ClearlySo has helped more than 50 organisations to raise about £60m in capital since the beginning of 2013.
This has not been easy; although more than half has come from institutional investors, it is angel investors and high-net-worth individuals who have proved a reliable mainstay of our business, funding the bulk of the high-impact organisations we assist.
However, regulation limits us to marketing these opportunities only to high-net-worth individuals and institutions. As a result, retail investors are unable to play a part in the impact investment revolution. This point was made in Impact Investing For Everyone, a recent report by the social lender Triodos as part of the G8 Social Investment Task Force.
Crowdfunding is a cost-effective mechanism to gain access to retail investors and we have helped the companies we serve to use it. It helps to complement the funds our high-net-worth individuals can provide and should broaden the market for impact investment. It is worth noting that crowdfunding platforms have been pursuing us for a few years because the companies we assist often touch people deeply and can be more successful on crowdfunding platforms. We also suspect crowdfunders are comforted by the fact that our angels have already priced the deal and carried out due diligence.
Our first foray into working with a crowdfunding platform has been with Extremis Technology, which designs shelters specifically for disaster relief. Although one hesitates to extrapolate too much from a first test, there are a few points to highlight – in order to help entrepreneurs understand the difference between crowdfunding and traditional fundraising with angel investors.
First, joining a crowdfunding platform involves carrying out two diligence exercises rather than one (although as this form of investment becomes more common, we hope the two might be merged into one).
Second, publicity is important; the flow of media interest must be maintained in order to raise money. This is in direct contrast to the more discreet angel fundraising. In crowdfunding, questions are asked publicly through the online forums, and entrepreneurs must set aside time to answer queries from a diverse investor base.
For organisations that have a public appeal, including charities and those calling themselves social enterprises, crowdfunding can provide a new audience and forge interesting new connections. We expect to work more with crowdfunding networks over time; they offer a useful add-on to the services we provide. For impact investing to increase in scale, crowdfunding is essential.
Rodney Schwartz is chief executive of ClearlySo, which helps social entrepreneurs raise capital