The walls are coming down. The #NewFinance ecosystem is alive. And in this post we are going to explore how Business Model Innovation (BMi) is driving the creation of a new generation of dealflow.

+ Time for BMi – Business Model Innovation

Rigid. Opaque. Vertical.

Would be a few of many possible words that would come to mind to describe the world of Finance as we know it today.

Fluid. Transparent. Horizontal.

Is how the Finance industry of tomorrow will look.

The shakeup has begun, and while we don’t know exactly what lies in between yesterday’s world of crony capitalism and tomorrow’s world of boundless entrepreneurship, big moves are already being made.

In recent blogs, we have looked at how BMi is reshaping the food (#realfood) and fashion (#sustfash) industries, today we are going to look at how #NewFinance is the beacon for BMi among the three.

Through a combination of digital platforms and network-as-market theories, Finance is being flipped on its head. Rather than going to a bank to ask for a loan or a venture capitalist for an investment, SMBs and entrepreneurs are logging into their laptop and tapping dispersed networks of investors.

+ DIGITAL Markets

It’s faster, it’s cheaper and it’s engaging. The wisdom and knowhow of those who make the deals flow is no longer being locked down in an investment bank or holed up on the 45th floor of a skyscraper. It’s being distributed and shared, becoming accessible for the average guy and girl with a dream to start their own company.

Not to say that the old grey hairs of Finance will be left on the sidelines; quite the contrary. It’s the mechanism that will change, as the real juicy deals will originate from outside of the traditional intermediaries and be packaged in simpler terms.

And the upside will be explosive. That’s what happens when you start to open the pipelines to previously unserved markets. In the same way that a spark can set a pool of gas ablaze, it only takes a shot of capital to set pent-up demand on fire.

Using BMi as the tool, a host of impact-driven entrepreneurs are bringing their scrappy, scalable upstarts to the global stage and collaborating with others in order to reshape the financial landscape.

What is Business Model Innovation?

A business model is defined as the rationale of how an organization creates, delivers and captures value.

+ The Key Components of a Business Model

Business model innovation is the process of reinventing the business model itself. Rather than being focused on end-product innovation, like derivatives and securitized debt, BMi focuses on changes in the process of exchange across the value chain, whether it be a new pricing structure, collaborative partnership or customer channel. In the end, it is the model itself that SHIFTS, rather than simply the product or service.

How do we bring BMi to the Finance Industry?

It’s already happening.

While most of the traditional finance institutions have gone on with business as usual on a debt-driven consumption model, others are opening the door to a new model of finance based on productivity and creation. Finance BMi is being driven from the bottom up – by entrepreneurs, customers and investors alike – while in the process, the old-school economic theories about efficiency and the free market are being torn to shreds.

Because the whole industry, as we know it today, is predicated on control and ownership, neither of which are conducive to economic ‘efficiency’ in a ‘free-market’ system.

How can markets be efficient when key information is controlled by a few?

+ see The Libor Scandal

How is our system free market when a few ‘own’ and disburse key resources?

+ see New Scientist’s analysis of the Capitalist Network

If we really wanted to have a system where entrepreneurship could thrive and ‘free-market capitalism’ could flourish, it sure wouldn’t look like this.

Governments would enable global currency exchange at fair-market value. Banks would lend to growing small businesses. Investors would take chances on high-impact entrepreneurs. Communities would ‘crowd fund’ cultural and social projects. People would loan money to one another to help make important purchases.

And so that’s how it’s going down. It’s distributed. It’s disintermediated. And most importantly, it’s driven by a collective.

How do we tweak the business model to make this happen?

Click here to download the PDF. View the larger image here.

The finance business model can primarily be broken down into two main categories: retail and investment banking. The retail banking business model is built off of scale, while the investment-banking business model is more centred around dealflow depth and securitization. There are many ancillary service providers who help fill the gaps in the market via partnerships and alliances with the banks.

The primary cost drivers are: staff salaries, real estate, compliance, back-end infrastructure and front-end systems.

While one business model is based on scale (retail) and another more on depth (investment), both are low-margin businesses. Retail banking profitability is dictated by the spread, the difference between the cost of borrowing versus lending, whereas investment banking is a fee-based business where profitability is more related to the bank’s brand and advisory services. So while one side focuses on scaling, the other is more focused on relationships. In the end though, both fall into the low-margin categories, with retail margins originating from the interest-rate spread oscillating between 0.5 – 5 % depending on macro factors, while investment banking fees typically ranging between 1 – 10 % depending on the type of service (M&A, IPO, etc), the amount of the deal and other factors.

Banks, whether retail or investment, can become extremely profitable if they can scale their brand across a number of different channels and create a diversified product offering. That’s why partnerships are so important. Retail banks partner with (or acquire) credit-card issuers, mortgage-origination entities, loan agencies and any other organization that can help them to extend their brand and add more volume. Investment banks build back-end partnerships to source dealflow, capital and advisory services, anything that will help them land the big deals.

But it’s all changing. As these vertical, debt-driven institutions are coming to a point where their business model will become unsustainable. There is only so much ‘free money’ that can be printed, mortgages issued and fees charged. Change is required from top to bottom.

In the Market Beacons section of our #NewEraBiz research on Finance, we analyzed three companies who are breaking away from the traditional mould and finding scalability through network and transparency strategies:

+ A New Era of Business: FINANCE

  1. Seedrs
  2. Funding Circle
  3. Triodos
  • Seedrs was the first regulator-approved crowdinvesting platform in the world. Built on a nominee model, they allow companies to raise up to £150,000 from everyday investors who have as little as £10, and just recently raised £750,000 through their own platform the fund their European expansion;

+ FT – Seedrs EU Expansion

  • Funding Circle is the pioneer of the P2B (Person-to-Business) Lending market and recently raised $37 Million to expand their presence into the US and build on their momentum in the nascent SMB P2P Loan market;
  • Triodos Bank is a Dutch-based entity who are building a ‘sustainable banking model’ on the pillars of transparency and ethics, and taking a lead in the impact and SRI (socially responsible investing) investment sectors.

On a macro level, there are three key areas of focus for sparking Finance BMi:

Given that borders and institutional walls make absolutely zero sense in the Finance world – capital needs to be able to flow – technology is acting as the bulldozer to break down the barriers.

There is a distinctive difference between what is happening in the ‘emerging’ versus the ‘emerged’ economies. Emerging markets are bringing in low-tech solutions to help money move within the boundaries of their country, while emerged markets are using high-tech solutions to remove restrictions on global capital movement.


