Will Santander enter lend-to-save market created to cut out the banks? Tie-up with Funding Circle for business loans on the cards

By LEE BOYCE

PUBLISHED: 17:44, 23 July 2013 | UPDATED: 17:44, 23 July 2013

 
 
 

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Santander: Reports suggest it could be set to team up with Funding Circle

Santander is set to enter the rapidly growing lend-to-save market and team up with one of its biggest players, reports have claimed.

The UK arm of the Spanish bank is in discussions with Funding Circle - which lends money from private investors direct to to small and medium-sized businesses - in a move which could undermine the sector’s position as an alternative to the big banks.

According to the Financial Times, Funding Circle’s ability to tap into the balance sheet of one the UK’s biggest banks will offer it a fast-track boost to its growth.

Funding Circle said it has been in talks with Santander – but the talks are at an extremely early stage, while a Santander spokesman said the FT report is based on 'speculation.'

Funding Circle is one of the three biggest lend-to-save firms – also known as peer-to-peer lenders - alongside Rate Setter and Zopa, the latter two solely focusing on personal loans.

The model has proved a massive success, both for investors looking for an alternative to poor savings rates and small businesses increasingly turned down by high street banks.

Funding Circle says it offers a better deal than traditional banks by linking depositors directly with individuals or businesses looking to borrow.

According to a recent note sent out by Samir Desai, the group’s co-founder, lending remained negative across high street banks in the second quarter, while Funding Circle helped lend £28.4million to businesses.

This is three times the amount lent in the same period of 2012 and 32 per cent higher than the first three months of this year, showing how popularity for lend-to-save is soaring.

More than 17,000 investors now use the site daily and have helped lend more than £120million to 2,000 businesses across Britain in three years.

Interestingly, he points out a recent piece of independent research by Nesta which found 77 per cent of businesses said they would come to Funding Circle for a loan first rather than go to their bank. 

Samir Desai said: ‘This news is further evidence that businesses are attracted to the speed and independence associate with peer-to-peer lending.’

According to a report by the Open Data Institute, the industry will be worth £1billion by 2016. 

But this impressive growth has made it harder to attract sufficient depositors to meet the requirements of businesses looking to borrow, says the FT. 

A potential tie-up between Funding Circle and Santander would let the bank lend alongside the lend-to-save platform’s depositors on larger loans which it might not otherwise be able to help finance. 

Impressive growth: Funding Circle is attracting swathes of investors and small businesses - could teaming up with a bank jeopardise it?

The arrangement could be launched at the end of the year and will give Santander an alternative route into the small business lending market. 

The Government has taken an interest in lend-to-save in recent months and recently invested £20million to lend through Funding Circle alongside private investors, as part of its Business Finance Partnership scheme.

Some in the industry are critical of a potential deal. Stuart Law, founder of lend-to-save platform Assetz Capital, said: ‘The banks are beginning to get concerned as they now know peer-to-peer lending is here to stay – it is no flash in the pan as some initially thought. 

‘However, Funding Circle’s reported involvement with Santander thrusts a spear straight through the heart of the peer-to-peer community. 

‘The relationship endangers the whole market which has worked tirelessly to build trust amongst disillusioned investors and borrowers across the UK by creating a new future for finance that doesn’t involve banks.’

A big drawback of the lend-to-save market is the fact it doesn’t cover investors under the Financial Services Compensation Scheme which guarantees £85,000 per person per institution and they also do not benefit from the £50,000 FSCS investing protection.

Although the industry isn’t regulated, Funding Circle, Rate Setter and Zopa set up a P2P Finance Association last year, which has a strict code of practice, including minimum capital requirements and other systems and controls.

None of the smaller lend-to-save firms have joined due to the stringent criteria.

BrewDog shares target may be hit ahead of deadline

Greig Cameron

Deputy Business Editor

Monday 29 July 2013

THE co-founder of BrewDog expects the company's £4 million crowd funding drive to close before its deadline because of strong take-up from investors.

James Watt said the Fraserburgh firm has already raised £2.5m towards the target since it launched the £95 per share Equity for Punks offer on June 20.

The fundraising was scheduled to close on January 22 next year but Mr Watt believes the full sum will be raised prior to that.

He said: "It will stay open until January unless we reach the target of what we need.

"We have raised £2.5 million in the first month so I am pretty confident it will close before then."

BrewDog wants to use the money to extend the Ellon, Aberdeenshire, brewery it opened earlier this year and boost annual production there ten-fold to 500,000 hectolitres.

