between the swarm of players in the alternative finance space with this report.
This report covers emerging trends in alternative finance as well as offering an overview of the different
areas of the sector, with a focus on equity crowdfunding in Volume 1. In subsequent reports we will cover
asset classes including real estate and debt in similar detail. Alternative finance is sometimes seen as a
broad and opaque space, through this report we outline how its seemingly disparate parts fit together,
and where the sector as a whole is headed. We begin by reporting our key findings and trends, before
moving on to describing the diverse array of platforms and services offered. We conclude with an
analysis of the changing investor landscape in the sector. This report has been prepared in collaboration
with several disruptive and leading alternative finance players across three continents and is furnished
with many useful case studies. We hope the report elucidates alternative finance for all who may have an
interest in this important and rapidly growing sector.
About DealIndex
DealIndex (www.dealindex.co) is an intelligent data and deal aggregator of private companies and assets
raising capital across leading alternative finance platforms globally. At DealIndex, we take a global,
curated approach to the alternative finance ecosystem. We provide extensive data, research and analytics
as part of our service to clients. For this reason, we are able to provide data and context on many different
aspects of the market. We can offer as much or as little as is required: from a simple, high-level overview
of what’s happening now to deeper insight on longer term trends.
Our flagship product (a global crowdfunding aggregator https://dashboard.dealindex.co/) allows
investors to navigate and track deals in real-time, manage their portfolio of private company investments,
and is backed by extensive analysis, data and research. The dashboard provides single sign-on access to
hundreds of private companies seeking capital, bringing together, for the first time, curated, quality deals
from leading equity crowdfunding platforms spanning four continents.
DealIndex is part of The Grow VC Group, a worldwide pioneer and leader in the crowd investing, peer to
peer and online investment market.
Authors and DealIndex Research Team
Michael Cameron Edward Flach
Research and Investment Associate Research and Investment Associate
michael@dealindex.co edward@dealindex.co
Duncan MacDonald-Korth Neha Manaktala
Director, Research and Sales CEO & Co-Founder
duncan@dealindex.co neha@dealindex.co
Tom Walker
Director, Product and Business Development
tom@dealindex.co

3.
Acknowledgements
Collaboration is a cornerstone of alternative finance, and so for this report we have invited our partners to
participate in the production process. Such collaboration will allow our readers unparalleled insights
directly from players across the alternative finance value chain and from across the globe. Sincere thanks
are extended to our 18 global partners who have contributed to the writing of this report. These industry
experts and disruptors are pioneering alternative finance in the markets in which they operate and have
contributed truly unique insights. We have received contributions from alternative finance disruptors
across Belgium, Canada, France, Germany, Israel, New Zealand, the United Kingdom and the United
States.
We are privileged to have first hand insight on the disruption, evolving models and the change each of
these players are pioneering in their markets. It is great to be able to bring all this together so our
readers can gain a better understanding of the alternative finance ecosystem in markets across the
globe: the issuers, the investors, the regulations, the challenges, the similarities, the differences,
constantly changing models, collaboration with the financial services industry, and the rapid pace at
which this market is evolving. These unprecedented insights from players across the ecosystem,
including crowdfunding and M&A platforms, infrastructure, data and technology providers, and advisory
firms, have helped us develop a global and more complete picture of the different parts of alternative
finance and how they work together. We are overwhelmed with the response and are grateful for the
time and effort all of our partners have taken to contribute and participate in this research.
Note From Some of Our Partners
"The digital investing and lending market has grown dramatically in recent years. While the growth is
unprecedented, the market is lacking in fundamental data and insight, the type that DealIndex has set out
to foster. At Crowd Valley, we believe in universality and transparency in this market and through our
digital back office product, we aim at catalysing the markets development through robust middle and
back office tools for operators, as well as for the buy and sell side stakeholders. That is why we partner with
leading stakeholders in the market that have a digitally native approach to the changes and opportunities
in the financial service market." Markus Lampinen, Co-Founder and CEO, Crowd Valley
“I was fascinated to preview this report, shows how new thinking is reframing the finance world, some
inspirational stuff and growing scale. Soon, more the new normal than the alternative!” Lin Feng, Founder
& CEO, DealGlobe
Contributing Partners
3

4.
4
Note From Some of Our Partners
“FinTECH (Financial Technology) is revolutionising the capital markets! DealIndex provides valued insights
regarding how companies and investors are leveraging technology to streamline the investment process.
Equity crowdfunding/direct investing has the potential to emulate peer-to-peer lending’s (~Prosper)
success as equity investors increasingly migrate online gaining access to premium deal flow at lower
costs.” Scott Jordan, HealthiosXchange
"Regulated crowdfunding is the most disruptive form of alternative finance available today. As is the case
for any form of alternative or traditional finance to flourish, regulated crowdfunding requires a cohesive
eco-system and an integrated infrastructure to bring it all together. Seamless infrastructure technology is
the key to integrating the eco-system and ensuring the continued success of regulated crowdfunding. We
are delighted to be able to contribute to this Alternative Finance report on how the eco-system works and
the importance of proper infrastructure" Oscar A Jofre, Founder, President/CEO, KoreConX
“We are at the forefront of the crowdfunding industry, leading the efforts to democratise capital for all
entrepreneurs.” Jeffrey Fidelman, Head of Investor Relations, Onevest
“We were happy to contribute to DealIndex's research, the platform that will become a very useful tool for
us." Grégoire Linder, CEO France, Raizers
“While the growth of alternative finance is racing ahead, there has been a dearth of research for those
seeking to gain a deeper understanding of the past, present, and future of this market. DealIndex's report
sheds light on this dynamic and diverse market, providing insight to the digital investment sector, as well
as delving into case studies from various partners in this space. As New Zealand's leading equity
crowdfunding platform, we feel that it's important to contribute to this report and help bring alternative
finance into sharper focus for global stakeholders.” Josh Daniell, Co-Founder & Head of Platform,
Snowball Effect
“As alternative finance increases in size, so does the complexity of its ecosystem. This report is a gold mine
for anybody looking to gain an overview of the ecosystem and find out who the main players are in their
respective areas.” Gonçalo de Vasconcelos, CEO and Co-Founder, Syndicate Room
"In order for equity crowdfunding to thrive and develop in to a long term and sustainable asset-class, I
strongly believe that sound investment principals need to be adhered to and the industry needs to
demonstrate that it can consistently deliver returns for its investors in line with the risk they are taking. At
VentureFounders we are not going to deviate from our core principals of providing investors with exciting
and interesting investment opportunities that are appropriately structured for the risk that investors are
taking. This in-depth industry report drills down on various aspects of the alternative finance ecosystem. It
is great to be able to feature our unique insights on the fast growing equity crowdfunding industry.” James
Codling, Co-Founder, VentureFounders

5.
Table of Contents
Infrastructure: The Importance of a Comprehensive Support
System
Investors: A Mix of Both Retail and Institutional
Platforms: The Evolution and Emergence of New Platform
Models and Asset Classes
Data and Marketplaces: Shifting Towards a More Data Driven
Approach To Investing
Executive Summary: Summary Observations, Key Findings and
A Message from the Founders
Issuers: Investment Activity Moving Upstream
09
20
24
31
51
58
65
Introducing the Alternative Finance Ecosystem: Who Are The
Key Players and How Do They Interrelate With One Another
Conclusion: Looking Forward
74
5

6.
CONTRIBUTING PARTNERS
Crowd Valley powers the future of financial services by providing marketplace
technology and API Back Office solutions. The company enables online
investment platforms; peer to peer lending, equity and debt marketplaces
Equidam provides a business valuation tool that helps SME’s to manage their
value, investors to achieve the required return and invest in the best ideas, and
early stage companies to grow and prosper
AgFunder is the world’s first equity-based investment platform created
specifically to connect investors with world-class agriculture and agtech
investment opportunities from around the globe
Bankless 24 is a German crowd investing platform for the SME sector. Investors
can invest in medium-sized companies from 100 euros. Businesses get access
to alternative finance
Crowdfundraiser is an expert across the crowdfunding ecosystem, connecting
capital between investors and entrepreneurs. It provides services related to
both debt and equity alongside liquidity solutions for investors and founders
DealGlobe provides an online platform for investors and corporate
professionals seeking investment and partnership opportunities. The
company's primary focus is on small and medium sized enterprises with the
aim of bridging the information gap between Europe and China
6
US Page 41
GERMANY Page 45
US Page 50
HK, UK, US Page 62
Page 47CHINA, UK
NETHERLANDS Page 60

7.
CONTRIBUTING PARTNERS
EquityNet has operated one of the largest business crowdfunding platforms
since 2005. The multi-patented EquityNet platform includes over 100,000
individual entrepreneurs and investors, incubators, government support
entities, and other members of the entrepreneurial community. EquityNet
provides access to thousands of investors and has helped entrepreneurs across
North America raise over $330Mn in equity, debt, and royalty-based capital
US Page 35
HK, UK, US Page 64
Grow Advisors is the consulting and advisory unit of The Grow VC Group. Grow
Advisors offers professional services aimed at growing crowdfunding, crowd
investing and P2P finance around the world
HealthiosXchange is an investment marketplace dedicated exclusively to the
global healthcare industry, employing crowdfunding as the cornerstone of a
new paradigm in healthcare investing, the company offers direct access to the
broadest investment opportunities
US Page 48
iAngels is an equity crowdfunding platform that gives accredited investors the
opportunity to become angels in their own right by investing in technology
startups alongside top tier angel investors in Israel
ISRAEL
Page 42
KoreConX supports the crowdfunding and capital markets industry by
supplying the eco-system infrastructure platform (ESIP). The ESIP is utilised for
pre-during-post crowdfunding transactions by facilitating due diligence of
issuers, data repository/deal room and shareholder management/
communications
Page 63CANADA
MyMicroInvest is a lending and equity based crowdfunding platform in Europe.
The platform is based on the co-investment principles between crowd and
professional investors and has already facilitated €10Mn investment in over 30
European companies. MyMicroInvest has also developed a system allowing
SMEs to make a public offering online by automatising the prospectus
redaction and establishing a relationship of trust with the Financial Services
and Markets Authority
BELGIUM, EU
7
Page 36