  • Crowdinvesting, where companies like Seedrs enable anyone in Europe, no longer just the UK, to invest as little as £10 in any startup company looking for £150,000 or less in Europe

+ FT – Seedrs spreads across Europe target=“blank”

  • Money Movement, where companies like Transferwise, based out of the UK, facilitate global money transfers between bank accounts, saving customers from having to fork over huge fees just to make a wire transfer through their bank

+ Transferwise


  • SMS Money Transfer, where services like M-Pesa enable everyday Kenyans and other Africans to send money between one another using SMS on a basic cellular phone

+ Businesses with Bang! M-Pesa

  • Mobile Banking, where companies like CARD Bank, in partnership with the Grameen Foundation, take advantage of existing mobile networks to build banking service solutions for the previously “unbankable” in the Phillipines

+ How CARD Bank activated 480,000 poor Savers

Taking the ‘borders-are-silly’ analogy, #NewFinance is being driven by distributed networks who are connected via platforms, creating entirely new channels for driving dealflow and connecting with customers.

In the emerged markets, this can be seen in the form of crowd-based platforms, while in emerging markets, channels are being created to help impoverished citizens and communities form networks and access capital.


  • Crowd Lending, where companies like Funding Circle create an entirely new channel for SMBs looking for a loan, making the approval process much faster and the fees lower
  • Sustainable Pipeline, where companies like Triodos help finance businesses who meet certain ethical criteria and build a community of customers around those entities, creating a new channel for ‘sustainable’ businesses


  • Crowd Micro Finance, where organizations like Aliança Empreendadora in Brazil help micro-entrepreneurs in low-income communities access to capital through their Impacto crowdfunding portal

+ Impulso platform

The movement towards new forms of currencies is in motion. Part of the transition away from the current system is based on the need to move away from purely debt-driven, government-issued currencies and create new forms of exchange between people (P2P).

In emerged markets, new currencies are sprouting up to help spawn new digital ecosystems. In emerging markets, alternative currencies are being developed to help citizens spend their money in local businesses, as typically 90% of the money spent in low-income communities flows out to global conglomerates.


  • Digital Dinero, where currencies like Bitcoin are enabling a new method of peer-to-peer payment via a digital currency which can be exchanged for real money. Despite its overhyped valuation and flawed structure, it does provide a signal that bona-fide digital currencies will be emerging in the future.


  • Local Currency, where the Sampaio in São Paulo helps steer citizens in the urban neighborhood of Campo Limpo to spend their $Reais on local businesses and build a flourishing community

+ Catarse: Banco União Sampaio

Overall, if capital is going to flow, we can’t have a million barriers, a thousand fees and a few controllers. Thanks to technology and a growing realization of the need to redistribute dealflow, the #NewFinance movement has come to life. In both emerged and emerging markets, countless examples of BMi exist to show how a few tweaks of the BM can create big impact, both locally and globally. And the beauty is, this is only the beginning.

Have you seen any great examples of FINANCE BMi?

+ Time For BMi

PLAN – the Business Model

The New Era of Business reports are focused on the future of important industries and include examples sourced from around the world.

How will we finance the future?

That’s the question driving the research behind this report on New Finance, as we take a deeper look at how finance is driving the New Era Business. As Finance is at the heart of the #NewEraBiz – no business can even get started without capital and not everybody is bullish on BitCoins – we wanted to scan the panorama and look at emerging ecosystems in the (new) financial landscape. The goal of next-gen finance platforms is to help entrepreneurs and small businesses (SMBs) avoid using credit cards to finance their entity; instead, they can source capital via these platforms that leverage technology to cut out middlemen and lower fees.

What is New Finance?

If traditional finance is a vertical, competitive and rigid hierarchy dominated by a small group of financiers and industrialists, then New Finance is the opposite. Horizontal, collaborative and fluid, it is an industry that is inclusive and takes advantage of collective actions to drive dealflow.

We’ve talked about New Finance before over the course of the last couple of years.

The first real research down this avenue happened with My Crowdfunding Stud in Latin America, as the advent crowdfunding was the catalyst for many of today’s New Finance platforms. That was followed up by a trip to see what Seedrs and other early movers in the crowdinvesting industry were up to in London.

+ Finance 2.0: Wall Street Meets the Web

Then at the end of 2012, we did a small case study on what’s happening in the UK to demonstrate how the SMB Finance ®evolution is in full effect.

+ The SMB Finance Revolution

More recently, we dissected how New Finance startups like Circle Up were helping to Redistribute Dealflow to the areas of the economy that need it the most; we used Food as an example of an industry that has been chronically underfunded at certain tiers.

+ The Redistribution of Dealflow

Now we are going to take a look at this from the bigger picture and see what the next step is in the evolution of Finance. To put it in perspective, we have embedded a video by Bridgestone founder Ray Dalio to outline ‘How the Economic Machine Works.’

To summarize, the economy is essentially governed by three forces acting simultaneously – the short-term debt cycle, the long-term debt cycle and productivity growth. Together, they work to drive the economic machine that powers the global economy.

Since the financial crisis, governments have resorted to printing money as the strategy to ‘stimulate’ the economy. This stimulus drives the short-term debt cycle, which usually lasts for about 5 – 8 years. When the Central Banks lower interest rates to rock-bottom levels and turn on the money-printing taps, they create an expansion of credit and we move up the short-term debt cycle curve.

The short-term debt cycle, the oscillating squiggly line, is a subset of the long-term debt cycle, the large oscillating line, which operates in periods of roughly 50 – 75 years. When the cumulative debt in an economy builds up to a point where it is no longer sustainable, the peak of the long-term debt cycle, then we begin to enter a period of deleveraging. If done correctly, and inflationary and deflationary measures are balanced, then we can have what Ray calls a ‘Beautiful Deleveraging,’ or an orderly unwinding of a debt bubble.

Thirdly, we have productivity growth, which is the straight line on the graph that increases steadily over time. Productivity is a function of how efficiently we utilize resources to achieve outcomes that boost the economy. The key to the long-term growth of any market economy is increasing productivity.

While the video doesn’t overlay our current economic environment into the model, it appears that we are entering a period of deleveraging when you take into account that:

  • Central Banks are printing money at an unrelenting pace;
  • Consumer Debt has reached unprecedented levels;
  • Underlying inflation remains low;
  • We have rock-bottom interest rates and sky-high sovereign debt.

