Crowdcube’s co-founder Luke Lang has voiced his support for the government’s call for a regulatory review on crowdfunding in the UK, saying the platform is committed to working with the Financial Conduct Agency (FCA) to ensure crowdfunding in this country is safe for investors.

In a review by the regulatory body earlier in the month, the organisation concluded: “We have seen the crowdfunding market continue to grow rapidly. We recognise that it is still early but, at present, we see no need to change our regulatory approach to crowdfunding, either to strengthen consumer protections or to relax the requirements that apply to firms.”

Although the FCA came to the conclusion that nor further action was necessary, it did say platforms need to be mindful that they are not promoting offers the general public may not understand or be favourable towards seasoned investors.

Additionally, it voiced concerns that some forum content was being filtered, which could foster an unfair playing field for all investors – whether small-time or VCs.

“As the market leader in the UK, I strongly feel that is vital that the FCA effectively regulates all platforms (particularly newer entrants with less resources and experience of operating in a regulated environment) to ensure all platforms follow the high standards we have adopted. This should help to avoid potential issues occurring in the future,” Lang told Crowdfund Insider.

However, he said other platforms and news outlets weren’t playing ball with the regulatory authority and this is saddening. “It is frustrating and somewhat bewildering that a few people ignored the FCA’s conclusion that there was no need to change their regulatory approach to crowdfunding,” he continues.

He finished by voicing his own opinion, saying the new regulations are currently working well and strike the right balance between encouraging new investors to try out crowdfunding as a form of income and protecting those already involved in alternative financing.

“The new regulations are working well and in my opinion strike the right balance by appropriately protecting investors whilst nurturing much needed new forms of finance for Britain’s start-up, early and growth stage businesses,” he says.

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Games are one of the strongest categories on crowdfunding services — Kickstarter project, Star Citizen, was the most highly funded campaign yet. Now a recent survey of European games industry professionals show they will use crowdfunding to raise funding for future creations.

Crowdfunding? Game on

It makes sense. You see, what these services do is offer investors the chance to buy things they like in advance: a book, a movie, an app, a game. That’s because the product being talked about is usually also the main available gift.

Games studios spend millions on their titles, and lose millions, too. Crowdfunding offers them a way to reach their potential audience, talk about the title they have in mind, and then test the market to see which titles are most robust — they don’t have to do anything if the funding fails to meet target. In recognition of the importance of games to its service, Kickstarter recently launched its “Play Now” video game service, selling successfully funded titles via Steam.

Industry shift?

These could be some of the reasons 41 percent of European games developers are already planning to use crowdfunding to finance future projects (according to the regular GDC State of the Industry survey by the organisers of Game Developers Conference, Europe).

Around 10 percent of European games developers and 11 percent of North American game developers are already using crowdfunding to finance their current project, up from 4percent last year.

The regulatory environment is part of the problem At present the only EU countries in which a developer can apply for such funding for a game are the Netherlands and UK. However, there is a danger that indie developers will be crowded out by the brand appeal of the big names, warns Gamasutra.

Choose your game

So, what games projects are currently seizing the oxygen on the big crowdfunding websites? It turns out there’s quite a few vying for attention:

Disparity Games (Australia) has launched a Kickstarter campaign for new title, Ninja Pizza Girl, an adventure game featuring a ninja pizza delivery ‘associate’ trying to get to her customers in some kind of dystopian cyberpunk hell.

Also on Kickstarter, Skymap Games is pitching for funds for new platform fighter, Bacon Man. He’s wandering around some weird location fighting off enemies with a variety of pork-tinged weaponry.

Then there’s After Reset, an RPG title set in a post-apocalyptic world. Dubbed by games mag, Joystiq, as “the Fallout 3 we never got” this title’s winning a lot of praise from critics for its visuals, music and compelling story line.

It turns out Indiegogo has a few interesting gaming titles to take a look at, too: there’s the darkly addictive Tormentum – Dark Sorrow and the incredibly promising (because the sport’s so far been overlooked) Lacrosse video game for PlayStation, Xbox and PC.

The big reward-based services aren’t the only game (sorry – Ed) in town — there’s even a couple of games-only crowdfunding sites, so if you’re looking to invest in games development check out:

• Gambitious
• Gamesplanet Lab
• LookAtMyGame
• Pozible

All the above are worth a look if you want to put some money into the next big game in town. With this side of the sector set to become incredibly volatile, you’re going to be spoilt for choice when it comes to putting your chips on the gaming table.

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A crash course in alternative lending options hosted by New York’s Department of Small Business Services that aims to explain the different types of investors: Angel, VC and private.

You will learn about:

• The different types of investors: Angel, Venture Capitalist, Private

• How to approach investors and what they look for where choosing to invest

• What is a pitch?

• Different equity options when working with partners and investors

• Using crowdfunding as a source to fund projects or fill a funding gap

• The science to a successful crowdfunding campaign.

All thanks to NYC business support.

NYC say…

“Taking out a line-of-credit or term loan for your business may not be right for your business. Find out what types of alternative lending options are available to business owners as well as how to find them. Learning what types of investors are out there can help you make informative decisions about partnerships and business growth. Choosing an alternative lending solution for your business needs will keep your cash flow current without cutting into your bottom line! In this course, attendees will learn about various financing options, seizing the opportunity, as well as rules for building healthy financing relationships.”

