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Post by easteregg on Nov 25, 2013 22:56:28 GMT
Hello! Should the term "crowdfunding" also include peer-to-peer lending? I have my own opinion on this, but I would like to gauge everyone else's view on this.
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Post by easteregg on Nov 25, 2013 23:15:36 GMT
The reason for the poll is that I'm starting to see the interchange of these two terms, but some people see these as mutually exclusive concepts, one lower risk on lending money, the other one higher risk on investing money. The FCA and EU are starting to use the term crowdfunding as a heading for all crowd activities, but I'm not sure everyone would agree with this terminology.
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jimbo
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Post by jimbo on Nov 26, 2013 2:30:42 GMT
I think that P2B Lending should fall under the term "Crowd Funding", because it represents a crowd of people filling a business loan. This is investment activity, and there are risks attached. It is not so different from investing in corporate bonds. At the end of the day, you're lending your money to a business, and you may end up losing all or part of it. However, I do feel lending to established businesses is less risky than buying equity in startups (ultra high risk), so I feel the following two terms should be applied. Crowd Funded Lending Crowd Funded Equity Both fall under Crowd Funding as an activity, but the level of regulation required should differ. At the end of the day, when you lend your money to a creditworthy operating business or individual, you're doing so on the basis that you'll probably get it back, with interest comensurate with the perceived risk that you will not. When you buy equity in a startup, unless you're a complete idiot, it should be obvious you stand a substantial risk of seeing your stake go up in smoke. There was actually a really good blog post in the Investors Chronicle recently that examined the dilution dangers of buying startup equity via Crowdfunding, and I enclose a link here: www.investorschronicle.co.uk/2013/11/14/comment/chronic-investor-blog/avoid-the-sting-in-crowdfunding-s-tail-MGSdsjALXwlB5knUprnpoL/article.htmlIf anything, this reinforces the difference in risk levels between lending and private equity. As an aside, it looks like Crowdcube carries greater dilution risk than some of the other platforms. |
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Post by stevegrice on Nov 26, 2013 7:17:02 GMT
P2P lendîng is fundamentally different from P2P equity, and only the latter should be called crowdfunding. The RSA put out an interesting podcast on Crowdfunding recently, and if you listen to this everyone is getting very excited about entrepreneurship, innovation and disruptive technology. That's fine, and if people want to invest in that sort of thing, it has to be realised its very risky.
As a TC sponsor (and for some of the other platforms) I have a lot of experience in originating P2P loans; the company profile is fundamentally different - reasonable history, steady growth, stable market, grounded management and some security. I'm not sure any of this applies to companies that are after Crowd equity; to some extent, you want the opposite. As part of an investment portfolio, it really is a different animal to equity.
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jimbo
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Post by jimbo on Nov 26, 2013 7:28:43 GMT
P2P lendîng is fundamentally different from P2P equity, and only the latter should be called crowdfunding. The RSA put out an interesting podcast on Crowdfunding recently, and if you listen to this everyone is getting very excited about entrepreneurship, innovation and disruptive technology. That's fine, and if people want to invest in that sort of thing, it has to be realised its very risky. As a TC sponsor (and for some of the other platforms) I have a lot of experience in originating P2P loans; the company profile is fundamentally different - reasonable history, steady growth, stable market, grounded management and some security. I'm not sure any of this applies to companies that are after Crowd equity; to some extent, you want the opposite. As part of an investment portfolio, it really is a different animal to equity. I agree with the differences, and they should be recognised by the regulators. However, both offerings require funding from a crowd of individuals, so logically they are being crowdfunded. The danger is that the term "Crowdfunding" ends up being associated with equity deals and regulators don't recognise the fundamental differences between lending and startup equity offerings.
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Post by tybalt on Nov 26, 2013 7:29:19 GMT
I am with Steve on this one but think we will loose the battle in the same way that people think kayak is a type on canoe.
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JamesFrance
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Post by JamesFrance on Nov 26, 2013 8:07:52 GMT
To me it means raising funds from a crowd. The use to which the funds are applied is different but I feel the term applies to either.
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Post by bracknellboy on Nov 26, 2013 8:55:46 GMT
Logic tells me the term can be equally well applied to anything which is funded from a crowd: be that a loan, investment capital/equity or anything else (charity appeals are 'crowd funded'). But I suspect elljay's point/concern, as emphasised by Steve G, is nothing to do with the semantic rights and wrongs of the English language, but rather how the term is then being used in the shaping of regulation and the very real risk that lending and investment will end up lumped under the same banner.
Perhaps it would be better to run a different poll, along the lines of:
"For the purposes of regulation, should crowd funded lending be treated in the same way and as if it carried the same level of risk as crowd funded equity investment."
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Post by batchoy on Nov 26, 2013 9:17:00 GMT
The short answer is no, from a personal point I would say that technically P2P lending is a subset of CrowdFunding, so all P2P lending is crowdfunding but not all crowdfunding is P2P lending, however linguistically I use the terms to mean different things and therefore would interpret them to mean different things:
CrowdFunding: you give us £100 to fund the writing of a computer program and we will add your name to the credits and give you a discount on the purchase price (if and) when the product is launched.
P2P Lending: I will lend you £100 to fund the writing of the a computer program for a period of 60 months during/at the end of which time you will pay me back the capital and interest at a commercial rate and if you fail to do so steps will be taken to recover the monies.
P2P Investing is again technically subset if crowd funding, but again linguistically I would use the term separately to indicate the purchasing of equity within the business.
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Post by uncletone on Nov 26, 2013 9:38:31 GMT
For no more a sensible reason than it is the way I interpret the terms:
P2P: lending money to a person, for them to do whatever they like with it (regardless of what they might claim).
Crowdfunding: investing money is a potentially profitable well defined project.
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JamesFrance
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Port Grimaud 1974
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Post by JamesFrance on Nov 29, 2013 15:11:41 GMT
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pikestaff
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Post by pikestaff on Nov 30, 2013 9:07:39 GMT
Logic tells me the term can be equally well applied to anything which is funded from a crowd: be that a loan, investment capital/equity or anything else (charity appeals are 'crowd funded'). But I suspect elljay's point/concern, as emphasised by Steve G, is nothing to do with the semantic rights and wrongs of the English language, but rather how the term is then being used in the shaping of regulation and the very real risk that lending and investment will end up lumped under the same banner. Perhaps it would be better to run a different poll, along the lines of: "For the purposes of regulation, should crowd funded lending be treated in the same way and as if it carried the same level of risk as crowd funded equity investment." I agree with your analysis. The draft regulations do treat crowd funded lending differently from crowd funded equity investment, and the hope is that this will remain so.
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