The ‘stimulus strategy’ has been focused on expanding consumer credit, which is administered by the banks, who have made enormous post-Crisis profits off the spread between what it costs them to loan versus what they charge customers to borrow. Unfortunately, however, much of that cheap credit has failed to reach SMBs, creating a large chasm in the SMB Finance market.

The problem is that, as many studies have shown, it is only (or at least primarily) new firms who create long-term jobs in an economy; therefore, if the required capital is not reaching the SMBs who need it most at an early stage, then a full economic recovery cannot occur. In the UK, for example, the 2012 Breedon report showed that there will be a £84 – £191 Bn gap in SMB loans if significant changes were not made.

Thus, to restore the global economy to an era of robust (and sustainable) growth, the SHIFT should be to measures that boost productivity and increase businesses access to capital, rather than giving consumers credit for consumption. And that’s where New Finance comes in.

Because it’s the SMBs (small & medium businesses) who can reignite the economy in a sustainable fashion – delivering economic, social and environmental benefits to all tiers of society – and bring full-time jobs to their respective nations.

In this light, we have seen several trends emerge in the last few years to provide businesses with the access to capital they need to startup, grow and expand globally, including: crowdinvesting, P2B Lending and sustainable banking.

Crowd Investment

Crowdinvesting is an offshoot of crowdfunding, which was sparked by the launch of Kickstarter in 2009. The crowdfunding model is a donation-based model that uses technology to efficiently enable members of a given community to each contribute small amounts of money to fund a project.

+ Business Model Breakdown: Crowdfunding

With crowdinvesting, ‘the crowds’ are able to actually invest, or take an equity position, in a seed-stage enterprise, rather than simply donating for a reward. While it sounds conceptually simple, it is a complex to implement because it requires national/state security regulators to rewrite security laws to allow for ‘crowds’ of unaccredited investors to buy shares in companies that have not filed a prospectus.

Seedrs, based out of the UK, was the first regulator-approved crowdinvesting platform in the world and uses a nominee model to enable companies to raise up to £150,000. Countries like the US, on the other hand, are trying to roll out nationwide regulations (the JOBS Act) to enable multiple platforms to work within the same framework.

While each country, and the strategy of each platform, is different, the goal is the same – use technology, and the wisdom of the crowds, to capitalize upstart companies. According to Crowd Valley, the market for startup crowdinvesting was approximately $112 Million however, the market is only just beginning and the growth will ramp up exponentially as laws are changed to facilitate crowdinvesting globally.

P2B (SMB) Lending

P2B Lending, in a New-Finance context, is an offshoot of the P2P industry, which was estimated to be a $1.2 Billion industry in 2012 and growing fast.

P2B Lending happens when one business receives a loan from an individual, group or institutional ‘peer’ rather than a bank. In a similar vein to crowdinvesting, P2B Lending leverages technology to create an efficient debt market and remove the middleman, in this case the banks. Rates are typically set using an auction or bid system, and the industry is, similar to crowdinvesting, subject to regulatory laws within each country it is based out of.

Zopa, started in the UK back in 2005, was the pioneer of the P2P Lending market and has facilitated $400 million worth of personal loans since its inception.

Now, the P2B Lending marketplace is starting to get hot, with companies like Funding Circle stepping up to give businesses access to expansion and working capital, plugging the gap left by banks. Since the company’s launch in 2010, it has facilitated $158 Million worth of loans to SMBs at an average rate of 5.8% and loan size of £65,000.

Other sites are popping up globally as well, as the market starts to take shape to start the capital SHIFT to the companies that need it. While the market is only estimated to be worth about $120 M globally, expect rapid growth in the next 5 years.

Sustainable Banking

Sustainable banking is an offshoot of traditional investment banking, with one key difference – it matters how profits are made. Rather than being a black box that bankrolls dictators and unsustainable enterprises, the goal of sustainable banking is to foster a vibrant economy so that there are markets left to bank in the future.

The essence of sustainable banking is that these banks actively fund enterprises that generate a positive impact for society. While a bank like Goldman simply acts as a ‘market maker’ and don’t limit themselves with ethical concerns, sustainable banks look to loan to and bankroll businesses that play a real role in the creation of a flourishing society.

Recently, a few studies have been conducted to compare the performance of ‘sustainable banks’ to ‘too-big-to-fail’ banks. One such study, which analyzed data between 2003 and 2012, comparing Global Systemically Important Financial Institutions (GSIFIs) versus ‘sustainable banks,’ revealed some interesting insights.

While global return on equity was greater for the traditional banks, it’s clear that it comes at the risk of depositor’s savings and assets. A breakdown of individual CAGRs in different banking categories, however, showed that sustainable banks outperformed in all categories.

It goes to show that there is a business case for sustainable banks, and that it goes beyond just ‘ethical’ rhetoric. While traditional banks will be able to maintain immense profitability for the interim, the whole banking business model will need to evolve to become more sustainable in order to bankroll the #NewEraBiz to grow globally in the decades ahead.

Market Beacons


Seedrs, who we alluded to earlier in the ‘Crowdinvesting’ section and have talked about in several previous blog posts, continue to be the beacon of crowdinvesting in our opinion.

While they have not generated the same volume as their closest competitor CrowdCube, who had about a year head start, their nominee structure and everyday-investor attitude make them the model to study for long-term crowdinvesting success in our opinion.

In addition to offering everyday UK citizens the opportunity to invest as little as £10 in startups, they also have worked with the UK Government to create the SEIS program and other seed-investing schems.

With Seedrs ramping up growth, they recently broke the £2 Million pound mark and have started opening innovative fund mechanisms, such as the recently funded WebStart Bristol, which raised £150,000 on the platform to launch their incubator.

Funding Circle

Funding Circle, who we alluded to in the P2B SMB Lending section, is pioneering the loan market for SMBs. The company is ramping up growth, developing new partnerships, and has a bad-debt rate of only 1.4%.

Beyond the numbers, they are meeting their market’s demand. A study conducted by Nesta showed that 77% of businesses would return to Funding Circle as their source for future financing. 75% of lenders, on the other, stated their willingness to increase lending in the next 12 months.

The strength with Funding Circle, other than general satisfaction and lower interest rates, is the speed. New applications are reviewed with 48 hours, and the average funding period is 12 days, compared to 15 to 20 weeks with the banks.

The company just raised $37 Million and is expanding into the US.


Triodos is one of the best of the sustainable-banking bunch. Founded in 1980 and based out of the Netherlands, Triodos is gaining traction in a banking world for a characteristic not typically associated with financial institutions, transparency.

