Making a big impact with crowdfunding

What is investment crowdfunding and why might you want to get involved? Triodos Bank UK CEO Bevis Watts explores the background, opportunities and risks to be aware of.
  • Blog

- 27 April 2022


Fans of the rock band Marillion are often heralded as early pioneers of crowdfunding. In 1997 they grouped together on the early internet to raise funds for a tour of the USA. And that's pretty much how crowdfunding still works today: an organisation uses a crowdfunding platform to seek investment from lots of individual investors, rather than one lump sum from a single investor or bank.  

There are several types of crowdfunding: reward-based, where you invest (often small amounts of) money in return for discounted products or perks, such as merchandise or event attendance. Donations are also a type of crowdfunding, albeit where the funder expects nothing in return. Investment-based crowdfunding can be either investing in company shares or bonds, which will be my focus here. Bonds are a form of debt and you invest money for the offer of a return over a fixed period with some interest.  

But why crowdfund? For the organisation seeking investment, crowdfunding can be a good alternative to a traditional loan if deemed to be too risky. However, some go down the crowdfunding route even though they could get a bank loan, because they want to engage hundreds of investors with their product or service.  

For everyday investors, there are also plenty of reasons to get involved in crowdfunding. It’s a chance to gain returns while knowing exactly where your money is going and supporting a project or business that may not be able to operate without the injection of additional finance. It’s also possible to invest small amounts – for example as little as £50 – meaning it’s a very inclusive form of investing. But it does also carry much higher risk than standard savings. As with all impact investing, you can combine financial return with a societal or environmental return, but doing your research is key.  

For anyone that wants to invest their money in line with their values, a major benefit of crowdfunding is that it allows you to pick specific companies and projects to support. That could include a community-owned renewables project, generating clean energy while reinvesting surpluses in the community or an organic food business looking to expand. Investing in these projects means you will normally get a good sense of where your money is going and what it is being used for.  

For those looking to ensure they have a positive impact on people and planet, there are several platforms that are dedicated to ethical crowdfunding offers, often offering investments as tax-efficient Innovative Finance ISAs. Whatever you pick, always check the track record of the site and the level of transparency in terms of fees and the history of the organisation.  

Look out for certified B Corporations or those recommended by Ethical Consumer or Good with Money. At Triodos, we were the first bank in the UK to launch a dedicated investment crowdfunding platform back in 2018, and to this day we only promote offers we feel have a positive impact on the world – for example a £2 million raise for a rewilding charity Trees for Life, which is part-funding the world’s first rewilding centre in the Scottish Highlands.  

It’s important to note that these investments are higher risk. The investments will be for a set period and may be difficult to sell, and there is a risk of losing money so you should only invest a discretionary amount you are comfortable with. Investments are not covered by the Financial Services Compensation Scheme (FSCS) and your capital is at risk and returns are not guaranteed.  

Crowdfunding allows everyday investors to make a positive choice to shape the world they want to live in. In that sense, money can be a hugely powerful form of democracy if invested directly into renewable energy, social housing, charities, community ownership or social enterprises. This type of social investment can be very accessible to everyday investors, who are increasingly recognising the power of their money and looking for opportunities to create change.

Explore our platform to find out more about the investment crowdfunding offers we currently have live triodoscrowdfunding.co.uk/investing

This article was originally published in the Metro newspaper.
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