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‘Alternative’ finance no more: Crowdfunder on why it’s eyeing up the mainstream

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Crowdfunder is an online platform for helping businesses, charities and community groups raise money from the communities around them. On the back of a record-breaking month for the UK-based firm, director Phil Geraghty talks to Tom Revell about the secret to its success and the transformative power of crowdfunding.

Crowdfunding is an increasingly popular form of alternative financing that allows entrepreneurs to make their ideas a reality. It helps people to direct their money towards projects they consider important, innovative and socially useful.

But it is not quite so simple. Phil Geraghty, managing director of Crowdfunder, explains that the crowdfunding market is made up of many different models funding a great variety of causes. 

“Equity crowdfunding is your kind of Dragons Den – ‘I’m going to take 30% of your business for £30,000’ crowdfunding – but instead of getting it from one person you’re getting it from the wider community”, Geraghty says.

Another type is peer-to-peer lending – a fast, efficient way of getting a loan for your established enterprise.

“The businesses get a market rate and they can choose who they want to borrow the money from, but they’re borrowing it from other people, not from the bank, so it bypasses that whole process.” 

Then there are rewards-based platforms; those like Crowdfunder. In this case, backers don’t get shares or even paid back, but instead receive a product or service in return for their donation. 

The example Geraghty has to hand is a Leeds-based bread co-operative. Its owners needed £8,500 to open a bakery, so they offered funders a years’ supply of loaves for £100 apiece. They reached their target with ease.

“Really, rewards-based crowdfunding is the only one that’s applicable for proper start-up businesses because most are too early for equity – no one’s going to by shares in a start-up – and they’re too early to lend too as well because they won’t pass all the credit checks”, says Geraghty, who joined Crowdfunder in 2013 from TouchLocal, where he oversaw the development of the UK’s largest network of business directories.    

The crowdfunding space is dominated by the big US sites Kickstarter and Indiegogo, but of the platforms based in the UK, Crowdfunder is king. Alone, it features more projects than all its British competitors put together. 

“It’s a long way between us and fourth place”, Geraghty adds.

In April, investors rushed buy into the project. Offering equity through its cousin Crowdcube, Crowdfunder hit its £500,000 target in a matter of hoursA record-breaking 14-hour campaign left the business with £650,000 and 370 new shareholders. 

“It’s really a testament to the hard work that the team has put in”, Geraghty says.  

“I think a big part of our success is working really closely with the projects.

“Each one of our crowdfunding agents is speaking to around 50 projects a day, talking them through the process and helping them throughout.”   

He adds, “A lot of the hard work that needs to be done is done before the projects go live. It’s about building up a crowd, warming it up, getting your message right – before it goes live.” 

Crowdfunder has achieved all this even while applying a selective screening process. It exclusively serves grassroots ideas and innovators that will do good.

“We’re looking for projects that have a good social, environmental or economic impact. A lot of what we do is creating jobs, in areas of the UK that really need it”, Geraghty says.

Phil Geraghty, managing director of Crowdfunder

A favourite example of Geraghty’s is the Greater Manchester food revolution, a popular initiative that provided locally and organically grown veg to Manchester restaurants.

Manchester Veg People, a firm concerned for struggling small-scale farmers and worried about the unsustainability of our food system, needed a van to extend its reach. With the help of the crowd, they got it. 

But what is the appeal? Why are visionaries turning to strangers on the internet, rather than more traditional sources of finance?

Geraghty says, “We get a lot of people coming to us saying they’ve been turned down by the banks. 

“But what is interesting is we’re getting a growing number of people who crowdfund then go back to the bank, show them that they are getting support, then get a loan off the back of it. 

Crowdfunding also validates the entrepreneur’s idea – like early market research.

“It validates it to other people, so they can go to bankers and say, ‘Look what I’ve done’, but it also validates it to themselves. 

“A lot of people who run a crowdfunding campaign start off not too sure what they’re doing, but by the end of it many say things like, ‘200 people have backed my idea with their money, this has given me real belief that I should push this forward’.

“I don’t think there’s any better way of marketing a new idea.”

Geraghty adds that the “democratisation of funding” means that those who source from the crowd not only raise money but build a community of budding loyal customers.

“If you go to the bank and get a loan, you get the money but you don’t get any customers with it. If you crowdfund, you really get up and running.” 

Experts expect crowdfunding’s meteoric rise to continue. In 2013, alternative finance intermediaries, including sources such as crowdfunding, peer-to-peer lending and invoice trading, raised almost £1 billion – a growth of almost 91% in a year.