On one side, they offer their customers the unprecedented opportunity to see where their money is being invested by acting as a ‘sustainable fund manager.’ Beyond simply offering feel-good investment opportunity, these ‘sustainable funds’ also offer a solid return. As an example, they have setup the Triodos Microfinance Fund, which helps to develop financial services for low-income people in developing countries; it has achieved an average annual return of 7.1% over the last three years.

For business financing, they only ‘finance organizations working to build a sustainable future for individuals, the community and the environment.’ Their criteria enables both charities and businesses to borrow money, with loans ranging from £25,000 to £15,000,000 and up. They offer a range of business credit products, including working-capital loans, commercial mortgages and cashflow lending.

End to end, Triodos strategy is based on openness, as they show full transparency on their loan portfolio and banking fees across the gamut. And the results are there to back their strategy. In 2012, they grew their balance sheet by 23%, increased SMB Lending by 16%, upped their customer base by 23%, and reported a 31% increase in net profit (€22.6 Million) from the previous year.

Overall, the New Era of Finance is focused on building a balanced and sustainable economy around impact-driven SMBs. Rather than traditional banking, where profits are derived at all costs and very little money actually circulates into the real economy, the new frontier will be built on the bedrocks of technology, collective wisdom and transparency.

How do you see the future being financed?

+ Time For BMi

PLAN – the Business Model

Finance 2.0 is here and with it comes the next generation of crowd-finance platforms. While the big players are grabbing the headlines in 2013, there is a lot of innovation happening in the smaller circles where capital is being directed towards specific sectors that are starved for capital. Rather than focusing on financing the high flyers, these entrepreneurs are all about funding the niche.

Late last year, we wrote a well-received article on the evolution of the crowdfunding ecosystem. One of the companies we analyzed was Credibles, a crowdfunding platform (*donation model) based out of California that is using its platform (currently in Limited Beta) to help local food businesses in Cali get off the ground.

*the donation model in this case is a hybrid of the pre-pay model, where backers receive a Credibles credit to purchase food from any of the businesses listed on the site.

+ The Crowdfunding Ecosystem : Evolved

This year, in our Redistribution of Dealflow post, we analyzed how Circle Up had created a crowdinvestment platform (*equity model) to help upstart food companies source growth capital.

* not a pure crowdinvestment platform, as only accredited investors can invest; regulations still inhibit everyday investors in the US from investing in this way.

+ New Finance : The Redistribution of Dealflow

While both platforms use different models, they are both targeted at the same niche: food. It’s a cool example of how different companies are taking unique approaches to work within the patchwork regulatory system to fund the same niche.

Peeled Snacks raised more than $2 million this year on Circle Up.

In today’s environment, an entrepreneur can’t simply wake up and start a platform to help new businesses raise equity capital online from the crowds (everyday investors). Ancient securities regulations in almost every country prohibit raising capital from hundreds of unsophisticated investors. Of course this is all changing (see JOBS Act, etc.), but in the meantime, many entrepreneurs are doing what they do best and finding ways to capitalize niche segments using models that work within the current framework.

Credibles and Circle Up are two examples of food-focused platforms.

+ A New Era of FOOD

What’s happening in other niches?

In fashion for example, Shop ZaoZao launched in Asia as a crowd platform for emerging designers; similar to Credibles, it uses the pre-pay model. Then there is WowCracy, a soon-to-be-launched portal in Italy that promises to help democratize fashion with its crowd-based approach. Regardless of the model they use, it is clear that the movement has started to get capital into the hands of upstart designers.

And no industry needs a shakeup more than fashion:

+ Avant Garde : Moving Fashion Forward

Naturally this trend is transcending into all types of niches across the board, from sports teams to solar energy. In the not-too-distant future, you could be able to invest in anything from your favorite soccer team to your neighbor’s solar panel project. The key to innovation in all these sectors is unlocking early-stage capital, and while the patchwork models currently in place may be restricting, it’s clear that the movement of capital has already begun.

+ The Small Business Finance ®evolution

Funding the niche. It’s an example of how social technologies are being combined with disruptive new business models to counter the currents of crony capitalism.

What niches do you want to see funded the most?

+ Time For BMi

PLAN – the Business Model

It’s 2013 and the New Finance movement has got some serious #momo. Crowdfunding / investing, in and of itself, is one of the hottest industries on the planet this year, while the façade that is the traditional finance industry continues to erode as their business strategies (ie. currency cartels) are revealed on a weekly basis. Now that the gates are opening up and some capital is starting to flow into the New Finance ecosystem, we are starting to see money moving into the companies that actually create real value in the economy. The redistribution of dealflow has begun.

What’s driving the redistribution of dealflow?

The simple answer is demand. The bottom tier of the market, which would include early-stage enterprises and small businesses, is starved for both startup and growth capital. While certain sectors receive excessive amounts of seed and/or growth capitals (ie. social media and mobile), others are starved (ie. consumer products) and rely on a patchwork of credit products and family investment to survive, neither of which have any value-added strategic benefits.

The entire sector of the traditional finance industry, including the angel investors / venture capitalists / institutional investors / pension funds, have played a role in creating a financial system (and consequently an economy) that is over leveraged, unbalanced and out of touch with the real needs of society.

Fred Wilson himself, arguably one of the best venture capital and early-stage investors in the world, believes that the crowd-finance movement will force VCs to rethink their role in the finance ecosystem and help to reallocate capital to where it is needed most (ie. less mobile & media, more medical). Others, such as John Fullerton, a former managing director of JP Morgan, have left the mainstream investment industry all together and created firms (The Capital Institute) that are 100% focused on rebalancing the financial system and synchronizing our economic system with the world around us.

+ Future of Finance Blog (Cap. Institute)

And so we are starting to see the distribution of capital to companies that are built to solve real problems for the communities around them.

Seedrs, an online portal for early-stage investment (< £150,000) in the UK, is one example that we have talked about several times on the blog. Another example is Bolstr, the first crowd-based investment platform to launch Pre-Jobs Act, which found a way to allow small businesses in the Chicago area to raise up to $1,000,000 per year within the current regulatory framework. Investors on Seedrs get a true equity stake, whereas Bolstr’s investors get a share of revenues, but both portals are open to the crowds and allow everyday people to participate.

+ Financing Early-Stage Enterprises : The Seedrs Report

Around the world, a series of crowdinvestment-type platforms are starting to emerge to serve specific underserved sectors in the economy..

