I am delighted to welcome Jake Wombwell-Povey co-founder and CEO of Goji to dive into the fascinating subject of –the Innovative Finance ISA. Goji’s aspiration is to take P2P into new investor markets and their first focus is on providing a white-label/back-office IFISA solution to existing platforms.
The IFISA might be unknown off these shores but here it’s generated plenty of excitement in the P2P community. There are direct impacts of the IFISA (which I had spotted) and some indirect impacts (which I had spotted less).
But for those offshore folks who don’t know what an ISA is, basically UK tax payers have been able to shelter a small amount of investment money every year from tax forever – income or capital gains. It was introduced way back in 1986 by Nigel Lawson under Margaret Thatcher’s government to encourage wider equity ownership. In those days it was called a PEP. Over the past 30yrs the whole thing has got more complicated and changed its name to ISA but the principle of away from the taxman remains. The current limit is £15k per annum.
In the Fintech-emergence year of 2014 George Osbourne announced in his budget that ISA eligibility would be extended to include P2P loans. In the 2015 budget it was confirmed that from 6th April 2016 lenders will be able to hold AltFinance assets in an IFISA.
Since then there has been much work on clarifying where we are – and perhaps preparations are not all entirely in place even a few weeks before the start-line as we will here.
If this all sounds very abstract the excitement stems from the fact that each year it has been estimated that approximately £50bn is invested in ISAs. And you can imagine how keen platforms are to get there paws on a percentage of that.
This is London Fintech Podcast episode 42, the answer to life, the universe and everything. Well a bit of everything anyway. And I have the pleasure to be joined today by – er – myself.
In the now traditional (um – can doing something twice be a tradition?) first podcast of the year step away from diving into a topic with an esteemed guest and take a more top of the mountain view of the landscape.
As it’s a bumper funpack we will cover a whole range of topics all of which pertain to Fintech.
So we start today’s show with the relevance of Star Wars; move on to beer and deep dive into a topic that applies to Fintech and to the whole of our perception of the world, the media – mainstream and indie.
Next a review of key themes from 2015 UK Fintech and finally we wrap up with some thoughts about the future.
In the next episode I’ll be back to the far easier task of asking folks smarter than I the answer to life the universe and everything or at least what’s going on in their corner of the Fintech phenomenon
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,
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.
David Stevenson is a journalist extraordinaire and writes for a number of leading publications including the Adventurous Investor Column in the FT, the Investors Chronicle, Money Management and Investment Week, where he’s the contrarian columnist. He also runs the AltFi empire that spans conferences, news and as we heard in LFP010 with Rupert Taylor, AltFi Data. He has also authored a number of books on investment including three for the FT as well as having extensive interests in the visual media world.
David joins us on the show to talk about why it matters that Alternative Finance becomes viewed as an asset class in its own right – a subject that draws together his long-term role as an investment commentator as well as lynchpin of the London Alternative Finance scene.
I must say that I thought that this hypothesis about being an asset class was rather a linguistic point. However, having discussed it with David, I can see the importance of it being so and I hope you will be persuaded too.
I am delighted to be joined on the show today by Goncalo de Vasconcelos CEO and founder of Syndicate Room who are one of my must-know-about equity crowdfunding platforms as they have originated an “investor-led” model of equity crowdfunding which has some powerful advantages.
As I have previously mentioned equity crowdfunding seems to me to occupy this triangle whose three vertices are spivs, “pile ’em high and sell em cheap” and professional. No-one resides at any of the vertices and the whole thing is in evolution.
Maybe I should be clear what I mean by professional … there are plenty of professional firms out there … but I mean more “professional in the way that well established stock exchanges are”. The London Stock Exchange or Deutsche Boerse eg I would say are pretty professional. Fintech as a whole hasn’t got there yet [although as we heard in LFP023 I think B2B-FX is the most professionalised subsector of fintech]
Syndicate Room are definitely one of the few fintech equity crowdfunding firms nearest the professional vertex in my opinion.
Their interesting business model innovation is investor-led crowdfunding (as opposed to company-led which is the general model). All of their deals are led by an experienced angel investor who has a personal stake in the deal – no doubt far higher than you or I who in essence co-invest alongside. Thus he has conducted his own due-diligence, price negotiation etc before investing.
Equity Crowdfunding is one of the key areas in which the UK has a great lead and so we have a special, longer than usual, episode. I am delighted to be joined on the show today by Karen Kerrigan Legal and Finance Director at Seedrs (who were the first equity crowdfunders to be FCA authorised in the UK). Karen is also a lawyer and a Director at the UK Crowdfunding Association and so an ideal person to take us on a deep dive into the scene.
I first met Karen at a breakout group in the London Financial News Fintech day last autumn. I was impressed by her passion for ensuring that all categories of investor – private thru to VC always get equal treatment. If you are unsure of the precise meaning in this context of things like pre-emption rights, tag-along and consent rights check out Karen’s great blog article in re: protecting small investors in equity crowdfunding rounds.
We have a wide-ranging conversation on a whole host of topics:
the perennial vocab problem (the UK crowdfunding association includes all types of alternate finance; the FCA used the word in that context recently; but many others (notably p2p folk) associate crowdfunding with the equity not debt platforms);
the competition at the Trade Association level for territory;
the origins of equity crowdfunding ~2009;
the many possible meanings and models when crowdfunders say for example that they are “expanding to Europe”;
regulation by the FCA – how long it used to take and plans to facilitate this process going forwards; principle-based regulation and how the meaning of that has changed over time; the review in 2016;
market pressures leading over time to equity crowdfunders and stock exchange convergence in approach and fee levels;
case studies of recent Seedrs fund raises for Chapel Down and Oppo – how it works, the motivation for doing and the wide range of reasons and benefits all the way through to marketing and brand awareness/customer loyalty;
the need to come to the platform with your tribe/network in place already in order to generate the social proof necessary to create momentum around the raise;
qualifying as an investor – either one needs to be a high-net worth individual or in the UK if one can prove that one understands the risk of investing (in the US right now only the first category can invest – “Jobs Act Title Three” awaited to broaden that out);
the big dangers of different types of equity share (eg “B” shares) in terms of investor protection and the role of Seedrs (and one or two other equity crowdfunders) nominee structure in terms of providing investor protection going forwards;
the risks/challenges for equity crowdfunding over the next few years; the FCA’s current focus on the up-front aspect of crowdfunding right now and less on the downstream journey; the equity crowdfunding triangle;
Seedrs US acquisition of Junction Investments and how that fits into the mix;
Seedrs dual pricing structure – pay on way in and way out/pay on success;
Platforms vetting of company applications, some run mini-incubators to prepare their companies for pitching; approaches to valuations.
And as if all that isn’t enough for a 45 minute chat we maange to squeeze in modern pentathlon; tetrathlon (I didn’t even know that existed); lacrosse (and whether mixed lacrosse plays by the male or female rules); ice hockey; kite surfing and kite buggying 🙂