LFP041 – The Dataless Desert – Equity Crowdfunding with Rupert Taylor CEO AltFi Data

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In a Fintech Era when Big Data is all the rage Equity Crowdfunding rather looks like a very poor relation indeed. Less Small Data even and more No Data. As I have written about in The Strange Case of Missing Data on UK Equity Crowdfunding none of the platforms, the UK Crowdfunding Association or the FCA appear to be providing or asking for even the bare minimum,

Rupert TaylorI am pleased to be joined in this curious vacuum by Rupert Taylor MD of AltFiData who first appeared on the show a year ago giving an overview of the whole alternative finance scene.  The AltFi Data team recently released a report City lawyers Nabarro entitled “Where are they now? A report into the status of companies that have raised finance using equity crowdfunding in the UK

For those of you who aren’t aware of the depths of the challenge in this area the acting head of the FCA and chairman of the FCA were grilled recently by the UK government’s Treasury Select Committee.  Perhaps the most shocking aspect of this was the lack of grip the FCA appeared to have on data on the sector – venturing that p2p losses were “around 1%” and that there was a lack of performance data around ECF.  However the FCA did mention that they insist that ECF platforms make it clear that the majority of startups fail.

In this episode we discuss:

– Rupert’s charity Momentum which aims to give children from a state academy work experience which he sees as the essential tyranny which can hold those back whose parents aren’t well-off/well-connected (especially as much experience/intern-ing can be unpaid :-()

– the problems of the English language, despite which we decided to continue using it 🙂

– the necessity of asset classes demonstrating their performance. A comparison of #ecf with #p2p which is doing a far far better job of transparency around track-record

– the huge difficulty of finding out even simple statistics like how many deals have been done and how many of those companies are alive today. Companies house Dickensian latency around data; social media; telephone calls and many other “old world” brute force techniques of discovering

– the twin aims of the report being this basic “survival” data and the desire that the #ecf industry pick up the ball and run with it – in it’s own interests as well as that of their investors (who they purport to serve)

– the parallel between professionally-managed stock markets and #ecf 2015

– the media treatment (both old and new) to the report to spin it into saying what they wanted to in the first place

– £140m raises to June ’15; over 2015 £145m is expected to be raised – more than in its prior history;

– the average age of ecf-raising companies being 3yrs which is not a startup

– although it is early days, especially for companies that raised funds in 2014/2015, the data shows that 4 out of 5 companies that raised ecf are still going.  Contrast this with the oft-reported (but apparently groundless) stat that 9 out of 10 startups fail.  Stats based in research are along the lines that roughly 1 in 2 startups failed (RSA, Nesta, ONS)

– the fact that an ecf-raising company is very different from a startup (which stats relate to)

– the curious fact that the FCA both focuses its vocabulary on startups and it’s un-evidenced assertion that the majority of ecf-raising companies will fail [of course in the fullness of time every company fails :-)]

– why ecf platforms don’t have to report even the most basic data on their raises to the regulator?! [Let alone more advanced material like profit performances compared to forecasts issued to support their raise]

– the responsibility of companies raising funds to realise that they need to provide information back to retail investors who are taking huge risks in investing in them and getting no=to-minimal data from them

– the irony (?) that a platform which has high due-diligence/listing requirements won’t be commercially successful; the tension between “everything working out in the end” (ie if investors are treated poorly they wont be there in the long term) versus “in the long term we are all dead”

– finally wrapping up we discuss AltFi Data’s new prototype index to provide data on performance in the US P2P marketplace (trailing one-year returns in the US right now being ~8% cf ~6% in the UK); the US being dominated by consumer lending

And much much more 🙂