One such example is Circle Up, a platform based out of California that focuses exclusively on funding high-growth consumer companies. According to a recent interview, the consumer-product segment is badly underfunded at the early-growth stage, as ~4% of total VC capital in the US went to a segment that represents 15-20% of US GDP. That’s why Circle Up is stepping in and helping companies looking to raise (roughly) between $0.5 and $2.5 million.

Taken from the Crowd Cafe

They generally only accept ~2% of applications receieved and have another level of strategic services that they offer to help the companies they source capital for grow. While not a pure ‘crowd’ platform, as only accredited investors can invest, it is a good example of how firms are using social technologies to bring capital to the companies that need it. A quick look at the companies that have successfully raised funding on Circle Up shows many upstart organic food companies (ex. Peeled Snacks), who are essential in helping to rebuild the food ecosystem.

+ A New Era of Business : FOOD

In terms of finding ways to increase lending to small businesses in the wake of the credit crisis, one great example is the UK government’s new Business Finance Partnership. They have teamed up with the nation’s leading crowd-lending platforms (ie. Funding Circle) and created a £110 million fund for the next-generation of UK SMBs. Combine that with the UK’s booming crowdfinance portals and the new SEIS program, and you can see the pieces for the New Finance ecosystem coming together quickly.

+ The Small Business Finance ®evolution

Eventually, as the regulations are hammered out and more people begin to trust these new ecosystems, private funds and public institutions will start to invest through these platforms and create their own ‘crowd funds.’ From top to bottom, the sector is being reinvented to facilitate the redistribution of dealflow to where it matters most – and everyone will be able to participate.

After all, one only needs to grab a newspaper or read a few articles online to see that the system we have in place is completely unsustainable and unbalanced. There is no shortage of great opportunities to invest in / entrepreneurs to build businesses around, but none of it matters if they can’t get the capital they need to move forward. Now that the New Finance movement is gaining #momo and the tides are turning, the time has come to rebuild the financial ecosystem and spark a new generation of enterprises.

What areas of the economy do you think need the most investment?

+ Time For BMi

PLAN – the Business Model

+ BMi Services

Up to this point, we have spent 2013 talking about impact-driven businesses, their corresponding business models, and highlighted some exciting examples from Brazil. But other than a bit of brainstorming around different models of incubation, there hasn’t been a lot of talk about how to finance them.

In our Impact-Driven Business Model post, we brought forth the financing stats from the 2012 Unreasonable Institute to show how investor appetite was growing for social enterprises with built-in business models. In today’s post, we are going to look at how crowdinvestment platforms are already being used to finance early-stage enterprises of all different varieties.

A couple of weeks ago, UK-based Seedrs, the world’s first regulator-approved crowdinvestment platform, published an infographic showing their results from their first six months in operation (July – December 2012). Despite the dealflow being slightly less than that seen in the recent JPM and Goldman earnings report, some great potential was shown : )

See full size image here

In that six-month period, £477,000 was raised on the platform by 12 startups. The size of the average deal during that period was £39,750, with deals ranging between £17,500 and £84,500. A variety of different types of companies raised capital in that period, from consumer-product startups to high-tech enterprises.

Of the 12 entrepreneurs who raised capital on the platform, 10 were male, while the average age of the entrepreneurs was 34. The average campaign took about 39 days to fund, with the fastest raise being achieved in 15 hours and the longest spanning 92 days.

Investors were getting on board with full enthusiasm, as about half of the investors on the platform made more than one investment, with the average investment being £585. Over half of the 5,507 investors on Seedrs, who ranged in age from 18 to 76, had never invested in a startup before. The reasons for investing in these companies ranked accordingly:

  • 1) Desire to help get new businesses off the ground
  • 2) Ability to access SEIS relief
  • 3) Hope to achieve meaningful financial returns

On the whole, a very good first report from Seedrs, one that really demonstrates the potential of crowdinvesting to rebuild the economy and stimulate the early-stage financing market for small businesses and startup enterprises.

From the beautiful infographic, there were three things that stood out the most to us:

  • 1) Investors trust the platform – the years of regulatory hurdles (ie. FSA regulation) and platform design decisions are proving worthwhile, as money is flowing through the platform to its intended target;
  • 2) The Concept is Working – The Seedrs model, which targets early-stage enterprises (deals < £150,000) and investors of all types (no need to be accredited), looks like it is hitting the sweet spot;
  • 3) SEIS is Having an Impact – the newly minted SEIS (Seed Enterprise Investment Scheme) program was ranked as the #2 reason by investors as to why they are investing in startups.

While it is still very early stages, these results are very promising. The crowdfunding business model takes a lot of time and investment to reach a level of scalability, but once it hits that level the growth-rate is tremendous (see Kickstarter). The key for Seedrs is to prove their model under the microscope of the FSA, so that they can build trust and credibility in the market. After six months of operation, it looks like they have achieved that and then some.

+ Business Model Breakdown : Crowdfunding

Last year, we wrote quite a bit about Seedrs, which allows everyday UK investors to invest between £10 and £150,000 in startup enterprises, as it was the first crowdinvesting platform to launch with regulator approval. The platform is targeting a very important gap in the market and helping to resolve the biggest problem facing entrepreneurs, raising early-stage capital.

+ Finance 2.0 – Wall Street Meets the Web

+ The Small Business Finance ®evolution

Equally important, was the creation of the SEIS program, which essentially curbs the risk investors’ bear when investing in early-stage enterprises by offering an instant tax credit and capital gains exemption.

+ SEIS – How it Works

We have been talking a lot about the what so far this year – the need to create enterprises with built-in business models that focus on impact. A key to making the what come to fruition is figuring out how to finance those enterprises – that’s a big part of the how. While crowdinvesting is still only available as an option in a select number of markets (UK, a little in the US, etc.), it will eventually make its way into every market in the world.

In the interim, if you have an early-stage idea but can’t use equity platforms, traditional crowdfunding platforms, which collect funds using donations instead of equity, may be worth exploring as an option:

+ Strategy Sessions : Crowdfunding + The Social Enterprise

+ Strategy Sessions : Crowdinvesting + The Entrepreneur

Overall, the Seedrs report is one of the first concrete examples to show how crowd-based financing will help bring badly-needed capital to the entrepreneurs who need it most. At a time when banks aren’t lending and the world needs impact-based businesses, the time is ripe to learn about how to make the crowds work in your favour.

Would you consider crowdfunding/investing as a way to raise capital for your enterprise?

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PLAN – the Business Model

+ BMi Services

The ®evolution in small business finance has begun. The shockwaves that emanated from the 2008 Credit Crisis have spawned an entirely new ecosystem for small businesses to access capital. Rather than being driven by the old boys at the top of the financial food chain, this ®evolution is being driven from the bottom up by the crowds, which is why today we are going to take a look at how crowd finance is reshaping small business financing – permanently.

