New Money

New Crowdfunding Model Puts Investors First

Less than 10% of start-ups actually succeed, and that number is lower with current strategies

BRIGHTON, England, September 7, 2016 /PRNewswire/ –A new Crowdfunding model has launched, which puts the needs of the investor before those of the companies seeking funds.

Traditionally, companies seeking funds have had it all their own way, with some crowdfunding companies, in their haste to get more opportunities on their platforms, allowing very high valuations and forgoing investor interests.

Shadow Foundr, which is authorized and regulated by the Financial Conduct Authority (FCA), prides itself on putting investors first – including scrutinizing company valuations; which they believe will result in a much higher success rate than the current industry standard.

Jason Kluver, co-founder of Shadow Foundr said, “We’ve all heard the figure of less than 10% of start-ups actually succeeding, but in reality, if you look at the number of exits and success stories over the past 5 or so years, that number would appear to be even lower for companies funded through crowdfunding.”

“This is unacceptable and ultimately, not sustainable for this important sector, moving forward.

More due-diligence

“We believe the reason for the poor success rate is because crowdfunding platforms are not doing enough due diligence and not questioning entrepreneurs on what are quite often, outrageous valuations.

“We’re seeing day in day out, companies that have nothing more than an idea, valuing themselves in the millions; and more worryingly, platforms happily promoting them at those valuations and investors putting their hard earned cash into them.

“If the due diligence is not done and the valuations are unrealistic, how can companies expect to exit through an institution; which will ultimately do the due diligence and find the initial valuation over the top?

“In a scenario like that, how can they seriously expect to provide crowd investors with a return?”

The team behind Shadow Foundr has been involved in the equity crowdfunding space, with various companies, for more than 6 years.

Between them, they have raised around £80m in funding from their networks of business angels and investors, many of whom have followed them into their new entity, to become the lead investors in all Shadow Foundr opportunities moving forward.


We're seeing day in day out, companies that have nothing more than an idea, valuing themselves in the millions

And this is where the Shadow Foundr model is unique.

Shadow Foundr ensures all opportunities placed on their platform go through stringent due diligence, undertaken not only by themselves, but also via their network of private investors, who must then fund the opportunity to at least 30% of its target, before it is put to the Crowd.

“Once these commitments are in place, our platform allows every-day investors to invest directly into pre-vetted, early-stage companies and Small to Medium Sized Enterprises (SME’s).

“Shadow Foundr’s ability to call on an established network of business angels and other professional investors, including family offices, venture capital and other authorised financial institutions, to commit to an opportunity before it is presented on the platform, should provide comfort for crowd investors.”

Currently there are platforms that seek funds from a lead investor, prior to going to the crowd; and others that ask companies to place funds raised by their family, friends and sometimes the entrepreneurs themselves, on the platform, to make it look as though an opportunity is getting a lot of traction, when the reality is that it perhaps isn’t as attractive to investors as the platform indicates.

Shadow Foundr’s team believes it will have the first platform that legitimately and transparently has an opportunity funded to a minimum of 30%, before it is presented to the Crowd.

“Our ultimate goal is to protect investors and the industry, by bringing that poor success rate for Crowdfunded businesses up, and really make Crowdfunding an attractive and legitimate way for investors to make some great returns.”

“We understand Crowdfunding is an exciting concept but we also understand the importance of putting investors’ interests and compliance at the core of the activity.

“There will always be failures and people will always lose money, but through our model we are hoping to turn the statistics on their head.”

Shadow Foundr has recently gone live, with several businesses already attracting significant funding through the company’s private investor network.