As well as that, there are plans to build a brewing academy in London, open specialist beer shops and extend the 12-strong bar chain in the UK and overseas.

Mr Watt: "There is no down time at the moment. We are building [at Ellon] and I am looking at sites in Sheffield then Germany."

A visitor centre, bar, restaurant and shop could also be built at Ellon.

If the fundraising goes as expected, the company also intends to put money into the development of spirits brand Watt Dickie.

The 35% alcohol by volume spirit was launched in BrewDog bars during June this year, initially in six centilitre bottles.

As well as holding the stock, shareholders get a lifetime discount for BrewDog bars and the online shop plus an invite to its annual general meeting which Mr Watt described as "more like a party, with lots of beer and great bands".

The sale of the 42,000 shares, equivalent to less than 4% of the entire share capital, values the business at more than £100m.

The company made a pre-tax profit of £486,000 last year on revenue of £10.7m. Turnover is predicted to hit £20m this year and double again in 2014.

BrewDog, which employs more than 180 people, was named as the fastest growing food and drink company in the UK earlier this year.

It emerged at the time the share issue prospectus was published that former ScottishPower chief executive Philip Bowman paid £221,000 for 15,000 A shares in BrewDog which he bought from co-founder Martin Dickie.

If Equity for Punks is fully subscribed, Mr Watt will retain 37.1% of the company and Mr Dickie 32.5%.

The previous Equity for Punks programme took place in 2011 and raised £2.2 million.

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Ubuntu plans crowdfunded 'Edge' Linux and Android smartphone

Campaign hopes to raise £21.5 million for a new device that will combine the convenience of a mobile with the power of a desktop.

Canonical, the software company behind the Ubuntu Linux open source operating system, has launched a crowd funding campaign to raise money for the development of its flagship smartphone, Ubuntu Edge, which it says will launch early next year.

Ubuntu founder Mark Shuttleworth describes the Ubuntu Edge as the "concept car of smart phones". It will bring together “mobile convenience with desktop power in a single device,” and aims to be a catalyst for mobile innovation as well as hardware and software development.

The Ubuntu Edge will run both the Ubuntu phone operating system, which launched in January 2013, and Google Android. Shuttleworth said that there is a very large enthusiastic community around Android, and providing a standard Android environment is a good way for them to experience the hardware.

However, it will also be a proofing ground for Ubuntu mobile OS, which Canonical is hoping will begin running on more mainstream devices in the near future.

Like Microsoft, Canonical is pushing the idea of desktop and mobile convergence. When plugged into a monitor, the device transforms into a PC with the full Ubuntu desktop and shared access to all the phone’s files.

Microsoft has certainly mapped out a similar vision, where they have common visual elements across the mobile and PC experience, but we thought it was possible to go even further and really converge the devices so that it’s the same operating system, not a similar operating system, and that’s really where we thing there’s a gap for this proofing ground," said Shuttleworth.

In order to run two operating systems in parallel, the device needs the power of a PC, Canonical claims, so Ubuntu Edge will be equipped with “the latest, fastest processor, at least 4GB of RAM and a massive 128GB of storage”. The company was not able to reveal exact specifications, but said it is working with “one of the leading design manufacturers in Asia” to develop the device.

The Ubuntu Edge will have a 4.5-inch 1,280 x 720 HD display with "pure sapphire crystal" touchscreen rather than glass, which is so tough it can only be scratched by diamond. It will have a 8MP rear and 2MP front camera, and will also pioneer the use of long-life silicon anode battery technology.

A special dual-LTE solution will allow high-speed roaming with access to 4G-LTE broadband in both Europe and the US, according to Canonical.

Canonical hopes to raise £21.5 million using crowd funding website Indiegogo. Anyone who pledges £394 on day one, or £592 thereafter, will receive their very own Ubuntu Edge device in May 2014, and there will also be an opportunity for people who back the project to participate in the final selection of some of the materials and software capabilities. Canonical is only manufacturing 40,000 Ubuntu Edge devices.

“To make the future of mobile happen we’ll have to smash every record in crowd funding history. But if there are enough enthusiasts who want the ultimate in performance, storage, screen, battery and bandwidth, Ubuntu Edge will be the catalyst for awesome innovation, and a taste of the future of the phone,” said Shuttleworth.