Small businesses (SMBs), the backbone of our economy, have had a rough go since the credit markets collapsed in 2008. While governments have been pumping a seemingly* infinite supply of credit into the economy for the last several years, the banks have used the free* capital to ‘fortify’ their balance sheets rather than lend it into the economy. Consequently, SMBs have been left in the dark and forced to find alternative sources of financing from wherever they can get it.

The kicker for governments, and consequently the people, is that if the money doesn’t trickle down and SMBs can’t access credit, then the economy doesn’t get rebuilt. A unilateral study conducted in the US by Kauffman in 2010 found that all new jobs are created by new businesses. The governments’ initiative to stabilize the economy by injecting unlimited* supplies of free* capital into the banks has created a problem that can only be resolved with one outcome, a ®evolution.

Enter the crowds. Thanks to a whole new generation of crowd finance, including crowd funding / lending / investing / factoring, a new era of small business finance is upon us. Call it a revolution, an evolution, whatever you want, either way the shift is massive.

Recently we attended the Windows of Opportunity event in the UK to see first hand how the pieces are coming together in the emerging crowd finance landscape. Led by former Dragon Doug Richard, the event was sponsored by the UK government to share information about the new alternatives available to British companies and investors, and educate the audience about the transformational new SEIS (Seed Enterprise Investment Scheme) tax incentive program. Mr. Richard, an American-born entrepreneur with experience at every level of business, opened the event by explaining the causes of the current SMB financing shortfall and outlined why he sees the SEIS tax incentive as one of the biggest triggers for economic growth in the UK economy over the next decade.

We talked about SEIS a couple months back in our post ‘Crowd Finance + London …’, it incentivizes investors to invest in seed-stage enterprises (< £200,000 in assets) by reducing a majority of their risk. They get an instant 50% tax credit, a potential future capital gains exemption of 28.5% and the ability to write off an additional percentage of the investment if it becomes a loss. While there are a few details that need to be understood, the scheme gives investors the potential to receive 100.5% in tax writeoffs.

+ SEIS – How it Works

SEIS becomes important when talking about the concept of crowd finance because investors will have exponentially greater access to deal flow thanks to these new platforms, specifically crowd investing, one of several new alternatives discussed at the event:


Crowdinvesting platforms give entrepreneurs the opportunity to raise equity financing from ‘the crowd.’ These investors no longer need to be accredited or invest large amounts just to make it worth the fees.

Seedrs, a platform we have talked about a few times on the blog in previous months (see post Finance 2.0 …), allows entrepreneurs to raise up to £150,000 from a crowd of investors who can individually invest as little as £10. The platform is FSA regulated, an important qualification for crowdinvestment platforms in the UK, and investments made through the site are SEIS eligible. They launched in July and have closed 8 deals for a total of £337,000.

As an investor on Seedrs, you don’t have to worry about monitoring the companies you invest in every week. Seedrs acts as a nominee for the shareholders and plays an active role in ensuring that the company stays above board with all future financing. The company is also incentivized to see the startups it helps fund succeed, as they take 7.5% of any investor profits.

+ Investors Chronicle – The Wisdom of Crowds (PDF)

Crowd Lending

Crowd lending platforms allow businesses to borrow money directly from investors at competitive rates, thereby removing the middleman and providing an alternative to the banks.

To put the problem in context, the current Crowd Lending market for SMB loans represents less than 0.1% of loans being made by High-Street banks despite triple-digit growth rates in 2012.

Funding Circle is one UK company in the P2P lending landscape who is giving businesses access to the capital they need to grow. SMBs can go on the platform and borrow up to £500,000. Lenders can search for loans at terms they are comfortable with, with average returns currently sitting at 9.1%. Default rates have been low up to this point, but the company’s CEO expects them to rise to around 2.8% as their loan book gets bigger. The UK government has committed £100 million to help kickstart the industry.

Crowd Factoring

When a startup company signs a big contract and sends out its first invoice, the feeling can sometimes be bittersweet. That’s because many companies have payment terms of 30, 60 or 90 days, an eternity for a new company that is under the gun. Additionally, many SMBs may not have the working capital to produce the goods for the order. Enter crowd factoring.

Crowd factoring allows entrepreneurs to factor their invoices, or receive a large percentage (~95%) of the money in exchange for cash upfront.

Platform Black is a new invoice-trading platform that connects small businesses with investors looking for new ways to find returns. Sellers (the entrepreneur) post the invoice they are trying to finance on the auction platform, while Buyers (the investors) bid on the invoice using the Seller’s discount rate as the starting point. The rate of return is determined by the Seller’s credit score, length of the invoice and supporting documentation related to the strength of the invoice.

It’s a new way for investors to earn returns from short-term debt obligations while giving SMBs access to the capital they need to move forward.

Overall, the inception of crowd finance is redefining the way small businesses access capital. One presenter at the Windows of Opportunity event drew the analogy between Henry Ford’s Model T and today’s banks:

  • Henry Ford was said to have been quoted joking that “you can have any color you want as long as it’s black” when referring to the new Model T Ford; nowadays, you can buy a car in virtually whatever shape, size, colour you want;
  • The banks have always been the one-stop shop for everything related to financing; nowadays, the market is opening up, as an entirely new financing ecosystem is emerging to fill the gaps left by the banks.

For both investors and entrepreneurs, the shift to a more democratized ecosystem is opening up a whole new array of opportunities. The UK, in particular, is moving ahead to reinvent its capital markets through the creation and promotion of innovative platforms and groundbreaking tax incentives. While much work still needs to be done, the pieces are slowly coming together to give small businesses access to the capital they need to grow. In today’s world, that might be enough to be called a revolution.

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PLAN – the Business Model

The face of Finance needs a facelift – a decade of derivatives and destructive lending practices is starting to show, the wrinkles have set in. With the Big Bank bubble on the verge of bursting and the guise of free-market capitalism being exposed, the stage is set for a seismic shift to a new financial ecosystem. What better backdrop for such a shift to occur than the City, London, where a new set of players are working together to put a new face on capitalism and bring finance back to the people it was invented for, the crowds.

