Freetrade crowdfunding service


(Alex Sherwood) #1

This idea was suggested by @kenny in response to this post from @saf -

which shared this link -


(Kenny Grant) #2
  1. Administration fees cost around £4 per crowd investor per year. We’ll probably need to pay these for at least 5 years until we eventually IPO. So call it £20 per investor in admin charges.

Taking £10 from 100,000 people would raise £1m but would cost us £2m :frowning:

Can’t help but feel there’s a very large opportunity for freetrade here -

  • Freetrade has (or will have) the investors ready to buy and a platform for selling shares
  • Freetrade wouldn’t have to add much to be able to support crowdfunding in the app
  • £4 cost per investor per year sounds pretty easy to beat, if you avoid things like issuing share certificates

There would be legalities to deal with of course, and it won’t be coming any time soon, but it’s another area freetrade could expand into in time and I think serve really well (on both sides of the market - investors and startups).

The current crowdfunding sites are not great, fail under load, and are focussed on the presentation of bids to punters, which is a very small part of a successful fundraise (which usually starts with a very large pre-existing list of investors to tap who don’t need much persuasion). People also often want to trade these shares after they’ve bought them which is really cumbersome with current platforms…


Monzo crowdfunding
(Dave Smith) #3

as a software developer myself, I have to ask how do you know?

The difference in the back end between supporting crowdfunding and sending trades to the stock exchange might be huge for all I know. I strongly suspect it’s wouldn’t a simple addition


#4

I think the big issue is regulation and compliance, and legwork before and after the campaign opens/closes. So onboarding the campaign managers, dealing with support requests, marketing, lobbying, keeping on the right side of the law etc.

Plus public securities alone is big and complex enough to keep everyone busy and happy.


Worth remembering we only see the tip of the iceberg that is crowdfunding sites, there’s a whole other side to their apps, focused on managing a successful raise.


(Kenny Grant) #5

as a software developer myself, I have to ask how do you know?

Hi. I’m a software developer too, snap! There doesn’t seem much to crowdfunding technically from looking at the backend of crowdcube and seedrs - you need listings per company, docs on a company, and the mechanics to allow buying/allocating shares in a company (most of which freetrade already have), the difficult parts would probably more be dealing with legal obligations and attracting the two sides of a two-sided market, but freetrade already have one side (investors) and will be somewhat familiar with the entities that regulate issuing and holding shares in companies (though obviously they handle public companies not private at the moment). Crowdfunding startups, secondary markets for shares, and IPOs for startups are all related areas that would be interesting for them to explore given they are growing a large market of investors looking for things to invest in. I’m not suggesting a full crowdfunding platform, just offering participation in crowdfunding rounds for established companies/startups, and administration of shares for the companies (if it really is costing £4 per shareholder that would be easy money IMO).

Personally I’d rather they looked at things like that than crypto as it’s more likely to be beneficial for their users IMO, however I doubt freetrade would be interested in other markets for some time (at least until they have ISAs and SIPPs, so a couple of years perhaps)…

[EDIT] When first posting I’d missed this post from Cal about secondary markets and how difficult that would be, which is good reading if you’re interested in this stuff - the hurdles seem mostly regulatory but being an exchange (as opposed to a broker) sounds much more difficult legally.


#6

I’m neither a software developer nor a financier!

But… It strikes me that as @saf says, regulation and compliance would be significantly different. Especially that (if I’ve understood it properly) under this model Freetrade would actually be the market, rather than providing access to the market (or exchange, if you rather). This means much more backend, much more regulation and probably more resource intensive.

I still kinda like the idea though. Maybe if Freetrade were to provide a neutral secondary market for the existing platforms? Or provided a platform so you can crowdfund on existing (erm) platforms like Seedrs or Crowdcube - and letting you see all your investments in one place? :thinking:

That said, all interesting thoughts for the future, but let’s maybe concentrate on getting the core product out and in our hands! :wink: