Over-Regulation Is Not the Solution to Crowdfunding Failures

Rebus Group was the company that had drawn over £800,000 from an eminent funding platform but became unsuccessful. The story behind the failure triggered the regulators to scrutinise the alternative finance sector and lay further regulations.

Rebus gained its funding from more than a hundred investors who were apparently uninformed of deep cracks running through the company the time it pitched.

The company eventually dropped — leaving the investors who had put considerable amounts with the hope that the organisation will generate profit later, terribly disappointed.

And because of that, the crowd started to criticise the sector.

The main point is that transparency is lacking in pitches which is the correct approach to follow when seeking outside investment.

In this situation, it is discussed that financiers were not told that the firm already had difficulties — leading to petitions for deeper regulation of the crowdfunding sector.

The alternative finance institution has stepped in where the banks have left a gap. It is being pitched to by numerous innovative companies that have latest ideas in areas such as fintech, tech, and augmented reality. The government of the UK must do all it can to help these companies in their venture so they would not be wandering in places a far just to seek monetary support in order to materialise the new ideas they bring, which can later be monetised.

The explanation of the Rebus case wasn’t clear, though. We never know what really happened and what the underlying factors of the bankruptcy were.

Just like any other types of investments, it would have been made clear that capital was at risk. However, investors also need to be accountable for their own decisions.

The second major point talks about the significance of Angel Investors in the alternative investment sector. Angel investors commonly function as formal or informal syndicates. This involves sharing notes and taking significant capital for investment, 50% to 100% of an investment round. The syndicates can be composed of experienced entrepreneurs, city professionals, and family offices.

The bottom line is, we must possess all the tools available to reassure investors and motivate them to hunt for new opportunities, provide employments and companies for the new economy.

Implementing excessively rigorous regulation is like placing an overwhelming control on advancement in the UK.