The City, a nickname given to London for its investment-banking roots, along with New York, have been the undisputed heavyweights of high-finance for much of modern history. During the last decade, when credit derivatives and low-interest loans became the fad, the two started scrapping for high-finance supremacy, Wall Street versus the City. While Wall Street employed it’s own strategy of deregulation, another story in and of itself, the brainpower behind London’s banking system decided on a strategy known as ‘light-touch regulation,’ a green light for bankers to ply their trade in whatever way they saw fit. Well a few bank collapses and several catastrophes later (ie. the LIBOR scandal), The City is falling to pieces.

But one man’s wreckage is another man’s opportunity – with a Crisis that has sent shockwaves through the global financial system far from being over – the time for a new system has arrived. Now, a new set of players are looking to unleash a new wave of finance, through the legalization of crowdinvestment, to counteract the mess left by the bankers. While the US gets ready to open the doors for their own set of crowdinvestment platforms through the JOBS Act, London already has a few of its own in operation and is looking to lead the charge towards the development of a new financial ecosystem.

Earlier this year, Joel took a trip to The City to learn more about the action. He got a first-hand glimpse at the excitement surrounding the early-stage developments and had a chance to chat with a few of the people working to make it happen. His blog (link below) walked through a few of the key initiatives being undertaken to build an open, transparent, web-based ecosystem – referred to as Finance 2.0 – and shed light on the new opportunities that lay ahead.

+ Finance 2.0 – Wall Street Meets the Web

Since that time, a lot has happened. The following is an update of a few of the developments surrounding the key players and initiatives in London’s crowd-finance ecosystem:



Seedrs was not the first crowdinvestment platform (where entrepreneurs can raise capital in exchange for equity online) to launch in London, Crowdcube takes that honor, but it was the first regulator-approved crowdinvestment platform in the world. The difference between the two is that Crowdcube operates using a legal loophole, while Seedrs worked with the FSA (Financial Services Authority) directly to get the regulatory stamp of approval. The result is that Seedrs is a tighter platform, one that is really well thought through on all different levels.

Joel learned that from chatting with Seedrs that the biggest risk surrounding crowdinvestment is not, contrary to popular belief, scam artists defrauding investors, but companies who raise capital and then proceed to dilute out (or screw over) their crowd during the next round of financing. Nobody wants to miss out on the next Facebook, so to counteract this risk, Seedrs has put in several mechanisms to protect its shareholders:

  • primarily, they act as the legal shareholder on behalf of the crowd; they continue to work with and monitor the company’s progress after they have been crowd-financed;
  • secondly, their business model incentivizes them to monitor the companies who are funded on their platform; in addition to taking a percentage of funds raised (7.5%), Seedrs also take 7.5% of the crowd’s equity (the investors) in the company;
  • thirdly, they have designed the platform in way that makes it very clear to people about the risks of investing; they include questions about experience and income, a clever questionnaire where one wrong answer will render you unable to invest, and educational content to help investors better understand the process.

Companies can only raise up to £150,000 and everyday investors, who can invest as little as £10, are limited based on their income to how much they can invest. The platform is brilliantly designed and their collaboration with the FSA has earned them a lot of credibility with both investors and entrepreneurs. Additionally, they won the London Web Summit in March, which helped them add more financial backing to their efforts.

During Joel’s trip in May, they were putting together the final details and getting ready to launch to the public in the summer.


Seedrs launched publically in early July of this year. In the roughly three months they have been in existence, six startups have been funded for a total of £207,500, an impressive start. Crowdfunding platforms take awhile to get going, which is why they require a lot of investment in the early stages, but if they reach critical mass, the growth is explosive.

The company has also implemented several design features and new investment guidelines to help reduce the friction for seed-stage companies:

The company has been active on a number of fronts and is setting an example for others around the world who want to see how crowdinvestment platforms should be operated.

SEIS – Seed Enterprise Investment Scheme

Last year in November, George Osborne, a British MP, signed SEIS (Seed Enterprise Investment Scheme) into law, giving investors in early-stage companies a 78% tax relief.

The SEIS program, which kicked off in April of this year, offers an instant 50% tax credit on any investment made into a seed-stage company, while the remaining 28% is applied on capital gains over a three-year period.

+ FT – 78% tax relief lures startup investors

To be investable, companies must be less than two-years old with less than £200,000 in assets, and investors are limited to investing £100,000 per year and they can’t invest in a relative’s business.


According to the Seedrs CEO, the biggest flaw with SEIS is that ‘it has been kept a virtual secret.’ Former Dragon’s Den investor and Startup School founder Doug Richard believes the program has the ‘potential to be transformative.’

+ FT – Seis has ‘potential to be transformative’

Both parties have teamed up to deliver their message to the UK public. Jeff Lynn, Doug Richard and a few other crowd-finance leaders are on the road to promote SEIS, educate the public about crowdinvesment and discuss alternatives to bank loans through their Windows of Opportunity workshop. The program will roll through nine cities in the UK until the end of November.

+ School for Startups – Windows of Opportunity

Any government looking for ways to spur entrepreneurship at the seed level should be studying this new program in depth.

Bank to the Future


Back in May, in London, Joel attended a crowdfunding event as part Finance 4 StartUp Britain Week. One of the speakers at the event was Simon Dixon), a former entrepreneur, financier and author, who is the force behind Bank to The Future.

Bank to the Future was developed to offer small companies and entrepreneurs the chance to raise capital using a mix of debt and equity – crowdfunding, crowdinvesment or crowdlending – in the same way an investment bank would. The platform seeks to fill the voids left by the banks and the financial sector.

The Bank-to-the-Future model, while different than that of Seedrs, employs the same principles of crowd finance. The site claims to be the first (and only) place in the world where entrepreneurs can raise and manage multiple fundraising cycles through the same platform. Whereas Seedrs is focused on the seed stage, Bank to the Future wants to work with the company through their lifecycle to raise capital. Additionally, they have created a new metric, called the Social Capital score, to help assess the creditworthiness of fundraisers.


Bank to the Future launched in September. In addition to founder’s capital, they raised £150,000 through the crowd.

They now have several fundraising campaigns live on the site, although they are all using the traditional reward-based crowdfunding system. It appears they do not have FSA approval to launch the crowdinvesting side of their business and we are not sure where the company sits in the regulatory framework. The FSA made a statement in August, that essentially said crowdinvesting presents a great risk to all but the most sophisticated investors, which has left many, including Bank to the Future, uncertain about how regulation will play out.

As the interview (embedded above) shows, Bank to the Future is serious about helping UK entrepreneurs of the future get the funding they need now. With banks not lending and a capital system in chaos, the hybrid platform (mix of crowd funding, lending and investing) could be a blessing for businesses trying to raise funds.