Margareta Pagano: Crowd power can carry us to recovery

Crowdfunding is one of the most thrilling developments in finance for at least a couple of hundred years – just check out how beer-lovers have poured their money into the Scottish craft brewery BrewDog. It is democratic, transparent, imaginative and inclusive as it lets the crowd – private investors – engage directly with start-up entrepreneurs and small firms looking for new sources of finance. It is also growing like topsy and going global.

There are now 600 crowdfunding platforms in the world and they have raised $5bn (£3.4bn) for new ventures. In the UK there are 40 or so crowd platforms that have provided about $1bn of new money for companies pitching either through debt, equity donations or reward-style incentives. The amounts being raised are still trivial compared with conventional bank finance – even now, after the crash, the UK's banks provide about £7bn a month to SMEs – but it has huge potential. Some suggest £15bn could be sourced from the UK crowd over the next few years as investors search for better returns for their cash.

By far the fastest growing are the peer-to-peer platforms, which offer investors a competitive interest rate in return for lending to either consumers or small business. Funding Circle, for example, has trebled the amount of money it has raised for small businesses in every year since its launch three years ago. In terms of risks for the investor, the P2P lenders are simple creatures and welcome being regulated by the Financial Conduct Authority (FCA) next year.

By contrast, investing in companies pitching on the crowdequity platforms is going to be longer-term and riskier. Even so, investors are proving keen and Crowdcube has now raised £10m for 56 companies that have pitched on its site. Others like Seedrs, Abundance Generation and Investing Zone, backed by the venture capitalist Jon Moulton, are also seeing a big rise in traffic from investors – and companies – on a daily basis.

Yet they share a common fear – that the regulators are in danger of taking the crowd out of crowdfunding. Indeed, Moulton is concerned that the FCA is going to strangle the industry at birth because it's being too heavy-handed and putting people off taking risks. In typical Moulton style, he told me: "You can stop all cancers if you kill all babies at birth." Quite. But his point is sound. At the moment, the FCA wants all sites to tell investors that they must prove they are high net worth and sophisticated if they are to register with them. To demonstrate this, investors have to fill in questionnaires to show they have the money – but everyone knows the answers can be made up.

Crowdcube and Seedrs also have to tell investors to have a diversified portfolio and invest a minimum of £1,000 across no fewer than 10 businesses in their first year of membership. How crazy is that? It's also unenforceable. Understandably, the FCA wants to protect consumers, but this sort of guidance is patronising to the public. Any potential investor looking at the companies pitching on these sites knows they are high-risk start-ups. Yet anyone is allowed to invest on the highly regulated stock market, so imagine you had invested your life savings in Royal Bank of Scotland in 2007 ... You can go into a betting shop and put large amounts of money on a horse, and no one is bothered.

Hopefully, the FCA's boss, Martin Wheatley, will make sure that when the watchdog publishes its consultation paper this autumn, it takes a proportionate approach. If carefully nurtured, crowdfunding has the power to shift the balance away from the big financial institutions that wrecked the economy, and give it back to the small business owners and the small investor to help kickstart growth. Even the Commission on Banking Standards said access should not be restricted to the "high net worth" individual. Let's hope the FCA chooses to walk with all angels and not just the rich few.

Yet they share a common fear – that the regulators are in danger of taking the crowd out of crowdfunding. Indeed, Moulton is concerned that the FCA is going to strangle the industry at birth because it's being too heavy-handed and putting people off taking risks. In typical Moulton style, he told me: "You can stop all cancers if you kill all babies at birth." Quite. But his point is sound. At the moment, the FCA wants all sites to tell investors that they must prove they are high net worth and sophisticated if they are to register with them. To demonstrate this, investors have to fill in questionnaires to show they have the money – but everyone knows the answers can be made uCrowdcube and Seedrs also have to tell investors to have a diversified portfolio and invest a minimum of £1,000 across no fewer than 10 businesses in their first year of membership. How crazy is that? It's also unenforceable. Understandably, the FCA wants to protect consumers, but this sort of guidance is patronising to the public. Any potential investor looking at the companies pitching on these sites knows they are high-risk start-ups. Yet anyone is allowed to invest on the highly regulated stock market, so imagine you had invested your life savings in Royal Bank of Scotland in 2007 ... You can go into a betting shop and put large amounts of money on a horse, and no one is bothered.Hopefully, the FCA's boss, Martin Wheatley, will make sure that when the watchdog publishes its consultation paper this autumn, it takes a proportionate approach. If carefully nurtured, crowdfunding has the power to shift the balance away from the big financial institutions that wrecked the economy, and give it back to the small business owners and the small investor to help kickstart growth. Even the Commission on Banking Standards said access should not be restricted to the "high net worth" individual. Let's hope the FCA chooses to walk with all angels and not just the rich few.

