Southpark parodied ‘Crowdfunding’ but is there a serious message?

 

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‘Go Fund Yourself’. Amazon

South Park ‘s ‘Go fund yourself’ parody of Crowdfunding, where the customer invests in a company that ‘does absolutely nothing’, whilst funny, has serious overtones – you need to know what you are investing in, and have a firm understanding of the risks involved.

Crowdfunding is the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet. It is most often associated with ‘newbie’ start-ups, such as those small businesses created in innovative tech hubs like Shoreditch, London.  However, it has started to become appealing for some of the larger, more established firms. Over the last year,  the amount of businesses looking for investment via Crowdfunding has grown exponentially. In fact, according to a report by Nesta, the market is estimated to be worth £939million.

The idea of Crowdfunding a project to many is attractive; perhaps to an investor, connecting with a company that you may feel will bring far-reaching rewards or fulfil an ethical or broader objectives in your life. To a business, it is without doubt a very effective way of reaching out and gathering funds that may have in the past been more difficult to achieve. However, there are risks and whilst this type of investment may be helping to fill a void in ‘savings’ opportunities at the moment, it’s absolutely vital that Crowdfunding is treated in the same way as any other investment type.

The good news is that the FCA introduced the 10% rule, where retail investors must certify that they are not committing more than a tenth of their net investable assets  – excluding their home, pensions and life insurance – unless they can ‘self-certify’ that they are ‘sophisticated investors’ or ‘High net worth’.  There is fear that regulation may hold back Crowd-funding, but surely it’s better this way than high number of people investing their life savings in potentially worthless businesses AKA South Park’s spurious Kickstarter venture .

[Please note: Searchlight Investments Limited does not offer any advice or guidance on crowd funding investments and that this article does not mean that we support or recommend crowd funding as an investment choice]. 

 

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