It is estimated the alternative finance market will continue to grow in 2014, raising up to £1.6 billion as it becomes an increasingly attractive option for individuals and businesses seeking funding, over mainstream banks.  

It may be titled alternative finance for now, but not for long, Geraghty suggests.

“I think it will become the norm. I think in the next two or three years it’ll become less alternative and more standard.”

On the subject of the future, what is next for Crowdfunder?

Geraghty says that the money raised from its share offer will help his busy behind-the-scenes workers to get through a backlog of projects worth around £5m.

The company is looking to triple its staff from 10 to 30 in the next few months, looking out for PR, marketing, tech and business development talent.

Crowdfunder’s tale demonstrates the potential of the alternative finance market, not just as a source of democratised success for wannabe businesspeople and financiers, but as a way of improving lives and communities and turning pioneering ideas into reality. It has all the makings of a great British success story. 

Further reading:

Crowdfunder meets £500,000 equity crowdfunding target in under four hours

April’s top 10 green crowdfunding projects

Solar crowdfunding predicted to top $5bn in five years

Peer-to-peer lending doubles in size to £843m in 2013

Treasury looks to extend ISA reach to peer-to-peer finance and crowdfunding

 

Economy

Will Self-Driving Cars Be Better for the Environment?

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self-driving cars for green environment
Shutterstock Licensed Photo - By Zapp2Photo | https://www.shutterstock.com/g/zapp2photo

Technologists, engineers, lawmakers, and the general public have been excitedly debating about the merits of self-driving cars for the past several years, as companies like Waymo and Uber race to get the first fully autonomous vehicles on the market. Largely, the concerns have been about safety and ethics; is a self-driving car really capable of eliminating the human errors responsible for the majority of vehicular accidents? And if so, who’s responsible for programming life-or-death decisions, and who’s held liable in the event of an accident?

But while these questions continue being debated, protecting people on an individual level, it’s worth posing a different question: how will self-driving cars impact the environment?

The Big Picture

The Department of Energy attempted to answer this question in clear terms, using scientific research and existing data sets to project the short-term and long-term environmental impact that self-driving vehicles could have. Its findings? The emergence of self-driving vehicles could essentially go either way; it could reduce energy consumption in transportation by as much as 90 percent, or increase it by more than 200 percent.

That’s a margin of error so wide it might as well be a total guess, but there are too many unknown variables to form a solid conclusion. There are many ways autonomous vehicles could influence our energy consumption and environmental impact, and they could go well or poorly, depending on how they’re adopted.

Driver Reduction?

One of the big selling points of autonomous vehicles is their capacity to reduce the total number of vehicles—and human drivers—on the road. If you’re able to carpool to work in a self-driving vehicle, or rely on autonomous public transportation, you’ll spend far less time, money, and energy on your own car. The convenience and efficiency of autonomous vehicles would therefore reduce the total miles driven, and significantly reduce carbon emissions.

There’s a flip side to this argument, however. If autonomous vehicles are far more convenient and less expensive than previous means of travel, it could be an incentive for people to travel more frequently, or drive to more destinations they’d otherwise avoid. In this case, the total miles driven could actually increase with the rise of self-driving cars.

As an added consideration, the increase or decrease in drivers on the road could result in more or fewer vehicle collisions, respectively—especially in the early days of autonomous vehicle adoption, when so many human drivers are still on the road. Car accident injury cases, therefore, would become far more complicated, and the roads could be temporarily less safe.

Deadheading

Deadheading is a term used in trucking and ridesharing to refer to miles driven with an empty load. Assume for a moment that there’s a fleet of self-driving vehicles available to pick people up and carry them to their destinations. It’s a convenient service, but by necessity, these vehicles will spend at least some of their time driving without passengers, whether it’s spent waiting to pick someone up or en route to their location. The increase in miles from deadheading could nullify the potential benefits of people driving fewer total miles, or add to the damage done by their increased mileage.

Make and Model of Car

Much will also depend on the types of cars equipped to be self-driving. For example, Waymo recently launched a wave of self-driving hybrid minivans, capable of getting far better mileage than a gas-only vehicle. If the majority of self-driving cars are electric or hybrids, the environmental impact will be much lower than if they’re converted from existing vehicles. Good emissions ratings are also important here.

On the other hand, the increased demand for autonomous vehicles could put more pressure on factory production, and make older cars obsolete. In that case, the gas mileage savings could be counteracted by the increased environmental impact of factory production.