8.
CONTRIBUTING PARTNERS
Onevest is reshaping the private equity industry by democratising early stage
investing: connecting founders to capital allowing their ideas to transform into
successful companies, simultaneously creating new investment opportunities
for individual investors
US Page 37
Snowball Effect is New Zealand's leading equity crowdfunding platform, with
around 75% of market share. This highly curated platform aims to attract the
best quality companies and investors, and is focused on growing carefully to
encourage a sustainable equity crowdfunding market over the long term
NEW ZEALAND Page 39
SyndicateRoom is an online equity crowdfunding platform that allows its
members to co-invest in exciting companies with seasoned investors. Members
co-invest alongside Business Angels
UK Page 43
TradeUp is an equity crowdfunding platform for globalising companies, a
rapidly growing and outperforming segment. It helps export-driven companies
to connect and transact with accredited investors
Page 45CHINA, UK
VentureFounders is an equity crowdfunding platform with a wealth of
investment and startup experience. The company is pushing the boundaries of
what can be achieved in the crowdfunding market by presenting investors with
a range of curated, structured and diligenced investment opportunities
UK
Page 44
FRANCE, SWITZERLAND,
DENMARK
Raizers is a crowdfunding platform for entrepreneurs. The Pan-European
platform is a collaborative space with innovative features that facilitates the
relationship between entrepreneurs and investors
Page 38
8

9.
Private Investment is Moving Online. While
Executive Summary
Private investment is moving online. While
alternative finance started off as a seed stage
endeavour, more recently platforms have begun to
emerge at different stages in the funding cycle,
disrupting traditional institutions
“

10.
10
PREFACE:A PARADIGM SHIFT IN FINANCIAL SERVICES
Alternative Finance is a new phenomenon, and it is taking the world by storm. With over 1,250 crowdfunding
platforms worldwide, this new model of collaborative funding is breaking boundaries and defying the status quo
as to how issuers source capital. In light of this paradigm shift and plethora of platforms, we perceived the need to
develop an alternative finance aggregator that would instantaneously display quality private investment
opportunities from curated platforms, all in one centralised marketplace.
We embarked on this mission to pioneer an innovative dashboard to address the ‘pain points’ often faced by
sophisticated investors who are keen to invest in private companies across all corners of the globe. It is throughout
the course of this 12-month journey and vigorous research-driven process that we discovered the relative dearth
of information on this burgeoning sector. This industry report thus aims to offer a comprehensive overview of this
emerging sector, as well as to provide valuable insights on the complexity of the wider alternative finance
ecosystem from various perspectives.
As we set out to develop DealIndex as an alternative finance aggregator, our first port of call was to define the
term “alternative finance” and to research the key players underpinning this rapidly evolving sector. While
alternative finance is primarily known for crowdfunding and P2P lending, we discovered entire asset classes,
important functions of investment banking, including a supporting ecosystem of due diligence, risk management,
and infrastructure that had transversed the offline and online world of financial services. We started to see how
these seemingly disparate players in alternative finance - involved in different aspects of fundraising, and from all
over the world - are interrelated. Assets including alternatives and M&A, represent significantly bigger (albeit
challenging) asset classes and have started moving online. More importantly, we learned how these players mirror
traditional investment banking services and had already started collaborating with the financial services industry.
Some of the themes underpinning alternative finance include:
1. Increased transparency and access to otherwise closed off asset classes;
2. Redefinition of the term “investor” across the entire spectrum of private and public asset classes. The crowd
gets access to privileged deals and the world’s largest financial institutions have started investing in companies
much earlier in the life-cycle of a company;
3. Collaboration is a cornerstone of the industry as the syndication model takes hold with mobile, social media
and millennials all generating network effects;
4. Increased volume of funding activity in private companies & assets, and increased amounts of companies
getting funded with customers getting involved in product development / playing a role in innovation as
investors; and
5. How technology, speed, and data have come together to reduce the inefficiencies in searching and accessing
private investment opportunities, thereby saving issuers and investors time in the procurement process.
Alternative finance has already demonstrated its potential to change the way fundraising is carried out by private
companies by implementing a much more democratic, transparent and efficient process for both entrepreneurs
and investors. Issuers get increased access to diverse funding options, while online platforms alleviate the time,
effort and costs associated with fundraising, in addition to generating increased marketing and product
awareness.
Democratising Finance Executive Summary
Neha Manaktala
CEO and Co-Founder, DealIndex

11.
11
Having been on both sides of fundraising, it is exciting for me to be
part of the potential to improve the way different aspects of
financial services are performed; all the while deepening
collaboration, not just between alternative finance players, but with
the financial services industry in general
Democratising Finance Executive Summary
“
The definition of investors itself has evolved since the advent of alternative finance and the surge of online
platforms. Increasingly, we are witnessing changes to investment behaviour since the start of syndication of
investment online. Furthermore, access to global investment opportunities has led to a more data-driven
approach to investing.
Despite growing into a $16.4Bn industry in 2014, it is still a drop in the ocean compared to the $3.3Tn
addressable market opportunity. Although crowdfunding is still often dismissed as a niche activity associated with
rewards or donations, the industry has developed into an entire ecosystem that is constantly evolving. Growth has
been exponential with players across the entire funding lifecycle offering diverse and alternative fundraising
options. Most of these alternative finance players already have a significant amount of collaboration with the
financial services world.
Finance is a singular industry with its ramifications permeating every single part of the economy. As an ex-Lehman
Brothers investment banker who witnessed the Great Financial Crisis first hand in 2008, I am constantly reminded
of these important principals. With rapid growth in the alternative finance space, comes the need for increased
maturity in the industry and systems to contend with the unknown and untested impact of changing credit and
interest rate cycles, liquidity squeezes, fluctuating asset pricing and valuations and the impact of the macro
economic environment. Moreover, with increased funding rounds, shorter capital raising cycles, diversified and
changing investor bases in private companies, structured offerings and more sophistication being applied so
early on in the life of a company, comes the need for best practices to be applied from financial services. Due
diligence, risk and portfolio management, research, liquidity channels / secondary market - these are all vital parts
of finance and are now beginning to permeate alternative finance.
Alternative finance is removing information barriers and information inefficiencies that exist in the private market,
opening funding conduits and channeling global liquidity. At DealIndex we take a global, curated approach to the
alternative finance ecosystem. We give you a pulse of the market through the provision of data, research, analytics
and context on the wider ecosystem. The availability of private company data is a game changer and everyday we
are fascinated by the volume of data and patterns that emerge as we observe dealflow going live from different
corners of the world across platforms, asset classes and sectors, all in real-time.
Having been on both sides of fundraising including at Morgan Stanley Investment Banking, Actis Private Equity
and as an entrepreneur, it is exciting for me to be part of the potential to improve the way different aspects of
financial services are performed; all the while deepening collaboration, not just between alternative finance
players, but with the financial services industry in general.
I would also like to extend my grateful acknowledgement and appreciation for all our partners and to those who
have contributed to this report. It would not have reached you in its present form without them.

12.
Democratising Finance Executive Summary
While alternative finance started off as a seed stage endeavour, more recently platforms
have begun to emerge at different stages in the funding cycle, disrupting traditional
institutions. Drawn by the increased access to investors that operating online affords,
platforms now make it possible for companies to raise capital at every stage of the
funding cycle online.
As the market grows in size, so too are more institutions investing in the sector. As
much as 66% of the loans originated at Prosper were snapped up by large institutions
in the 3rd quarter last year. Similar figures across other P2P platforms highlight an
increasingly institutional marketplace. While equity investment remains someway
behind the P2P market in this respect, things are beginning to change with more VC’s
participating in crowdfunding campaigns. This is expected to only strengthen as more
tools for sophisticated investors emerge.
Originally seen as a solution to the long-standing funding gap for early stage
companies that appeared in the wake of the 2008 financial crisis, the ability for
issuers to raise capital more quickly and at a lower cost than would otherwise be
possible at traditional institutions coupled with a host of other benefits such as the
increased marketing awareness and customer loyalty has meant that
crowdfunding is now seen as an attractive option by many issuers.
ALTERNATIVE FINANCE IS DRAWING MORE
ESTABLISHED ISSUERS
As the private investment market moves online, the ability to harvest large
quantities of data surrounding investment decisions becomes easier. Furthermore,
tools that allow investors to then analyse the data, uncovering trends, are enabling
more informed decisions. This is a radical change for the private investment
market given its historically closed-off nature.
AVAILABILITY OF DATA IS CHANGING
KEY FINDINGS
Many have wondered if the alternative finance space is set to upend the traditional early
stage investing business model. While this angle is hyped, in reality it is emerging that
venture capital and alternative finance will work side by side. Rather than disrupting,
alternative finance is developing a collaborative and synergistic model. Evidence of this
can be seen in the growth of investor-led platforms, as well as the adoption of digital
finance by major businesses like Goldman Sachs and Metro Bank.
12
PRIVATE INVESTMENT IS MOVING ONLINE
INCREASING INSTITUTIONAL INVOLVEMENT
COLLABORATION RATHER THAN DISRUPTION

13.
Democratising Finance Executive Summary
INTERESTING FACTS
Value of the Early
Stage Investment
Market2
$300Bn
Number of
Crowdfunding
Platforms Worldwide4
1,250
Estimated Revenue
Crowdfunding Added to the
Global Economy in 20143
$65Bn
Alternative Finance
Immediately Addressable
Market Opportunity1
$3.3Tn
Equity crowdfunding
average growth rate
2012-20145
410%
Number of jobs
crowdfunding
created in 20143
270,000
VC Industry annual
average6
$30Bn
Estimated Crowdfunding
Market 20156
$34Bn
Angel capital
annual average6
$20Bn
> >
100M+
Unaccredited
investors in the U.S.
351%
Increase in quarterly
revenue post equity
crowdfunding
13