This NYC event is free and you can sign up here.

Image c/o Vincent Desjardins/Flickr

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UK regulators are taking a heavy-handed and seemingly inappropriate response to the promotion of crowdfunding pitches — they’re preventing them, citing the Financial Services and Markets Act (FSMA) when they do.

Talking about equity pitches? You’re nicked!

What’s happening, according to RealBusiness, is that the Financial Conduct Authority (FCA) has decided that allowing websites and social media channels to discuss crowdfunding pitches for equity offerings constitutes financial promotion under Section 21 of the FSMA. This means anyone doing so faces up to two years in jail “unless they are regulated by the FCA”.

This isn’t an idle threat — the FCA has recently been sending letters threatening action against crowdfunders who commit such actions as:

• Mentioning a pitch on the Web
• Mentioning a pitch on Facebook
• Mentioning a pitch on Twitter
• Or even retweeting someone else’s Tweet.

Chilling effect

The rationale behind this ridiculous legislation was to prevent unregulated promotion of financial products to the public, but this reading of the law is likely to cast a chilling shadow across equity crowdfunding sites, and sites reporting on available projects for investment.

That’s incredibly bad for business users attempting to exploit crowdfunding to get their ideas off the ground. It is particularly bad given the essential part social media and websites play when sourcing funding.

The only people likely to benefit will be the big banks and well-heeled investors, who get to maintain their historic grip on business funding. This grip enables them to cherry-pick the most profitable ideas while sending other valuable business propositions to the wall.

In an environment in which banks and investors are pulling the plug on new business funding, this could threaten future economic recovery by limiting the available money supply for new business.

TheCrowdfundingCentre.com has already received this warning from the FCA, RealBusiness reports. That site cannot now display complete listings of equity and loan offerings it carries, “Due to current FCA rules”.

Take action

There is a little hope. Chris Moss of Channel 4’s Bank of Dave has written some easy amendments to the FSMA that would update the law so the Web and social media would be treated in the same way as any other form of media. That’s because conventional media channels are not threatened under this rule.

RealBusiness urges action:

“Please don’t delay, write to your MP enclosing this article and the link to Chris Moss’ FSMA solution. Write also to the Prime Minister and Andrea Leadsom, Economic Secretary to the Treasury.”

We’re writing right now.

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When you’re about to invest in a company you ask questions; you check balance sheets; you engage in due diligence, discovery and check criminal records. You meet the team. All these things are as true for investors using crowdfunding services as it ever has been, but author Dan Marom thinks these services make it even easier to make good investment decisions.

Crowdfunding wisdom

“I think crowdfunding is a crucial toolkit for an entrepreneur,” Marom, who wrote The Crowdfunding Revolution tells the Irish Times. “It’s the democratisation of entrepreneurship.”

Kickstarter isn’t the only crowdfunding site in town, he explains, there’s peer-to-peer lending, equity, donation and reward-based funding services — many of which are included within our directory of services.

While reward-based crowdfunding can be characterised as little more than buying a product in advance, equity-based crowdfunding means much more:

“It’s very popular to say it will destroy conventional venture fundraising, but my personal view is that the future lies in a synergy,” he says.

Can’t fool all the people all the time

You see, the advantage of pointing the crowd at business ideas is that it means those ideas come under far more oversight than any individual investor can possible deliver. You have a crowd of experts taking a look, rather than just the limited number that may exist inside your investment company.

“Sometimes it’s wiser to have the crowd do due diligence,” Marom notes, and while the crowd may not have complete expertise in the business it is being asked to look at, it’s a start. “It’s not easy to fool the crowd, but it could happen,” he says.

The potential positive impact of crowd-based decision making concerning new business ventures is one thing, but there’s another consideration that should please investors: In most cases the business itself has been vetted by the crowdfunding service.

Watch the line

Savvy investors already understand this, of course, which is why so many funding rounds fall around the 30 percent to 40 percent funding mark — usually around the line at which a founder’s personally aquired funds shut down. Businesses that rise above that line are potential investments for seasoned crowd investors, as achieving this means either the idea has impressed a lot of people or the people behind the idea have figured out their marketing.

There’s more in future, of course, Marom believes that it won’t be too long now until big firms begin to crowdfund ideas: “not just funding, but also crowd-sourcing new ideas and also, crowd-sourcing execution”.

Read the whole interview here.

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Sponsored by the City of London, Starting a Crowdfunding Business (£5/ticket) is aimed at those who already run or are planning to launch new crowdfunding platforms.

The event consists of a seminar with Governance, Risk and Compliance advisor, Jay Tikam, of Vedanvi Business and Risk Consultancy. Jay will explain how crowd funding businesses can become authorised with the Financial Conduct Authority, and how you can exploit that status once you achieve it.

From the event publicity:

“Crowdfunding and peer-to-peer lending is booming at an exponential rate. Recent research revealed that, globally, a new crowdfunding project is created every three minutes, with around 500 new projects created every day. The industry is currently doubling every sixty days!”

“Technology and funding, previously the biggest barriers to entry, are now no longer preventing entry of new players in this market place. The biggest obstacle now is getting through regulatory approval.”

Get your tickets at Eventbrite.

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