Six Partnerships that Prove How Crowdsourcing is Going Mainstream

Posted on June 10, 2013 by Yannig Roth

 1 27

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In a recent blog post titled Five Signs That Crowdsourcing 

Will Cross The Chasm in 2013, François Pétavy (CEO of eYeka) 

examined some current trends and explained why he thinks 

crowdsourcing will go mainstream in 2013. He argued that 

crowdsourcing now solves real business problems, that the 

ROI of crowdsourcing is easier to demonstrate, but also that 

embracement of crowdsourcing by brands has exploded 

in recent years.

If we take a step back, we can see that he’s right. Six partnerships 

between crowdsourcing companies and major corporations 

have been announced since December 2011, proving that big players 

start integrating crowdsourcing in their innovation, marketing and 

communication strategies. ADK, Booz Allen Hamilton, Edelman, 

Sony, Deloitte and Unilever have signed strategic partnerships 

with different crowdsourcing providers in the last months. 

Who said that crowdsourcing was a fad?

ADK partnered with eYeka in 

December 2011

The first major marketing group to strategically invest into 

crowdsourcing was ADK. In December 2011, the Japanese
creative agency Asatsu-DK, or ADK, announced the formation 
of a strategic partnership with creative crowdsourcing 
specialist eYeka. Effective as of December 1st 2011, the 
partnership allowed ADK to tap into eYeka’s online community 
of 250,000 consumers to solve its clients creative challenges. 
Japan’s third largest advertising agency recognized that 
crowdsourcing creative ideas was an effective way to help 
its clients to innovate.

The duty of an agency is to embrace change before 

its clients do, so we have decided to take the lead 

with a new, open model where we integrate consume 

ideas from start (Kenichiro Omori, head of global 

business division, ADK)

Since the announcement, the two companies having
already initiated a number of projects across the World. 
One of them was the “Stand for Japan” project, winner 
of the 2012 Co-Creation Awards in the Not-For-profit Marketing 
& Communication category, where people from all over the 
World were invited to create imagery that showed what  made 
Japan truly unique to them. The campaign generated over 
300 submissions from 41 countries such as France and even China, 
with the best visuals shown at the ADK Shochiku Square 
and exhibited at Ad:tech Tokyo. The project is a good example 
of how crowdsourcing can bring fresh and creative ideas 
from a diverse group of consumers.

Booz Allen Hamilton partnered

with Innocentive in December 2011 

A few days after the above partnership was 
announced, crowdsourcing pionneer 
innocentive announced a strategic alliance 
with the management and technology consulting 
firm Booz Allen Hamilton. This alliance provided 
Booz Allen Hamilton’s commercial and government 
clients an integrated open innovation solution, 
including a “Booz Allen Hamilton-InnoCentive Open 
Innovation Diagnostic Program” and, of course, the 
prize-based crowdsourcing challenges that 
Innocentive pioneered since 2001.

We find that agencies are 

serious about leveraging new tools

and methods to find innovative 
solutions to problems

(Allan Steinhardt, VP, Booz Allen Hamilton)

Edelman PR partnered with 

Poptent in August 2012

But crowdsourcing is not only used for
innovation and marketing, it is also increasingly
used in the video advertising space. One of the 
established actors in the field is Poptent, who announced 
a partnership with Edelman, the world’s largest public 
relations firm, in August 2012. The objective of the 
partnership, which was effective immediately, was 
that Edelman would use Poptent’s network of videographers
to create relevant and authentic video content for Edelman’s 
clients, as the announcement explained.

We are experiencing strong global client demand for

 original online and offline video content, so the time is

right for Edelman and Poptent to join forces (Caroline

Dettman, Executive Creative Director, Edelman)

Crowd sourcing represents a cost-effective 
way to produce video content for the 
PR firm’s clients, to be used in social 
media campaigns, public service announcements
and other integrated communication efforts, 
both online and offline. Neil Perry, president 
of Poptent, explained in an interview that 
the video crowd sourcing company 
already worked with PR companies 
besides Edelman, including Ogilvy PR, 
who crowdsourced videos for Intel.