14.
What role have governments played in the adoption of digital investing and lending in areas where
adoption has been the fastest?
Governments play a very important role in digital investing markets, anyone who innovates spends
significant effort on doing their own risk assessment and due diligence. While it’s understandable that
laws and regulations typically follow innovation, the most important factors for risk assessment are the
easy availability of information and the clarity of the regulatory environment. When the rules are less clear,
the way the government reacts to innovation is important. For example, in the UK and US, the
governments have led and openly communicated their views on innovations in alternative finance and
how they plan on acting should the market move adversely. It is important to open a dialogue and build
mutual trust between all parties and this approach sends a positive signal to those in this new market.
How do start-up ecosystems across different countries benefit from alternative finance, especially in
attracting international investors and how can data on digital investing and lending benefit start-up
ecosystems?
New digital investing models and related processes accelerate start-up ecosystem knowledge especially
with reference to investment processes and investor expectations. In general, they can help a city or
country to “skip a generation” of trying to only build or grow traditional “offline” based risk finance models
like grants, traditional business angel and venture capital models. Furthermore, in mature markets,
business angels and VC’s are already moving onto digital platforms and investing alongside the crowd. In
addition by applying digital marketplaces in different countries and cities, one can productively showcase
the best regional investment opportunities in the international market, channelling opportunities to
different audiences beyond the single marketplace itself.
One of the fundamental differences between digital investing and open marketplace models is that,
instead of a company having to limit itself to specific funding instruments rules or limitations, it can freely
structure its offering and then let the market decide if it’s interesting.
ALTERNATIVE FINANCE: ROLE OF GOVERNMENTS,
STARTUP ECOSYSTEMS AND INVESTORS
Valto Loikkanen
Co-Founder & Chairman, DealIndex; Co-Founder & CEO, Grow VC Group
14

15.
Democratising Finance Executive Summary
What has been the evolution and strategy of the Grow VC Group and why did you and Jouko set it up?
The idea was to help scale entrepreneurship and identify innovations in the context of the recent financial
market failure. We also wanted to harness the power of social networks that brought people to the online
world. Both of us have experienced successes and failures in building innovative companies and have
learned that market timing is key. We could see we were very early to the market and had difficulty trying
to communicate our vision and business model to others. The initial idea for equity crowdfunding was in
the summer of 2008, when Facebook only had 100 million users. The name ‘equity crowdfunding’ hadn’t
yet been coined and as such we had a hard time explaining it. Initially we called it Venture Capital 2.0.
Furthermore, it was hard for many to believe in. It therefore became evident that we would have to
commit to a long journey and approach it globally from the start in order to reach the necessary volume
of users. Today there is a broad scope of opportunities within various alternative finance sectors.
As an entrepreneur yourself, what are the benefits that alternative finance has for start-ups and founders
in the fundraising process?
Overall, alternative finance simplifies things and makes the process more transparent. In addition,
founders also can gain a lot more knowledge about other companies that have used the process before
them. It can be a bit scary to put your business out there as it’s possible that you may not be successful in
fundraising, but for any genuinely good deal, with a good valuation, that is well structured and with a
good team behind it, it is a very good option. It must be stated that whenever there are more options than
before, it is generally a positive thing for everyone and for any company that has high growth ambitions,
the digital fundraising process forces them to learn how to communicate with investors early on. This
alone is valuable for the future. From a general perspective the digital finance market is all about better
access, transparency and efficiency. This, together with the data that this digital market generates, leads to
ever faster learning and further development of all areas it spreads to.
The digital finance market is all about better access,
transparency and efficiency…..Whenever there are
more options, it is generally a positive thing for
everyone and for any company that has high growth
ambitions, the digital fundraising process forces them
to learn how to communicate with investors early on.
This alone is valuable for the future…
15
“

16.
1
2
3 4
Democratising Finance Executive Summary
MARKET DRIVERS
ALTERNATIVE FINANCE IMMEDIATELY ADDRESSABLE MARKET
OPPORTUNITY1
DATA AND TECHNOLOGY DRIVES DECREASE IN COSTS AND
INCREASE IN USAGE1
ADVISORY FEES (2014); DECREASE IN
COSTS
INCREASE IN USAGE
CHANGING DEMOGRAPHICS1 MACRO ENVIRONMENT14
Millennials 10X more
likely to use P2P
Lending than Boomers
Millennials already
using alternative non-
bank financing Avg.Yield P2P Lending Average Interest Rate for
Total Marketable Debt
April 2015
Low interest rate environment drives yield
hungry investors to alternative finance
16

17.
5
6
7
Democratising Finance Executive Summary
MARKET DRIVERS
GLOBAL CROWDFUNDING MARKET4,5
Worldwide Crowdfunding in 2014: $16.2Bn YoY Growth 2013/2014
DEMAND FOR DIGITAL INVESTMENT OPERATIONS Q420147
NETWORK EFFECTSYIELD EXPONENTIAL GROWTH1
50% Of all Lending Tree/Prosper loans originated
in Q4 2014
17

18.
Over the last few years, much has been made of the potential for alternative finance to disrupt the traditional
financial industry, including subverting the established bank loan process with P2P lending. Some may
wonder if this will actually be the case, and additionally, whether alternative finance as a whole, will disrupt
the traditional early stage investment industry.
Thus far, it appears the alternative finance market is actually moving in the opposite direction. Rather than
trying to supplant banking and venture capital, a collaborative model is emerging whereby digital platforms
work side by side with traditional investors. This trend is evidenced by a number of developments. There is
an increasing trend towards investor-led platforms. Such platforms allow individual investors to follow the
lead of an accredited investor, showing how traditional financing and alternative financing can work in
harmony.
The emergence of a secondary market for private company shares is making it easier than ever for
institutions to participate in the space. According to media sources like the Financial Times, even businesses
as regulated and traditional as mutual funds are now investing in private companies, such as Uber and
Pinterest. Large institutions are starting to utilise P2P lending as well, with the UK’s Metro Bank announcing
that it would start lending customer deposits through P2P platform Zopa. Goldman Sachs itself, widely seen
as the pinnacle of traditional investment banking, has even announced that it will start lending through a
digital consumer-driven platform. All of these points show how rather than disrupting traditional financing
models, alternative finance is developing its own collaborative niche within the industry.
ALTERNATIVE FINANCE: DISRUPTION OR
COLLABORATION?
Rather than trying to supplant banking and venture
capital, a collaborative model is emerging whereby
digital platforms work side by side with traditional
investors and financial institutions.
18
“

19.
Global easing of regulations around the world is opening up the
private investment market to larger numbers of investors. In the US,
changes to legislation allowing for companies to state publicly that
they are raising funds meant that the market was opened up to
accredited investors in 2013. Regulators recently went a step further
and now non-accredited investors have access to the asset class for
the first time under Title IV.
REGULATION
Millennials desire for fast, seamless user experience coupled with
their preference for online, mobile-first solutions is changing
consumer investment behaviour. Furthermore, they are drawn by
the greater transparency and increased involvement in the
investment process that online funding platforms afford.
CHANGING INVESTMENT BEHAVIOUR
With crowdfunding’s roots in the donation/rewards based category,
it did not take long for the sector to evolve and incorporate P2P
lending and equity platforms. Furthermore, there are now platforms
at every sector of the funding cycle while other online tools such as
data providers are evolving to compliment the fast moving sector.
INNOVATION
Investors are incentivised to share campaigns across their network in
order that the funding target is reached and as such, alternative
finance is an increasingly social market. Furthermore, strong network
effects mean that as platforms draw more investors they will draw
more issuers and vice versa. All this makes it easier for online
platforms to recruit customers than their traditional bricks and mortar
counterparts.
CUSTOMER ACQUISITION
Democratising Finance Executive Summary
GROWTH DRIVERS
19

20.
INTRODUCTION
If the Alternative Finance sector does reach its
forecasted $34.4Bn in funding in 2015, it will have
surpassed the venture capital industry’s $30Bn of
annual funding volume6
“

21.
Born out of the ashes of the 2008 financial crisis,
alternative finance, which encompasses practices like
crowdfunding and peer-to-peer lending, has grown
rapidly as a means of financing globally. Beginning as
an online extension of traditional financing by friends
and family, alternative finance has given rise to truly
global online communities of investors and issuers,
democratising, globalising and streamlining the capital
raising process.
There are many examples of early crowdfunding
campaigns, but it has been the combination of a
number of factors that has allowed it to grow into the
industry that we recognise today. Technological
advances, namely the advent of Internet 2.0 has meant
that users can enjoy greater interactivity online, while
the squeeze on bank lending and low interest rates
post 2008 have pushed issuers and investors to
explore non-traditional financing and investment
models.
Since 2008, individuals and companies have
successfully raised billions of dollars in debt, equity
and donations online. Worldwide, some estimates put
the total alternative finance market at $16.2Bn in 2014,
more than double the $6.4Bn it was in 2013, but still some way short of the $34.4Bn it is expected to reach
this year. If the sector does reach its forecasted $34.4Bn in funding in 2015, it will have surpassed the venture
capital industry’s $30Bn of average annual funding volume. Such success has given rise to a new, but still
nascent, digital investing ecosystem of issuers, investors, funding platforms, marketplaces and information
providers that are challenging the traditional players.
Though led by developed nations in a geographic sense, particularly the United Kingdom, the United States
and China, which, according to some estimates make up 96% of the financial return crowdfunding market, no
single region controls the digital investing landscape as we know it today. It operates on a truly global basis.
As with the development of any new financial market, the regulatory environment remains fragmented,
differing across geographies not only in a rule-making sense but also in maturity, clarity and relevancy.
Moreover, funding platforms, service providers and data availability all remain fragmented as well.
As the Statue of Liberty was being shipped
from France, efforts by the US government to
raise money for a pedestal for the statue to
stand on had stalled. By the summer of 1885 it
seemed like all options had been exhausted.
Renowned publisher Joseph Pulitzer took it
upon himself to launch a fundraising
campaign through his newspaper the New
York World. He sought lots of small donations
from a large number of people and within 5
months had raised the required $100k from
160k ordinary Americans.
Pulitzer used a single collection point to
collect small amounts of money from a very
large pool of donors and if this was launched
today, the campaign would resemble a
reward/donation based crowdfunding
campaign similar to those run on Kickstarter
and Indiegogo.
STATUE OF LIBERTY
21

