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Crowd Funding: connecting creatives and savers

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20160316_12352720160316_123606In my bookcase there is a volume entitled The Book of the Lincolnshire Seaside. Published in 1981 as part of the centenary celebrations of Nottingham University, it was written by an alumnus of that institution, David A Robinson. It describes the geology, geography and history of the coastline from the north bank of the Wash to the south bank of the Humber. My copy is number 173. At the back is a list of 810 ‘subscribers’, including me at 173.

I recently finished reading Signs Preceding the End of the World by Yuri Herrera. You can find my review at Goodreads. At the back of that book, too, is a list of ‘sponsors’ whose financial support made the publication possible. The UK based publisher of the English translation of this Mexican work offers three levels of subscription, ranging from 2 books per anum at £20 to 6 at £50. Subscribers receive their copy of the book they’ve chosen up to 3 months before it goes on general sale. There are various other perks too.

Whilst the internet has made it easy to set up crowd funding solutions to the problem of financing book publication, or other creative endeavours, the existence of my 1981 published volume demonstrates the concept is not new.

The Irish historian Finn Dwyer is about to publish his book about the Black Death. That, too, has been funded by subscribers, or sponsors, obtained via the crowd funding website fundit.ie. There are other crowd funding sites used by independent and self-publishers. Kickstarter describes itself as ‘the worlds largest funding platform for creative projects’, whilst indiegogo claims to be ‘the largest global site for fundraisers’. It deals with a wider range of non-profit and community projects.

If you want to know more about crowd funding a book project I recommend you read this article.

Linked Finance

It is not only creative or socially useful projects that can take advantage of crowd funding opportunities. Small businesses in Ireland can connect with small savers via sites like Linked Finance. Similar platforms exist in other jurisdictions. According to a recent article by Adi Gaskell on the Forbes website, in the USA “These platforms generated an estimated $2.1 billion in investment for startups in 2015”. The article went on to quote a World Bank prediction “that crowdfunding investments will be a $96 billion a year market in developing countries alone by 2025”.

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According to the Linked Finance website, “Crowd Lending or P2P Lending was originally invented in Ireland in 1727 by Jonathan Swift when he set up the Irish Loan Fund to lend to small Irish Farmers”.

The key benefit for investors is that their risk is spread. A saver with €1000 might, for example, invest €100 in each of 10 companies. Investors determine the rate of return they require. Loans are repaid over 3 years in monthly installments. The financial health of borrowers is assessed by the Linked Finance team who charge savers a small administration fee. In the unlikely event of a borrower failing to meet his/her commitment, individual investors are exposed only to a small share of the total borrowing.

Such investor-borrower relationships rely heavily on trust. As the Forbes article reminds us, traditional financial institutions continue to score badly on trust, 8 years after the 2008 crash. Couple this with historically low interest rates for savers and bankers’ reluctance to support small business, and you have an environment in which “it is inevitable that the crowd is a market that will continue making waves in the coming years.”

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