The Bottom Line

Right now, there are too many unanswered questions to make a confident determination whether self-driving vehicles will help or harm the environment. Will we start driving more, or less? How will they handle dead time? What kind of models are going to be on the road?

Engineers and the general public are in complete control of how this develops in the near future. Hopefully, we’ll be able to see all the safety benefits of having autonomous vehicles on the road, but without any of the extra environmental impact to deal with.

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Economy

New Zealand to Switch to Fully Renewable Energy by 2035

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renewable energy policy
Shutterstock Licensed Photo - By Eviart / https://www.shutterstock.com/g/adrian825

New Zealand’s prime minister-elect Jacinda Ardern is already taking steps towards reducing the country’s carbon footprint. She signed a coalition deal with NZ First in October, aiming to generate 100% of the country’s energy from renewable sources by 2035.

New Zealand is already one of the greenest countries in the world, sourcing over 80% of its energy for its 4.7 million people from renewable resources like hydroelectric, geothermal and wind. The majority of its electricity comes from hydro-power, which generated 60% of the country’s energy in 2016. Last winter, renewable generation peaked at 93%.

Now, Ardern is taking on the challenge of eliminating New Zealand’s remaining use of fossil fuels. One of the biggest obstacles will be filling in the gap left by hydropower sources during dry conditions. When lake levels drop, the country relies on gas and coal to provide energy. Eliminating fossil fuels will require finding an alternative source to avoid spikes in energy costs during droughts.

Business NZ’s executive director John Carnegie told Bloomberg he believes Ardern needs to balance her goals with affordability, stating, “It’s completely appropriate to have a focus on reducing carbon emissions, but there needs to be an open and transparent public conversation about the policies and how they are delivered.”

The coalition deal outlined a few steps towards achieving this, including investing more in solar, which currently only provides 0.1% of the country’s energy. Ardern’s plans also include switching the electricity grid to renewable energy, investing more funds into rail transport, and switching all government vehicles to green fuel within a decade.

Zero net emissions by 2050

Beyond powering the country’s electricity grid with 100% green energy, Ardern also wants to reach zero net emissions by 2050. This ambitious goal is very much in line with her focus on climate change throughout the course of her campaign. Environmental issues were one of her top priorities from the start, which increased her appeal with young voters and helped her become one of the youngest world leaders at only 37.

Reaching zero net emissions would require overcoming challenging issues like eliminating fossil fuels in vehicles. Ardern hasn’t outlined a plan for reaching this goal, but has suggested creating an independent commission to aid in the transition to a lower carbon economy.

She also set a goal of doubling the number of trees the country plants per year to 100 million, a goal she says is “absolutely achievable” using land that is marginal for farming animals.

Greenpeace New Zealand climate and energy campaigner Amanda Larsson believes that phasing out fossil fuels should be a priority for the new prime minister. She says that in order to reach zero net emissions, Ardern “must prioritize closing down coal, putting a moratorium on new fossil fuel plants, building more wind infrastructure, and opening the playing field for household and community solar.”

A worldwide shift to renewable energy

Addressing climate change is becoming more of a priority around the world and many governments are assessing how they can reduce their reliance on fossil fuels and switch to environmentally-friendly energy sources. Sustainable energy is becoming an increasingly profitable industry, giving companies more of an incentive to invest.

Ardern isn’t alone in her climate concerns, as other prominent world leaders like Justin Trudeau and Emmanuel Macron have made renewable energy a focus of their campaigns. She isn’t the first to set ambitious goals, either. Sweden and Norway share New Zealand’s goal of net zero emissions by 2045 and 2030, respectively.

Scotland already sources more than half of its electricity from renewable sources and aims to fully transition by 2020, while France announced plans in September to stop fossil fuel production by 2040. This would make it the first country to do so, and the first to end the sale of gasoline and diesel vehicles.

Many parts of the world still rely heavily on coal, but if these countries are successful in phasing out fossil fuels and transitioning to renewable resources, it could serve as a turning point. As other world leaders see that switching to sustainable energy is possible – and profitable – it could be the start of a worldwide shift towards environmentally-friendly energy.

Sources: https://www.bloomberg.com/news/articles/2017-11-06/green-dream-risks-energy-security-as-kiwis-aim-for-zero-carbon

https://www.reuters.com/article/us-france-hydrocarbons/france-plans-to-end-oil-and-gas-production-by-2040-idUSKCN1BH1AQ

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