Crowd Funding.

A question about : Crowd Funding.

I've just been listening to an interesting feature on Bbc 4 Moneybox about Crowd Funding. They described it as a Dragons Den online when businesses who were struggling to borrow from the banks looked for other sources. One of the places they spoke to who had borrowed like this was the Eden Project in Cornwall, but it seemed mostly small start-up companies. One man had loaned Ј500 to some young people to start a business and when asked if he was worried he may not get anything back he suggested that it was more important to help young people learn about business and give them a start.
Unless i had a pet subject that i'd like to help out i don't think i'd go for this type investment. I wondered had anyone else here taken a chance, or would you.

Best answers:

• There's things like Kickstarter, but those are a bit more like 'I'm starting a business making which you can't buy at the moment. Here's my proposition, if you pay me $X then you'll be first in the queue to get //.' There may be some that offer a return on investment, I haven't seen those.
  The problem is that 'investors' come along and think 'hey, it would be cool to have a Thing'. What they don't do is look at the business side. So they're suggesting it's going to be manufactured in a factory in China. Do they have a factory lined up? Do they speak Chinese? Do they have a prototype? What are the production costs? What's the market price going to be? Who are the management? Have they done something like this before?
  All too often people invest due to a neat idea, the vendor goes quiet for a bit, then announces 'unexpected delays'. Investors start getting unsettled. Then a few years down the track everything disappears in a puff of smoke. But then the project gets forgotten about and the next great idea comes along and gets all the publicity. Rinse and repeat.
• I think the OP is confusing crowdfunding with peer-to-peer lending.
• No i'm not confusing the two, although they seem similar.
  I'm a regular Moneybox listener and they've talked several times in the past about P2P, and we've had threads here on Mse about the Pros and Cons of it. But today the Moneybox team featured Crowd Funding, and i just woundered what peoples thoughts were on it.
• I use The House Crowd, which is crowd-funded property development rather than business start-up or development.
  It is less than 5% of my total portfolio, but it has done a good, reliable job for me thus far, at 6% pa plus a share of profit on sale of the property. Gut feeling says it is a little riskier than my peer-to-peer lending (also paying 6%), but the additional potential payout makes that worthwhile for me.
• I have money in Abundance which matches individual investors with sustainable energy projects. The project I am currently invested in has an IRR of 7.5%.
  Abundance is described as an "equity based crowdfunding" service so I think there is a bit of a grey area between crowdfunding and P2P.
• There is a tax shelter for Angel Investors/businesses supporting business growth.
  IES and SIES.
  J_B.