Posted on July 29th, 2009 by Charles Armstrong
Today we’ve announced that Trampoline is financing the next stage of its growth through an innovative process called crowdfunding instead of traditional venture capital. We’re raising £1 million from up to 100 private investors with a minimum stake of £10,000. In the last few years crowdfunding has established itself as an alternative model in the music and film industry, enabling artists to finance production and releases without signing to a label or studio. This is the first time the technique has been used by a technology venture of Trampoline’s scale.
There are several reasons Trampoline decided to take this step. First and foremost, the financial crisis has severely restricted the availability of conventional finance for businesses at Trampoline’s stage of growth. To maintain the company’s momentum we needed to find a different route. Secondly, we think entrepreneurs should have more choices about how they finance their businesses. We wanted to prove that the internet makes new alternatives available which can function at a reasonably large scale. Thirdly, innovation is a core part of Trampoline’s DNA. We’re always looking for new solutions that are more efficient than the conventional ways of doing things. We’ve spent the last month working with our advisors and shareholders designing the process and ensuring it fits with FSA (Financial Services Authority) regulations. Today we opened the doors.
Some of the greatest changes the internet has brought have involved mobilising large communities of people in new ways, whether that’s Wikipedia, Facebook or Ebay. Crowdfunding is the equivalent for the corporate finance world. Crowdfunding isn’t going to replace venture capital, private equity, debt finance or stock-markets. These traditional models will continue to provide the most efficient solution for certain financing needs. But I think crowdfunding could establish itself as the best solution for many early and mid-stage ventures. In many ways it’s an evolution of “friends and family” and “angel” models, just operating with greater transparency and on a larger scale. Crowdfunding grows organically from peer to peer networks of trust, experience and influence that can help a venture to secure the resources it requires and achieve success.
I hope the the initiative Trampoline’s announced today will spark a discussion in the start-up and venture finance worlds. I’d love to hear what you think. We invite you to add your comments on our discussion page.