And its not only small businesses and entrepreneurs who are taking notice. Serial entrepreneur and global celebrity Richard Branson has publically pledged his support for the company, and shortlisted it in his ‘Screw Business as Usual’ competition for innovative business models.

+ Richard Branson backs Bank to the Future

Eventually, the CEO wants Bank to the Future to become a full ‘entrepreneurs bank,’ and allow its investors to invest in a portfolio of companies.

The Future of Finance …

The UK is making strides to rebuild their financial system; a fluid, transparent and open ecosystem driven by collective intelligence and democratic principles is ready to replace a corrupt system built in the post-war era. It takes the collaborative efforts of players at all levels – government, private enterprise, non-profit, etc – to create a new ecosystem, and it needs to be done carefully to avoid creating similar problems to those that lead to the crisis. As illustrated by companies like Seedrs and programs like SEIS, however, many positive steps have already been made.

A host of other nations, including the UK’s neighbor across the Atlantic, are also taking steps in this direction. The US, is set to launch its own wave of Main-Street financing alternatives on the back of the JOBS Act; projected launch date is January. 2013 is shaping up to be the grand opening for the global crowdinvestment ecosystem.

Overall, the future of finance will be built around the crowds. Rather than the few dictating the decisions of the many, the crowd-finance wave will democratize the financial ecosystem and catalzye a new generation of global entrepreneurs. While many hurdles still stand in the way, the demand is huge and the trend is clear – the new era of finance has begun.

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PLAN – the Business Model

The bubble is about to burst. With the near-catastrophic collapse in credit markets in 2008, the stage has been set to bring in a new generation of financing alternatives and end the Big Banks’ oligopoly on capital markets. Innovative tools like crowdfunding are emerging to help entrepreneurs, creative types and business owners get access to capital in new ways, marking the beginning of a new era in finance. Welcome to the world of Finance 2.0, where the Web is helping to redefine the financial ecosystem and move the power from Wall Street to your web browser.

Even five years ago, it would have been hard to imagine the economic reality we are facing in today’s world. Stagnant (if not non-existent) growth, high unemployment, massive debts levels and flat-lining wage growth for the middle class. Place this economic reality in the context of our current financial system, one dominated by big Wall Street banks and post-War industrialists, and you see why the need for new alternatives has emerged.

Yet it is precisely this economic backdrop, in conjunction with the explosion of the social web and technological advances, that is giving birth to a whole new financial system. Unlike the traditional system, where decisions are made within rigid hierarchies, the new system will be driven by intelligent crowds using fluid online platforms. Imagine the transition from a system that is vertical and opaque into one that is horizontal and transparent – that’s how the democratization of finance is unfolding.

For the last two weeks, I have been in London, UK studying the emergence of this new financial ecosystem. Given The City’s history as a global financial hub, it is not surprising that a good percentage of world-leading financial innovation is taking place here. I had an opportunity to take in two exciting events here in London, including the Next-Generation Financial Forum and Startup Britain’s Crowdfunding event. Both events were sold out, and showcased companies who are on the cutting-edge of innovation in the financial space.

The catalyst for the Finance 2.0 movement began with the global financial meltdown in 2008, coupled with the advent of collaborative financing platforms, namely Kickstarter, in 2009. Since that time, crowdfunding platforms have been blossoming in countries around the world. The effects have been profound, as Kickstarter raised almost as much as the National Arts Endowment (NEA) in the US in 2011, meaning that crowdfunding could soon become a more viable source to raise money for creative projects than government grants.

It was about this time last year when I started to become deeply interested in the crowdfunding movement, which prompted me to take a trip down to South America early this year to study the action. My journey, which I wrote about at, allowed me to get an inside view into the emergence of crowdfunding in an area of the world where the cultural and social dynamics are conducive to the explosion of collaborative processes, like crowdfunding.

Now, investment via the crowd is entering into a new phase, as crowdinvestment has officially become a fundraising alternative for entrepreneurs in the UK, and soon the United States. Earlier this year, London-based Seedrs soft launched its FSA-approved crowdinvesting platform ; the platform is set to open up to the public in July. Meanwhile, Barack Obama officially signed the JOBS (Jumpstart Our Business Startups) Act into law earlier this year – now the SEC (Securities and Exchange Commission) is reviewing the details of the legislation as part of its 270-day review period. Following that period, anyone in the US will be able to raise equity for their new ventures through certified crowdinvesting platforms.

Unlike crowdfunding, where funds are raised on a donation-basis in exchange for a social reward, crowdinvesting allows businesses to raise equity capital. By putting the process online, crowdinvesting platforms allow entrepreneurs to efficiently tap into their networks (and beyond) in order to raise money. The upside to crowdfunding is that there is no cap on the amount of capital that can be raised, whereas with crowdinvesting you can only raise the proposed amount of capital.

Two prominent examples of crowdfunding campaigns illustrate the potential success that the concept has:

  • In Brazil, the Belo Monte project raised over 140,000 Reais (approximately $80,000 USD) in thirty days (a Brazilian record), giving the producers of the hard-hitting film enough to cover production costs – the film will be released for free on the Internet in the near future and is sure to sway public opinion on the controversial hydroelectric project that is underway in the Amazon
  • In the US, Pebble is in the final stages of its campaign, where over $10 mllion dollars on the Kickstarter platform has been raised for the company’s innovative E-Paper watch. The company was unable to raise the necessary funds ($100,000) from venture capitalists, so the founders turned to Kickstarter to meet their funding needs.

And the real fun is only just beginning. The next phase of the crowd is about to be tested, with the crowdinvesting cycle ready to begin. In addition to crowdinvesting, new business models, concepts, and niche platforms will emerge to satisfy the public’s demand for crowd-based opportunities.

Beyond just crowdfunding and crowdinvesting, other financial innovations are hitting the market to ensure that new companies are able to get around the hurdles faced by early-stage companies. Market Invoice, a London-based company, gives new companies the ability to factor their accounts receivables at low rates through their online portal, ensuring that these businesses can access working capital upon issuance of their invoices. Other notable new financial platforms include Bank to the Future, a next-generation platform for entrepreneurs, and the Social Stock Exchange, a new public trading platform for socially-focused ventures – both are set to launch in the not-too-distant future.

Overall, we are at the beginning of a new era of financial innovation, one driven by technology, online networks and the desire for a democratic, horizontal process of financing new ventures. At Lumos, we are big-time bullish on this trend and are digging deep in order to develop the best strategies for funding new ventures and validating new concepts using crowd-based platforms.

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PLAN – the Business Model