April 21st, 2017
How An Electric Car Company Won Britain’s Equity Crowdfunding Race To Profit
Every investor taking a stake in a young business raising money on an equity-based crowdfunding platform dreams of a big payday. Investors have to be realistic – they know there’s a good chance they’ll never see a return on their money when investing in small, high-risk ventures. And many are motivated by more than just the potential for profit – they actively want to support entrepreneurial ventures, for example. Still, at the back of their minds, they wonder whether they’re buying a stake in the next Facebook.
For equity crowdfunding investors in Britain, these dreams have remained just that. No business that has raised money via a U.K.-based equity crowdfunding platform has yet been able to offer its investors a profitable exit.
Until now that is. E-Car Club has just won the race to do exactly that. The business, which hires out electric cars on a pay-as-you-go basis, raised £100,000 for investors on the Crowdcube platform in 2013. And now it’s been bought by Europcar, the car hire company that operates throughout Europe and beyond.
E-Car Club and Europcar aren’t saying exactly what the deal is worth. But they describe the exit terms offered to the 63 investors who put up that £100,000 two years ago as representing a “multiple return.” Most of those investors will not have expect to be able to walk away from their investment with a profit so quickly, but the emergence of a suitor in the form of Europcar has accelerated the exit process very dramatically.
E-Car Club is joining a very select club – there are barely a handful of businesses anywhere in the world that have raised money via equity-based crowdfunding and gone on to offer their investors a profitable exit, whether through M&A, an IPO or another route. Investors on hundreds of platforms that have sprung up globally to facilitate this kind of investment will naturally hope to see many more success stories of this kind, but the sector is still too young to be producing winners in large numbers.
Indeed, to put the evolution of this sector in context, private equity funds tend to operate with five-year exit strategies in mind – five years ago, there weren’t any equity-based crowdfunding platforms.
E-Car Club’s sale therefore represents a breakthrough moment. Until now, British equity crowdfunding platforms have had to talk purely theoretically about the potential for investors to make money. Now they have a real-life case study to tell the world about.
The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 1100+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more About Us or visit www.ncfacanada.org.