Enhancing UK growth capital

On Thursday 24th March, CrowdX, the new marketplace for privately held companies seeking financing, hosted its second webinar. Looking at the subject of Enhancing the UK’s Growth Capital Ecosystem, the session was once again led by Paul Atkinson, Chair of CrowdX, with panellists including Ifty Nasir, Founder and CEO of Vestd.com, Fran van Dijk, CEO of ESG consultants One Stone Advisors, Dr Emma Black, co-founder and CEO of CrowdX member firm Cascade, and Neil Shah, Research Director at Edison.

The conversation looked at the great steps which have already been made in terms of funding for privately held companies in the UK – moves which have contributed to developing a far more mature marketplace than exists in Continental Europe – but also asked why on this side of the Atlantic, the sector still lags so far behind its transatlantic rivals.

There was consensus that the moves already being made by CrowdX – supported by the strong response the initiative has received from buy and sell side alike – would help drive forward the conversation here and in turn serve to improve that funding ecosystem. As Ifty Nasir commented, the availability of transparent data on a company will make a significant contribution to ensuring there’s a liquid secondary market when it comes to trading its securities. Investors are naturally cautious about parting with cash when they have no clear visibility as to what is going on, and whilst smaller, growth companies will by their very nature be seen as more risky than a blue chip, this is reflected in the upside potential. By using technology to ensure that investment opportunities can be compared on a like-for-like basis, it becomes significantly easier for trading decisions to be justified from the buy side.

The subject of how the ecosystem needs to develop was also covered, with interesting observations as to how current technology should allow participants to rate those involved at every step of the journey – a TrustPilot for SME financing, as one participant put it. Again the challenge stems from data – or a shortage of it. This time it’s smaller parties working on deals, lacking the visibility that comes from the higher-profile end of the professional adviser network.

Extending from that, the ability for CrowdX to help educate the market – both on the buy and sell side – was also highlighted. Investors are increasingly demanding routes to access smaller, privately held companies but can often struggle to find a starting point. Conversely, founders all too often don’t know about the full array of funding options available to them, something which can all too frequently end up with bad decisions – and equally bad outcomes – arising. Dr Emma Black noted that as many as 60% of founders aren’t adequately aware of the different financing routes at their disposal.

One key take away however was that this remains very much a work in progress. It was Ifty Nasir who summed it up succinctly, with his proposition that whatever CrowdX does next will only be a step in the journey to getting a fully streamlined ecosystem for private growth capital in the UK and that the company will continue to drive this agenda forward on an incremental basis. Change is needed right across the board and whilst some regulatory progress has been made, further government intervention is likely necessary, whether that’s to help grow the market or ensure founders have responsibility when it comes to ensuring investors’ interests are protected.

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