22.
DI Sphere: Mapping the Digital Investment Ecosystem
22

23.
Democratising Finance Introduction
The ecosystem on the previous page stands to
highlight the various sectors and major players
that make up the alternative investment market.
Whereas traditionally a young company would
look to family and friends for seed capital, a bank
to borrow from, a VC to provide growth capital and
the public markets for liquidity, there are now
online platforms servicing every step of the
funding cycle. Despite the existing fragmentation,
as a whole these players are creating an integrated
digital landscape that serves a specific economic
need: to provide capital to growing enterprises
that do not have access to capital under traditional
finance methods and/or to provide capital in a
more cost effective way than traditional sources.
In effect, alternative finance is removing
information barriers and opening funding conduits
into the private investment market for both issuers
and investors, resulting in a more accessible asset
class. There are added benefits too for
entrepreneurs who choose alternative funding
routes over more traditional routes, such as
increased product awareness and a more
developed customer base.
This report aims to highlight and breakdown the
various sectors that make up the overall alternative
investment ecosystem. The alternative finance
ecosystem has evolved over the past decade and
consists of players in differing segments across the
globe including:
• Funding platforms: rewards, debt, and
equity
• Liquidity platforms
• Private placement platforms
• Alternative investment platforms
• Online M&A platforms
• Data and research providers
• Back office and support providers
• Business intelligence providers
WORLDWIDE ALTERNATIVE
FINANCE4,5
ALTERNATIVE FINANCE IN
EUROPE5
23

24.
ISSUERS
Initially platforms primarily featured young
companies raising seed stage capital at a time when
it was hard to access traditional funding sources, but
now, the industry is moving upstream and is
attracting more established businesses, drawn not
just by the speed and cost savings but by a host of
added benefits too
“

25.
Democratising Finance Issuers
From alternative finance, equity and debt-based
crowdfunding emerged to fulfil an important
portion of a developing SME’s funding cycle known
as the funding or capital gap. Whereas VCs and
even angel investors are increasingly looking for
businesses with a clear path to exit (somewhat a
function of their increasingly traditional investor
bases), excluding the majority of young companies
f ro m f u n d i n g , e q u i t y a n d d e b t - b a s e d
crowdfunding stands to provide capital to
businesses that are moving from prototype to start-
up to early growth without forcing them to call
upon friends or family for capital at a stage that is
too early for traditional bank funding. Moreover,
requirements for series A rounds are becoming
higher, forcing companies to raise prior rounds.
Basel III, resulting in new regulations and capital
rules has meant that banks are increasingly strained
in their ability to lend to SME’s. This coupled with
the fact that even small lines of credit are taking
increasingly longer amounts of time to approve has
created a funding vacuum. Specifically, in its
October 2014 Senior Loan Officer Opinion Survey,
the Federal Reserve noted that the majority of
respondents indicated that underwriting policies
on small business loans were tighter than their
average over the last decade. Alternative funding
methods stand to reduce this working capital gap.
Such reduction in time to funding could have
massive implications for small businesses and
overall economic growth.
Alternative finance platforms ability to reduce this
working capital gap and time to funding has meant
that they are beginning to attract the attention of
larger, more established issuers and that has led to
investment activity moving upstream in the last
couple of years.
In March 2014, Facebook made an announcement
that they were taking over Oculus Rift, the virtual
reality gaming headset manufacturer, for $2Bn.
What made this exit particularly interesting was
that two years prior to the announcement, Oculus
Rift raised $2.4Mn via the Kickstarter platform. In
return for donations, donors were given T-shirts,
posters and for larger donations, developer kits.
While the exit did not reap any financial rewards
for the donors, it further highlights the potential of
investing via crowdfunding.
FACEBOOK ANNOUNCES
ACQUISITION OF OCULUS
RIFT FOR $2BN
CROWDFUNDING DEALS
BY STAGE 2014/155
CROWDFUNDING INVESTMENT
BY STAGE 2014/155
25

26.
This year, Lending Club has announced
partnerships with both Google and more recently
Alibaba, to whom they will provide small business
loans of up to $300k to US businesses that are
looking to buy inventory from the Chinese
eCommerce site. This is of particular note due to
the fact that Lending Club is replacing an
established, traditional Chinese bank and
highlights the threat traditional lenders face from
this still infant industry.
LENDING CLUB
Earlier this year, JustPark, previously backed by
BMW and Index Ventures, used Crowdcube to
raise £1 million of growth capital at a time when it
would have usually looked to more traditional
funding avenues. JustPark citied one of the key
drivers as being the fact that by giving their
customers the opportunity to invest in the
company it would make them less likely to join
competitors in the future.
NEARDESK
NearDesk, who rent desks and meeting rooms by
the hour around the UK, recently raised £1Mn via
Seedrs. The capital will be used as growth capital
and follows previous funding rounds raised
online. NearDesk saw VC’s Juno Capital and
Renaissance Capital take part in the online round.
In October 2014, UK-based winemaker, Chapel
Down Group, raised £3.95 million via Seedrs,
making it the first publicly listed company to
access the public equity markets via
crowdfunding. The funds were raised to promote
growth and necessary investment to support that
growth. Similar to companies raising in the non-
public sphere via crowdfunding campaigns,
Chapel Down cited the ability to build a
significant body of shareholders as a primary
reason for using an alternative finance fundraising
model.
In 2013, Nicola Horlicks, a highly regarded fund
manager, raised £150k via Seedrs. The money
was sought to allow her to start raising capital for
her first investment fund. Since then, she has
raised follow-on investment via Seedrs, to the
tune of £450k and increased the fund target from
$100 million to $250 million because of investor
appetite.
CASE STUDIES
The Mill Residential REIT became the first real
estate investment trust to utilise the power of the
crowd, when it raised £2.1 million in just three
weeks via Syndicate Room last year. In total they
raised £3.5 million, with the balance coming from
institutional investors. The round preceded a
listing on AIM a couple of months later, giving
investors immediate access to liquidity and was
one of the main reasons that the round was so
well received. Furthermore, the structure stands to
highlight the increasing sophistication that is
becoming prevalent in alternative finance.
CHAPEL DOWN JUSTPARK
MILL RESIDENTIAL REIT
NICOLA HORLICKS
26

27.
Alternative lending has moved on from providing
small-scale loans to consumers and seen
exponential growth since 2010, when the industry
self-imposed restrictions to address default rates that
were sometimes as high as 30%. Their ability to
extend credit in a quicker and more cost effective
manner than traditional banks has meant that the
industry now encompasses more commercial loans
and is providing credit to a growing number of
SME’s.
In equity crowdfunding there is evidence of a similar
theme developing. Initially platforms primarily
featured young companies raising seed stage capital at a time when it was hard to access traditional
funding sources, but now, the industry is beginning to move upstream and is attracting more established
businesses, drawn not just by the speed and cost savings but by a host of added benefits too.
Aside from the aforementioned benefits, early stage companies have reported seeing increased Angel
and VC interest immediately after closing a round through crowdfunding. In a recent study, 71% of
businesses reported that within 3 months of closing a fundraising round that they had either taken on
investment (or were in discussion to) from Angel investors or VC’s5.
Other reasons private companies are drawn to raising capital online include the increased marketing
awareness that engaging with funders brings, from becoming more aware of new market opportunities, to
understanding which features resonate with people and gaining insights into competitors. A number of
firms are reported to have even scrapped their marketing plans and completely rewritten them
subsequently.
Democratising Finance Issuers
CHARACTERISTICS OF UK CROWDFUNDING ISSUANCES5
Summary of benefits for entrepreneurs/issuers
of raising money online:
• Efficiency
• Access to wider investor base
• Marketing/product validation
• Democratic process
• Newfound comfort with investor structure
now in crowdfunding
27

28.
DEALINDEX DASHBOARD INSIGHTS
Democratising Finance Issuers
DEALFLOW STANDARDISED ACROSS LEADING EQUITY
CROWDFUNDING PLATFORMS GLOBALLY
AVERAGE AND MEDIAN DEAL SIZES
28

29.
DEALINDEX DASHBOARD INSIGHTS
Democratising Finance Issuers
SECTOR ANALYSIS: FUNDING GOALS,VOLUMES, SHARE OF SPEND
29

30.
The race towards embracing crowdfunding has spread globally. Crowdfunding platforms globally raised a
total of $16.2Bn last year, according to a recent crowdfunding industry report by Massolution, a research firm.
Regulatory reform, international expansion and cross-border deals have helped boost the industry, as has a
tide of investors seeking rewards or equity in return for their cash. Among all the regions, Asia is leading the
race in terms of growth, with a 320% increase in funding volume. With $3.4Bn raised last year, Asia is
experiencing the highest growth in the crowdfunding sector and has surpassed Europe ($3.26Bn raised) to
become the second-largest crowdfunding region. In 2015, crowdfunding in Asia is forecast to grow by more
than double the rate of that in North America.
What are the Trends Driving this Crowdfunding Revolution in Asia?
First, while rewards and equity-based campaigns typically get the most headlines, it is actually lending-based
crowdfunding that dominates the industry: in 2014, it raised $11.08Bn. Part of that, according to Massolution
founder and CEO Carl Esposti, is explained by the strong growth of crowd-based lending in Asia: “Surprises
materialising from this year’s research included the astounding growth in the P2P and P2B lending market in
Asia, stemming largely from the Chinese market.”
Other key drivers underpinning the rampant growth of crowdfunding in Asia can be attributable to the
following three factors:
1) Online marketplace popularity (explosion of retail e-commerce). It is estimated for APAC to outspend
North American by $40Bn. In fact, 45% of all buyers worldwide on retail e-commerce come from Asia.
2) Social media penetration and savvy. 52% of social media users and 47.6% of mobile users are from Asia.
3) Success and popularity of crowdfunding. Singapore now ranks in the top ten worldwide for crowdfunding.
Compound this by the fact that two thirds of the world’s global middle class will live in Asia by 2030 with
$3.5Bn coming from emerging economies; crowdfunding in Asia is clearly here to stay and is poised for
even more rapid growth.
Is Asia Ready For Crowdfunding?
Asian markets and regulatory structures are not as sophisticated nor developed as say, the Americas. As such,
this naturally begs the question as to whether Asia is really ready to embrace the crowdfunding tidal wave?
According to Doctor Jeffrey Chi, Managing Director of Vickers Venture Partners and Chairman of the
Singapore Venture Capital & Private Equity Association, the answer is that Asia is absolutely ready to embrace
the crowdfunding movement. It is his view that emerging markets are actually more suitable for crowdfunding
than mature markets. This is because gaps in the marketplace and lack of access to capital are more
pronounced in these markets.
“Crowdfunding in Asia Poised for Rapid Growth”
Director,Marketing & Business Development,DealIndex
MICHELLE TANG
30

31.
PLATFORMS
Over time one would expect a broad swath of
financial services currently carried out at bricks and
mortar institutions to transition to alternative models
as business and cultural support is gained
“

32.
Reward Crowdfunding
Popularised by Indiegogo and Kickstarter, donation-based funding allows users to make donations to
companies or non-profits raising capital in return for an incentive. Those incentives include early access to
products, gifts, or an increased sense of self-worth. Compared to equity and debt-based models, rewards
based crowdfunding applies mainly to firms in the idea or early prototype phase, or organisations that
wouldn’t seek traditional financing like not-for-profits. As recently as July 2015, Kickstarter had $1.8Bn in
pledges by 9Mn+ total backers.
Reward based platforms, such as Kickstarter, have proved particularly beneficial to companies who are
developing products. The platforms provide an important portal through which issuers can market their
product directly to consumers, gain feedback on initial prototypes and validate their ideas, essentially de-
risking the process of starting a business. In turn, this makes it more likely that they will go onto raise
Angel/VC rounds in the future.
However, with the present capital gap for enterprises in both the start-up and early growth phase
discussed above, alternative finance solutions have rapidly moved upstream. No longer are issuers solely
looking for seed capital. Companies in the early stage and growth phase are all tapping funding
platforms as a means to raise capital.
Democratising Finance Platforms
The alternative finance, or crowdfunding industry started with the three primary platform models: 1) reward or
donation based models; 2) debt-based models; and 3) equity models. More recently however, given the
industry’s ability to successfully challenge more traditional institutions, there has been a number of newer
entrants to the market. They are designed to compliment the existing players and include liquidity and exit
based models, real asset models and wealth management models.
In essence, over time, one would expect a broad swath of financial services currently carried out at bricks and
mortar institutions to transition to alternative models as business and cultural support is gained. This growth
will more than likely mean the market will stratify leading to niche players before an eventual shakeout occurs.
With its roots in donation and reward-based crowdfunding, alternative finance began as a seed-stage
endeavour.
ALTERNATIVE FINANCE ADDRESSABLE
MARKET OPPORTUNITY1
LENDING IS A $1.7TN AVAILABLE
MARKET1
32

33.
Since “Star Citizen,” the video game, initially raised $6Mn on Kickstarter and CIG simultaneously in
2012, donations have continued to come from nearly 750,000 ordinary fans at a steady pace of $1-2
million per month. The end result, one of the largest reward crowdfunded project to date at $52Mn.
The pledges have ranged in size from $36 – 18k. In return, those making donations get access to
special game features, access to unfinished game versions and other merchandise.
Compared to traditional financing, it appears customers, or “fans,” like having input in a finished
product. Through their donations, they have a say in development, resulting in a more marketable
finished product.
STAR CITIZEN
P2P/Marketplace Lending
As it stands, debt-based alternative funding appears more popular with more mature and well-
established SME’s, many of whom prefer the cost benefits of an alternative-funding model. Currently, the
largest debt-based players include Funding Circle, Lending Club, and Prosper. As evidenced by Lending
Club’s recent IPO, this sector of lending continues to gain traction on both the consumer and commercial
side. This includes more than $9.2Bn of loans issued by Lending Club and $1Bn issued by Funding Circle.
Morgan Stanley estimates that the P2P lending market, which it says is a “misnomer” because of
increased institutional activity in the space, will be worth $290Bn in five years12.
As the lending market matures and grows further, drawing in more institutional money such as from
pension funds, we expect to see increasing importance placed on good due diligence. This pressure is
also likely to come from regulators as the platforms handle larger amounts of capital and appear in the
news more.
Democratising Finance Platforms
PROJECTED CROWDFUNDING
MARKET GROWTH IN EUROPE4,5
33
GLOBAL CROWDFUNDING
MARKET 20144,5

34.
LENDING CLUB IPO
In early December, the peer-to-peer lender, Lending Club, debuted on the New York Stock
exchange to strong investor support. On its first day of trading, valuation climbed north of $9Bn,
putting it on par with much larger financial institutions by assets. While this is an
accomplishment in and of itself for Lending Club, it also serves as a sign that alternative finance
has arrived to the mainstream.
Ultimately, it remains to be seen if Lending Club’s goal of transforming the entire banking
system from a transparency and efficiency perspective comes to pass, but its IPO certainly
added credibility to its cause and the greater cause of alternative finance.
Equity Crowdfunding
Equity Crowdfunding has been on the rise for some years, with the UK leading the charge. Other
countries, like Australia and New Zealand also made early regulatory moves in the area. Both the US and
UK began discussing crowdfunding rules in 2010, but the UK has been faster in allowing broad public
access. In 2013, with the passing of the JOBS Act in the United States, equity crowdfunding was made
available to accredited investors. Numerous platforms have emerged to serve this market segment and
there is now an increasing array of companies at various stages of the funding cycle and operating
different business models. These include businesses in the growth equity, private placement, M&A,
secondary, and wealth management markets. These platforms are now able to provide a holistic
solution for businesses at all stages of the funding cycle. Equity crowdfunding models provide young
businesses with a platform that allows them to reach a wide range of investors.
Democratising Finance Platforms
UK MARKET BY TYPE OF
PLATFORM 20144,5
UK AVERAGE GROWTH RATE BY
TYPE OF PLATFORMS 2012-20144,5
34

35.
What are issuers looking for from crowdfunding providers? What are the key value propositions?
Issuers are looking for market appeal and validation. They need crowdfunding providers that can provide
them with tools to refine their offerings so they can present them in a manner that is appealing to a large
number of investors who may be interested in their companies. Value propositions such as business
planning and analysis solutions, document hosting and sharing capabilities, and social media integration
methods are vital to accomplish this task.
What has been the feedback from the angel and VC market on your platform? Are there any features you
are keen to add, or modify, based on the feedback?
Angels and VC’s want the ability to quickly and efficiently screen deal flow. Our system is designed so deals
are categorised by automated, unbiased, and patent protected indicators. Angels and VC’s can see a rating
of each deal based on dozens of attributes so they can quickly find the ones that meet their investment
criteria. They are also provided with data regarding progress towards a company’s funding goal which
includes pre-money valuation, funding raised so far, a percentage of how much ownership is for sale,
current funding commitments, and funding raised in the past. All investors on our platform can also request
any documents that pertain to an issuer’s fundraise at any time. This includes the results from our Enterprise
Analyzer software which highlights abnormalities in the company’s business plan, benchmarks the
company against its peers within its industry, and provides a host of other financial analytics presented in a
standardised format.
What are the current liquidity characteristics of the equity crowdfunding market? How do you see this
evolving over the coming months and years?
There currently are not any liquidity characteristics of the equity crowdfunding market in the US. Some
current regulations require a holding of securities purchased from private placements. Investors can be
required to warrant they are not investing for trading purposes, so investments made through
crowdfunding are considered long term by many. New regulations, however, may reduce transfer
restrictions, which will lead to a general movement towards a secondary market. Companies such as
WealthForge have taken great steps towards liquidity by working with CUSIP Global Services to create a
standardised database for private investments by issuing unique alphanumeric codes to private securities
sold within the crowdfunding industry.
Platform: Equity Crowdfunding
Country: United States
Founded: 2005
Funding provided to date: US$330Mn+
EQUITYNET
PARTNER CONTRIBUTION
35

36.
What are issuers looking for from crowdfunding providers? What are the key value propositions?
Through crowdfunding campaigns, issuers are looking to increase brand awareness, accelerate global
fundraising and create communities that can help them to grow their business. Crowdfunding campaigns
bring a lot of visibility (press, events and online marketing) to companies. Furthermore, after the campaign
finishes, companies can expect the investor community to continue to promote the company, buy the
product, advise the entrepreneur and share with their network.
Our key value proposition is to help European SME’s to scale by making pan-European public placement
affordable. We are headquartered in Belgium but we operate across the EU and are currently raising funds
for French, German, Belgian and Dutch companies.
What are the characteristics of the investors you are, or expect to, work most closely with?
We have 3 different types of investors:
• Unaccredited investors, who invest on average €700 per transaction.
• Business Angels and sophisticated investors who invest an average of €45k per transaction.
• VC Funds who invest up to €200k in a deal.
What has been the feedback from the angel and VC market on your platform?
Angel and VC’s investors like the fact that MyMicroInvest publishes an information memorandum or
prospectus for each new transaction on the platform. Professional investors want to leverage their
investment alongside the crowd, who validate the company concept/offer and also like that companies can
capitalise on their community to promote the business in the long term. MyMicroInvest offers a simple and
efficient crowdfunding solution to issuers by pooling all crowd investors in one single investment vehicle.
The simplicity of the structure, whereby all crowd investors are pooled into our investment vehicle instead
of investing directly in the target company is an attractive feature.
What do issuers see as the main benefit of listing on your platform?
MyMicroInvest actively promotes each company by doing lots of offline and online marketing such as live
crowdfunding events. We also have partnerships with major banks such as BNP Paribas, Fortis and
KeyTrade Bank. Furthermore, we can help issuers to connect with sophisticated investors such as Angels
and VC’s.
What are the current liquidity characteristics of the equity crowdfunding market? How do you see this
evolving over the coming months and years?
The current liquidity of the equity crowdfunding market is low even though our investors can transfer his/
her share(s) to a third party. We believe this situation will quickly evolve since stock markets are willing to
list our titles on their market.
Platform: Lending and Equity Crowdfunding
Country: Belgium, EU
Founded: 2011
Funding provided to date: €10Mn
PARTNER CONTRIBUTION
MYMICROINVEST
36