Sony CEA partnered with Mofilm

in April 2013

Another partnership in the video crowdsourcing 
space was recently announced by Sony Computer
Entertainment America (SCEA), who partnered with the UK-based
crowdsourcing company Mofilm. Previously to the announcement,
SCEA worked with Mofilm to produce content for the launch of 
“LittleBigPlanet Karting” in the USA, and for the “Live in a State of Play”
campaign for the PlayStation brand.

As PlayStation moves into its next phase of growth, we 

look forward to continuing our work with Mofilm as our 

agency of record for crowdsourced advertising (Guy Longworth,

SVP, PlayStation Brand Marketing, SCEA)

It is interesting that the words used in the announcement are that of the
advertising world (“hiring [...] advertising agency Mofilm“), which shows that
Mofilm positions itself similarly to traditional advertising agencies, and
definitely plays in that universe. If you go on Mofilm’s contest website, you
will see that references to the advertising world are numerous, including
annual brand contests for the Cannes Lions in Cannes.

Deloitte partnered with Kaggle in May 2013

Kaggle is a crowdsourcing platform that focuses on data analysis. 
Surfing on the wave of Big Data, the company has secured a 
partnership with Deloitte Australia, combining Kaggle’s 
nearly 100,000-strong data scientists with the analytics 
professionals from Deloitte Analytics’ network in order 
to expand its $2 billion global data analytics business. 
The partnership with Deloitte is Kaggle’s first global partnership.

We can now help clients apply data to yield even more effective 

and timely business insights [via] Deloitte Analytics’ wide-ranging

in-house capabilities but also [by using] Kaggle (Anthony Viel,

National Managing Partner, Deloitte Analytics)

As Business Review Weekly notes, the Kaggle-Deloitte partnership is
non-exclusive (which is not the case of some of the above), so Kaggle can
team up with other accounting and consulting firms in the future. But Kaggle
says that this is not a problem a the start-up plans to team up with other 
Deloitte offices in the US and Britain within the next 12 months. “The
next stepwill not be for us to work with competitors, but to see Deloitte 
take this globally,”Kaggle president and chief scientist Jeremy Howard 
says, “we see this as a major part of our business.”

Unilever partnered with eYeka in June 2013

The latest major announcement isUnilever’s partnership 
with eYeka, a crowdsourcing specialist already
mentioned above for its partnership with ADK. The FMCG-giant has
signed a contract that shows its intent to further tap into the open 
creativity and crowdsourcing platform that eYeka has nurtured over
the last few years. The appointment is official as of June 7th, and covers
markets across Asia Pacific, Middle East, Russia and South Africa.

We have worked with the eYeka community for two years

on a number of projects and now extend that relationship

further and deeper (Rahul Welde, VP Media for Asia, Africa,

Middle East, Turkey and Russia, Unilever)

The eYeka community has already worked with a number
of Unilever brands such as Clear, Close Up, Comfort, Cornetto, 
Lifebuoy, Lipton, Lux, Pond’s, and even the Unilever brand itself. 
From now on, eYeka’s online community can be expected to work 
across more of Unilever’s brands on innovation, 
marketing and communication-related contests.

Conclusion

These partnerships are strong signs that crowdsourcing
is a viable business solution for a variety of organizations. 
The above examples 
indicate that agencies (ADK, Edelman), consultancies
(Booz Allen Hamilton, Deloitte) and brand organizations 
(Sony, Unilever) alike embrace crowdsourcing! 
In some cases, organizations are looking for the crowd’s 
brainpower to solve technical problems (Innocentive, Kaggle), 
and in some cases it’s more about creative idea generation 
(eYeka) or video content production (eYeka, Poptent, Mofilm).

“Now that crowdsourcing is crossing 
the chasm, it may soon turn out 
that not leveraging it will become a 
competitive disadvantage,” said
François Pétavy in Five Signs That 
Crowdsourcing Will Cross The 
Chasm in 2013.
All the partnerships described above
are strong signals thatconfirms that 
crowdsourcing is being recognized as a 
business accelerator. “We have long 
advocated turning to consumers for 
ideas and content with consumers as 
a source of competitive advantage,”
says François Pétavy about his 
company’s partnership with Unilever, 
“so we are thrilled to partner with 
Unilever to bring this approach to a 
new scale.” There will certainly be 
more partnerships announced in the 
future. And crowdsourcing 
will continue making inroads 
into mainstream business practice.

image credit: elliecrocker.com

- See more at: http://www.innovationexcellence.com/blog
/2013/06/10/six-partnerships-that-prove-how-crowdsourcing
-is-going-mainstream/#sthash.pS6qkKR3.dpuf