37.
Over the past five to ten years the landscape for alternative investing has changed greatly due to technology.
Crowdfunding platforms have facilitated a massive influx of capital to early stage/seed stage companies
including technology, real estate and everything in between. Traditionally, founders had to approach
individual venture capital firms, angel associations and other institutional sources one at a time and wait for a
response regarding either the investment size or valuation. What we have successfully done at Onevest is not
only enable entrepreneurs to go out and raise money through the traditional sources as mentioned above,
but employ fundraising tactics such as equity crowdfunding. At Onevest we do not act as a replacement but
as a supplement to their fundraising efforts. Technology has enabled entrepreneurs to reach out to a wider
audience in a shorter amount of time to not only showcase their product but to also raise funds.
Issuers look for a platform where they can successfully meet or exceed their fundraising goals. They look to
us to perfect their pitch and to understand the general investing landscape. In regards to key value
propositions, when it comes to fundraising, the CEO or co-founder has one of two choices, they can either
continue to run their business, or go out for 6-9 months and exclusively focus on fundraising. It is near
impossible to do both simultaneously and that is why we see such a large value proposition as an equity
crowdfunding platform.
Digital investment services are not new, there are companies such as, Charles Schwab, E*trade, Fidelity and
basic brokerages that offered their services online. What Onevest is doing is democratising private
placement capital. What that means is that founders are able to go online and start fundraising ideas.
Individuals out there, as long as they are accredited investors or more recently non-accredited with the
passing of Title IV, can now participate in those companies that they have been reading about over the past
10-15 years, that have been going public and not been able to participate until they are publicly traded.
Onevest focuses primarily on tech enabled companies but there are other crowdfunding platforms that
fundraise exclusively for real estate, biotech and other company types. We chose tech companies because
we have an advisory base that are well known amongst the early stage investment community and we are
therefore able to execute a vigorous due diligence process on each company.
We have seen investors all across the field from doctors and lawyers to small business owners, former
entrepreneurs and real estate developers. Furthermore, the investors that commit the highest level of capital
seem to be very knowledgeable about the specific sector that they are investing in. Angel groups often look
to us for the due diligence. Every company has a full due diligence report, financial records, pitch deck and
all necessary collateral for an angel or an angel group to make an educated decision on whether or not he or
she will make an investment into that company. Regarding VC firms, we have been able to form strong
partnerships with them due to our vigorous due diligence process. We are able to provide both groups with
quality deal flow that they would otherwise not be able to filter through any process.
Platform: Equity Crowdfunding
Country: United States
Founded: 2010
ONEVEST
PARTNER CONTRIBUTION
37

38.
We recently spoke to Raizers a Pan-European equity crowdfunding platform located across France,
Denmark, Switzerland, and with intentions to spread throughout Europe. They help companies to raise
between €50k to 1m.
Raizers is the only French crowdfunding platform with a European dimension, with offices located in Paris
(France), Lausanne (Switzerland) and in Copenhagen (Denmark). The issuers benefit from this cross-country
community through the global vision they have and the help they can give while expanding abroad.
Most of their investors tend to already be consumers of a product, or will be post-investment and act as
brand ambassadors who can provide the companies with important feedback. In France a lot of their
investors are attracted because of the tax exemptions for equity investors, while debt investors tend to
purely be looking for higher returns than other avenues.
VC and Angels are also important to Raizers, who solicit them at the beginning of the round, as the crowd
is more likely to invest if the round is subscribed to already. As with many other platforms, Raizers noticed
that it was easier to incentivise the crowd to invest when 30% of the financing objective was already
realised.
Liquidity still remains a concern for the equity crowdfunding market in Europe, as it does for most people
in the sector. Raizers tends do deal with this through tag-along and drag-along clauses, or even calls
integrated into the shareholders agreement.
Platform: Equity Crowdfunding
Country: France, Switzerland, Denmark
Founded: 2014
RAIZERS
PARTNER CONTRIBUTION
38

39.
Previously, we talked with Snowball Effect, a crowdfunding platform based in New Zealand where
securities law has been overhauled and a new equity crowdfunding framework was installed in 2014.
Now, Kiwi companies can raise up to NZD 2Mn publicly over a rolling twelve month period.
Snowball Effect was one of the first equity crowdfunding platforms in New Zealand to be granted a license
in July 2014, and the industry certainly remains in its infancy. However, success has already come for
Snowball Effect. To date, issuers have raised in excess of NZD8Mn at an almost 100% success rate via
Snowball Effect’s platform. The largest was Invivo, one of New Zealand’s fastest growing wine brands,
which raised NZD2,000,000 (maximum possible in New Zealand) through Snowball Effect.
Snowball Effect’s strategy is to showcase a range of companies from New Zealand to test and grow the
awareness of equity crowdfunding in its corner of the globe. Other successful raises to date through
Snowball Effect include Renaissance Brewing (beverage sector), The Patriarch (first major feature film in
the world to be funded through equity crowdfunding), Carbonscape (cleantech sector), Aeronavics
(advanced aerial solutions) and Breathe Easy (pharmaceutical company), Red Witch (guitar and bass
effects pedals company) and Punakaiki Fund (invests in early/growth stage NZ businesses). Snowball
Effect has also raised funds successfully for two private offers and expects private offers to increase over
the next 12 months.
Similar to global peers, Snowball Effect takes a multifaceted approach to evaluating issuer applications.
Selection criteria includes: (1) performance, (2) markets and product advantage, (3) growth, (4) capability,
(5) governance, (6) financials, (7) legal, and (8) pre-committed funds/networks. In its words, companies
looking for growth or expansion capital are in its sweet spot, as they can benefit best from the brand
exposure and support brought by a public equity crowdfunding offer.
The Executive Director of CarbonScape provided his feedback on the process of raising funding through
Snowball Effect:
“Equity crowdfunding has been an absolute life saver for our small start-up CarbonScape Ltd. Despite two
distinguished international awards for our technology we could not escape the narrow limits of New
Zealand's "eligible investor" criteria. In one of their best moves the Government changed all that with the
April 2014 Financial Markets Conduct Act. Suddenly there are platforms like Snowball Effect
acknowledging the right and maturity of ordinary mum and dad Kiwis to make their own assessments of
commercial risk in equity investments. 207 mostly New Zealanders invested an average of $3,850 and the
company raised $764,302, well above our $400,000 target.”
Platform: Equity Crowdfunding
Country: New Zealand
Founded: 2012
Funding provided to date: NZD8Mn+
PARTNER CONTRIBUTION
SNOWBALL EFFECT
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Co Investment Models
More recently hybrid, co-investment models focused on early stage issuers have emerged, pioneered by
OurCrowd and VentureFounders. These platforms allow investors to co-invest alongside the co-investment
funds they manage and more traditional VC investment and differentiate themselves by their level of due
diligence and investment management expertise.
OurCrowd, for example, have channelled around $130Mn into 70 companies with plans to invest another
$100Mn by the end of 2015. They have a 50 person due diligence team that vets deal before they are
presented to investors and invest between 5-15% of the funding in every deal13. They recently invested in
ReWalk Robotics, an exoskeleton company that helps disabled people to walk, who having listed recently,
have a market cap of around $160Mn.
Investor-Led/Syndicate Models
Investor-led platforms, adopted by AngelList in the US and SyndicateRoom in the UK form syndicates around
accredited lead investors, whereby the lead investor must invest their own money, negotiate the terms and
then invite other investors to join under those same terms, (lead investors also carry out the diligence which
provides comfort to the syndicate, this model has resulted in investment from non-traditional sources of
private company funding). The idea of both platforms is to open up the deals that the top investors are
investing in to the online community and continues our theme of broadening the scope of the private
market.
This platform model gives other investors peace of mind by investing alongside professional investors, with
the platforms benefiting by taking a slice of the carry on deal. This emerging model also highlights the
increasingly collaborative relationship that exists between alternative finance and the traditional investing
community. Rather than trying to replace the traditional VC-led funding paradigm, alternative finance is
developing a symbiotic and mutually beneficial relationship with the angel and VC community.
Niche Platforms
The increasing proliferation of platforms in recent times has meant that a number of new entrants to the
market are choosing to specifically target niche sectors. This has been the case with Trillion Fund, who
concentrate on clean-tech investment opportunities; AgFunder, who follow a syndicated investment model
and operate in the $6.4Tn Food and Agriculture industry and TradeUp, who focus on export driven
companies.
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PARTNER CONTRIBUTION
Agriculture is a $6.4Tn market employing roughly 1.3Bn people around the world. It has outperformed all
other sectors but one over the past 15 years, yet there are few avenues for investors to access this asset class
and few investors have exposure to agriculture in their portfolio. One reason it’s been so difficult for investors
to access agricultural investments is because the industry is highly fragmented. Current investment figures
indicate that agriculture needs $200Bn in annual investment in growth and innovation just to keep pace. The
lack of funding and cohesiveness across the agriculture industry presents a serious problem because current
agricultural production capacity must grow by as much as 70 percent by 2050 in order to supply a global
population of over 9 billion people.
The next wave of agriculture will look fundamentally different due to the new technologies now available in
this sector, like drones, autonomous vehicles, indoor agriculture operations, and more. Investors looking for
exposure to long term trends like population growth, protein consumption, and climate change are
increasingly searching for opportunities in pure-play agriculture or in agriculture technology companies.
AgFunder seeks to play a central role in facilitating the funding, access to investment, and ecosystem
development for the industry as it enters this next generation. The company has directed nearly $20M in
investment into agriculture and agtech companies, with that figure set to double this year.
To help facilitate investment, equity crowdfunding - and technology generally - is key to enabling investment
on a global scale. First, crowdfunding offers important procedural benefits. One of the most obvious is the
reduction in time that it typically takes to raise funding. A crowdfunding platform offers a much faster way to
attract and secure capital. The costs and expenses associated with running a crowdfunding campaign are
often significantly less expensive than pursuing funding through a traditional channel. For investors, it offers a
shorter investment cycle by providing access to curated deals, transparency, centralising company
information and documentation, and enabling electronic investment.
A crowdfunding platform with vertical focus like AgFunder’s allows both companies and investors to self-
select around a particular topic and for AgFunder to provide added value and expertise for both parties.
Issuers target a curated list of investors who possess industry knowledge, domain expertise, or are simply
interested in investing in the space. All of this takes place on a platform that removes key geographical
constraints, magnifying the community exponentially.
Currently, AgFunder has over 5,500 registered members. Roughly 1,300 of those members are accredited
investors, with over 45% of them coming from venture capital firms, family offices, private equity firms, and
even sovereign wealth funds. In addition to pure fundraising functions, AgFunder has also established and
continues to cultivate an ecosystem for investment in agriculture. Through its affiliate news site
AgFunderNews, investors, partners, experts, corporates, and media outlets interested in food and agriculture
technology can learn about new innovations, industry developments, and funding news.
Founded: 2012
Funding provided to date: $20Mn
Platform: Equity Crowdfunding
Country: United States
AGFUNDER
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PARTNER CONTRIBUTION
How have you leveraged crowdfunding in the angel investment market?
Equity crowdfunding is the platform that allows us to do our business. It enables us to get our research
across to an international community of investors, and provide them with everything they need in order to
make intelligent investment decisions in Israeli startups.
What have been the keys to the success of your business model?
The key to our model is the alignment of interests between ourselves, our investors, and the lead angel
investors we have partnered with. Investing alongside local lead angels with a proven track record and
skin in the game, international investors can be assured that they are gaining access to the most exclusive
deals the market has to offer and coming in on terms these angels have negotiated for themselves.
What has been the feedback from the angel and VC market on your platform?
We are viewed as complementary partners. Angel investing as an industry is based on syndication, and
VC’s and angels alike want to invest alongside added value partners they trust and like to do business
with. iAngels allows the VC community in Israel to close rounds faster and more efficiently by bringing
capital and insight from abroad.
What is the value proposition of performing thorough due diligence on the behalf of investors?
Angel investing is not the kind of business where you can simply invest passively. Investors need to be
selective, diversify, and conduct their own due diligence. Most people, however, do not have the time to
make it their full time job, especially in a foreign country. This is what we provide and we love what we do.
Our investment team works day and night in order to provide our investors with the best deal flow and
investment experience.
What are the characteristics of investors that are most likely to use your platform?
Our investors are sophisticated business people and see us as their investment arm in Israel.
What deals do you invest in?
Mobile, enterprise software, fintech, SaaS, consumer applications, big data, robotics.
Founded: 2013Platform: Equity Crowdfunding
Country: Israel
IANGELS
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PARTNER CONTRIBUTION
Enabling the crowd to co-invest with professional investors is a game-changer for the angel investment
market and a clear sign of how much the industry is maturing. As the driving force behind the initiative in
the UK, equity crowdfunding platform SyndicateRoom is uniquely positioned to comment on both the
benefits for the crowd and the response from angels and VC’s.
SyndicateRoom’s approach differs from the more traditional company-led equity crowdfunding model by
putting the emphasis firmly on investors. Instead of the investment-seeking company deciding its own
valuation and setting the terms of investment, under the investor-led model, a professional investor
negotiates the deal and the crowd is then able to co-invest alongside them under the same economic
terms.
The validation of having professional investors carrying out their own due diligence first and investing large
sums of money into the deal is the key differentiator with the investor-led model. As it’s a more curated
approach, poorer quality investment opportunities are weeded out - a case of quality over quantity. This
and the fact that the crowd can invest just £1,000 alongside professionals investing much larger sums have
been the keys to the success of SyndicateRoom’s business model.
The SyndicateRoom ’crowd’ tend to be sophisticated and high net worth investors investing an average of
£15,000 into each round. This is well above the amounts that the general equity crowdfunding investor
typically invests. However, the platform also has many members investing towards the lower end of the
scale as they know that whether they invest £1,000 or £1Mn they will still get the same class of shares and
same share price as the professional investor.
One of the key attractions of SyndicateRoom for issuers is its members. Their endorsement of the investor-
led model has meant that SyndicateRoom has successfully closed over 80% of all the rounds it has listed.
Issuers are also reassured by knowing that they are getting sophisticated investors that have the ability to
follow their money when the next funding round comes.
In addition, for more sophisticated deals, it is important for issuers to have an audience that understands
complex investment opportunities. With 33% investments in life sciences, 25% in engineering and 25% in
B2B, SyndicateRoom members clearly have an understanding and attraction for sophisticated deals. The
majority of deal sizes on the platform are in the £250k to £2Mn range.
SyndicateRoom works with over 30 angel networks throughout the UK, helping them to leverage their
investments. Feedback from the angel and VC market about the platform has been excellent. Some VC’s
have requested the addition of reporting tools that comply with their internal processes but as each has
their own differing set of rules and requirements this can become too challenging.
Judging by the response from both the crowd and the angel and VC market thus far, it appears that the
investor-led model of equity crowdfunding is set to go from strength to strength.
Founded: 2012
Funding provided to date: £29Mn+
Platform: Equity Crowdfunding
Country: United Kingdom
SYNDICATEROOM
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PARTNER CONTRIBUTION
VentureFounders was established with the aim of bringing a curated offering of venture capital and angel
style investments to investors in an efficient and cost-effective way. We launched in 2014 to offer a more
bespoke and professional service, both to businesses looking for finance through crowdfunding, and to
investors wanting to diversify their investment portfolio.
The team’s extensive experience in corporate finance, private equity, deal structuring and start-ups means
we are well placed to identify the businesses that meet our criteria i.e. those with potential for growth and
profit, a sustainable competitive advantage, a clear path to commercialisation, a strong management
team and viable monetisation options. Our team is complemented by a Senior Advisor panel of industry
leading experts and entrepreneurs including Justin Urquhart Stewart, Founder of Seven Investment
Management and Martin McCourt the ex CEO of Dyson.
VentureFounders is much more than a crowdfunding platform. We offer long-term advisory services and
partnership to the businesses seeking funding and provide access to a curated range of well-structured
early stage and growth capital opportunities for investors. We screen all of the investment opportunities
on our platform, conducting detailed due diligence before presenting to our investor base. All of this vital
information is presented on our website for investors to see.
We believe that the role of crowdfunding shouldn’t end just because the investment round has
completed. We create long-lasting relationships with our investment businesses, checking in throughout
their growth cycle, often taking a board observer seat and providing regular updates to shareholders and
helping to maximise returns on their behalf.
VentureFounders will typically work with sophisticated and High Net Worth investors who have already
established a diverse portfolio of investments and are interested in angel style investments at a level that
is much more accessible and affordable. Our entry-level investment is £1,000. The reason that we set this
minimum is that we believe this is an appropriate minimum threshold for more serious investors looking
to self-select their own portfolio whilst also indicating a suitable level of risk appetite.
Our current investors are a mix of backgrounds but in general there is a South East and London bias. The
profile of investors who may find our platform is right for them will range from highflying city
professionals, through to the adventurous retiree, through to successful entrepreneurs seeking to support
the next generation. We expect to appeal to any HNW investor from across the UK and possibly in to
Europe in the coming years.
VentureFounders is aimed at growing businesses that have already demonstrated early signs of strong
potential. The company must be UK-based and in terms of deal size, looking to raise between £250,000
and £2 million. We are open to any industry sectors. Typically between one and three years old, they will
be up and running with a strong management team in place and a detailed business plan. The businesses
that VentureFounders works with tend to value the in-depth support and guidance throughout the
fundraise process as well as access to a mix of supportive investors and senior advisors who can open
doors and introduce valuable networks.
Founded: 2013
Funding provided to date: £9Mn+
Platform: Equity Crowdfunding
Country: United Kingdom
VENTUREFOUNDERS
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PARTNER CONTRIBUTION
Bankless 24 is the first crowdfunding platform in Germany for small to medium sized businesses. We
caught up with them to discuss their business model, which is unique in that they offer a mezzanine
product. The reason for this is that the funding gap in Germany for growth financing means companies
are battling a declining equity ratio, which impacts their credit score and the mezzanine product is
designed to solve this issue.
Their investor base is composed mainly of private investors, although more recently institutional investors,
such as family offices, have started to invest. For Bankless 24 to reach their transaction targets of €1 - 5
Mn, these institutional investors are needed.
Founded: 2012Platform: Equity Crowdfunding
Country: Germany
BANKLESS 24
PARTNER CONTRIBUTION
Founded: 2014Platform: Equity Crowdfunding
Country: United States
TRADEUP
TradeUp are taking a unique approach to crowdfunding by focusing on export driven enterprises. They
noted that investors in the US are slowly becoming alert to the fact that companies must become globally
minded earlier in their life. With technology companies now being ‘born global,’ record numbers of mid
sized businesses are looking towards international expansion in order to tap new revenue sources. As a
comparison, European companies that operate in comparatively smaller countries have always had to think
about international expansion from a very early stage in order to maintain growth.
The reason for this focus is down to the fact that leading research all points to exporters outperforming
peers who are domestically focused. Exporters tend to employ better, more productive staff who are, as a
result better paid. TradeUp cite these businesses as out-performers in terms of ‘revenue, productivity and
stability’ and ‘stand out assets offering a unique portfolio diversification strategy.’
As crowdfunding platforms work at reducing the funding gap that exists, TradeUp is targeting funding at
least 200 US companies in the next two years. Feedback from issuers on the platform has been positive
with value added activities such as a list of best-fit investors, contacts for exporting and access to broker
dealer services all being well received.
TradeUp, is a Grow VC Group Company.
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Growth Capital Equity Platforms
Out of the movement upstream by issuers,
platforms focused on raising capital at the growth
stage of the funding cycle are beginning to
appear. Raising larger ticket sizes of between of
$2-50Mn, players include ASSOB, OfferBoard and
Healthios Xchange, who have raised $350Mn for
clients and focus on investments in the health
industry.
OfferBoard, has a wider scope and recently
featured a Series B financing round from medical
device company Atlas Spine which comes after
previous financing of $8.5Mn via more traditional
sources. Most of OfferBoard’s clients are
traditional middle market firms and on average
raise between $8–10Mn through the platform.
Private Placement Platforms
Private placements have also started to move
online. Ace Portal, Axial Ventures, which has
secured $20Mn in funding, and Venovate are all
disrupting the private placement market by
providing platforms that connect family offices
and high net worth individuals with opportunities
to invest in hedge funds, PE funds, energy
projects or other opportunities.
Venovate claims to have a total audience of
330,000 accounts totalling U$17Bn in assets,
while the NYSE took a minority stake in ACE
portal in 2013, signifying the potential this
category has.
Alternative Assets Platforms
Funding platforms ability to raise capital in a more
efficient manner through better access to
investors and their ability to disrupt traditional
firms has led to the emergence of alternative
investment platforms replicating the model. Firms
such as Darc Matter, iCapital Network, and Palico
are all bringing together wealthy investors and
private equity funds through the use of
technology.
iCapital Network is supported by placement
agents from Credit Suisse and Blackrock and is
opening up access for single investors to private
equity funds, at lower costs and much lower
qualifying amounts than would otherwise be
possible at traditional banks. iCapital Network
expected their aggregated qualified investor
assets to reach $850Bn by the end of 2014.
Online M&A Platforms
The Mergers and Acquisition market has also
benefitted from technological innovation as
companies such as Intralinks Dealnexus and
DealGlobe bring dealmakers together from all
parts of the world, streamlining and speeding up
the deal making process. DealGlobe is a new
platform specifically developed to connect
European businesses with Chinese capital at a
time when Chinese foreign investment is strong.
While, Intralinks Dealnexus, arguably the largest
online M&A platform, showcases deals from more
than 3,300 investment banks and advisory firms.
In a recent study, 55% of the M&A professionals
questioned confirmed they used online platforms
to support the M&A process. We can only expect
this figure to grow as Millennials start to move up
traditional banking organisations.
Democratising Finance Platforms
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PARTNER CONTRIBUTION
Platform: Online M&A
Country: China and United Kingdom
Founded: 2013
DEALGLOBE
The majority of online M&A activities have been quite basic, offering little more than online promotion.
Buying or selling businesses is complex, especially cross-border, requiring significant offline activities and
as a result there have been very few genuinely executional platforms, meaning that until recently the M&A
space for SME’s in particular has been relatively lightly affected by digital.
Addressing this was the inspiration for DealGlobe. Whilst businesses and sectors have similarities every
business sale or investment strategy is individual and generally has numerous parties involved.
Additionally, the procedural, regulatory or compliance requirements of markets are different. These
factors mean that to create a truly end-to-end digital business model for M&A and capital raising, you
need to combine both online and offline capabilities.
Our approach, therefore, has three key elements:
• First, the online platform automates and deepens the more standard parts of the process, with a
proprietary algorithm to support business match making and analytics to assist with sector and
individual business level decision-making, with the internet enabling global reach.
• Second we have a centralised infrastructure that drives product development as well as providing
remote support for specific business situations – from specific analytics through to accessing global or
local industry experts – a digitally enabled and scaled ‘virtual consultancy’.
• Third, we have Deal Partners, a global network of M&A professionals who provide the offline
executional support with their local process & compliance knowledge.
Online platforms provide efficiency via a lower cost, by increasing the reach of dealmakers. This is valid
intra-market (UK-UK) or region (EU-EU) but it also helps close the knowledge gap across regions (EU-
China, EU – India..).
The core value proposition is in the fragmented and less developed SME marketplace, but the platform
also compliments traditional investment banking, where the scalability and configurability gives users a
choice of how to utilise the platform. Already many large organisations are engaged as corporate deal
partners.
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PARTNER CONTRIBUTION
What are issuers looking for from crowdfunding providers? What are the key value propositions?
Issuers seek providers leveraging “offline” (one-on-one meetings) and state-of-the-art “online” technologies assisting
with identifying, connecting, closing and managing investors post-close. Technology is critical for engagement (i.e.
“matching” investors with companies via market sector/geographic proximity) and streamlining the investment
process (evaluation and diligence of premium deal flow, accredited investor verification, eSignature, payment
processing) making it easier to raise capital from alternative sources including accredited investors. However, given
healthcare is still largely institutionally driven/funded, it is important for issuers to evaluate whether providers have
access/connections to traditional forms of capital (venture capitalists) to meet overall capital needs (average pharma
company raises over >$50Mn prior to approval).
Could you provide perspective on the healthcare investment market and the role HealthiosXchange is playing?
Healthcare is one of the more challenging market sectors to raise capital online (vis-à-vis real estate or early-stage
technology) given the industry’s capital intensity, inability to provide “yield,” and multitudes of risks including clinical,
regulatory and commercial. Leading healthcare providers including HealthiosXchange assist companies from Seed
to “Exit” raise capital directly from investors on a “no carry” basis. To date, 3,000+ emerging growth company
executives, investment professionals, strategic buyers, and accredited investors have joined HealthiosXchange. Over
600 companies actively participate including centralising their investor relations activities, connecting with
HealthiosXchange members (friend, follow message, share), and raising capital via 506 (b) and 506 (c) – general
solicitation.
What are the characteristics of the investors you are, or expect to, work most closely with?
Many HealthiosXchange investors are former pharmaceutical, biotech, healthcare services, and medical device
executives. We encourage issuers to connect with these investors and their respective networks (i.e. former work
colleagues) via “Messaging” “Friending,” persuading them to “Follow” company pages and receive catalyst updates.
Similar to angel networks/groups, companies build “virtual” networks of followers/investors who can work together to
perform company due diligence. For investors without the background or ability to do this, many companies provide
attractive investment minimums so investors can diversify their private equity allocation across a number of
companies.
What has been the feedback from the angel and VC market on your platform?
The feedback has been mostly positive. Institutional capital sources are intrigued by FinTECH (Financial Technology)
innovation and are participating including building relationships with alternative sources of capital (family offices,
accredited investors), and sourcing premium deal flow. 600 investment professionals (venture capitalist) are currently
members of HealthiosXchange.
What are the current liquidity characteristics of the equity crowdfunding market?
Most attempts at forming secondary markets (i.e. SecondMarket) have been challenging given the overall market is
fairly small (estimated to be $35BLN in 2015) compared to the >$1Tn in Reg D industry. Over time we expect to see
more established secondary markets and integration with primary markets (Initial Public Offerings, IPO’s) whereby
companies can readily access liquidity pathways as evidenced by HealthiosXchange’s recent partnership with
Clearbridge Accelerator and SGX launching Capbridge.
Founded: 2010
Funding provided to date: $350Mn+
Platform: Equity Crowdfunding
Country: United States
HEALTHIOSXCHANGE
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Democratising Finance Platforms
Liquidity Platforms
Until recently, a major drawback of investing in the
private markets has been the inherent lack of
liquidity and opportunity to exit for both founders
and investors. Vitally important for the ecosystem
to scale, this need is being addressed by
companies such as The Founders Club and Second
Market, who both provide secondary markets for
private company shares to be traded.
The introduction of this type of platform has
allowed companies, such as Facebook, whose
shares traded pre IPO on Secondmarket, to stay
private longer and delay a public listing. After
having some problems, Secondmarket, who last
year handled around $1.5Bn in secondaries,
recently launched a transfer facility that allows
companies and their employees to sell shares in a
more controlled manner, avoiding the need for
traditional brokers.
The importance of this new market should not be
understated. Liquidity is always of concern to
investors, and those in Venture Capital are no
different. The increased freedom with which VC’s
and company employees can exit equity positions
should stimulate greater investment in the private
sector as a whole. The ability to exit a position on
demand increases the flexibility of any investment
and could be seen to lower risk. While the
secondary market for private shares is still very
much emerging, it does not seem a stretch of the
imagination to envision liquid private sector share
markets not fundamentally unlike those that
currently exist for public companies.
Wealth Management Platforms
New online wealth management solutions provide
investors with cost effective access to discretionary
asset management. Wealth management has
traditionally been a closed industry, available to
those investors with large amounts of disposable
income, but that is starting to change. Firms such
as Nutmeg and Wealthfront are making wealth
management available to larger amounts of
people via lower cost offerings. For as little as $5k
they will manage investors’ money and charge
comparatively low rates of around 0.25% of assets,
with no commission fees. Wealthfront, the largest
player has amassed $2.2Bn in assets under
management.
AUM IN PASSIVE MUTUAL FUNDS1ADVISORY FEES, 20141
Though “crowdfunding” currently stands as the descriptor of choice for this segment of the alternative
finance market, over time we believe these platforms should be thought of more as digital investment
platforms to reflect an increasing presence of institutional and accredited investors. This will become
increasingly true as deal sizes move upstream and away from the seed stage. Market infrastructure is
currently being developed so that the sector can support larger transaction sizes. Moreover, as funding
moves online, discovery of investment opportunities will become more centralised. Comparability across
opportunities also becomes easier as the data deficit currently found in the private market is reduced.
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