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How do we judge which investments to support?
As Crowdfunding continues to grow in the UK, it can be difficult for people to decide what to invest in and who to trust.
Dan Hird explains that at Triodos we are proud of our distinctive approach to choosing the organisations we help raise investment for.
- 2 April 2019
Crowdfunding in the UK is continuing to grow rapidly and there are a wide range of options in the market for people ranging from peer-to-peer lending to equity, loans, gift and rewards-based crowdfunding. It is a crowdead marketplace, if you pardon the pun.
However, despite investment crowdfunding being regulated by the Financial Conduct Authority, it can be difficult for people to decide what to invest in and who to trust.
Our focus is ethical investment crowdfunding – in other words, equity and debt investments in organisations which are committed to positive social, environmental or cultural change. We are very proud of this distinctive approach, it is consistent with our underlying values and helps us to further encourage people to use their money to positively influence the way we live and to benefit the planet.
In some of the comments from our recent crowdfunding community survey we noted there’s interest in hearing more about how we select the investment opportunities on the platform. It can be quite a lengthy process, however in all cases we run through a sequence of steps before proceeding and making the offer ‘live’ on the platform. Some of the key questions we ask include:
1. Does the organisation deliver a positive impact for people and the planet?
This isn’t a tick box exercise - we dig deep to ensure we are comfortable with this and that the organisation is truly impactful.
2. Is the business in a position to take on external equity or debt?
Our experienced team will regularly work with the organisation over a period of months to help them become ‘investment ready’.
3. Can we agree a fair deal for both parties?
We take responsibility for structuring the investment to ensure it works and is fair for both investors and the issuing organisation before we decide if it’s an offer which we are happy to put our name to.
4. What does our due diligence tell us?
As we take responsibility for promoting and approving the investment offers on our platform, we make sure we have undertaken thorough due diligence before any offer goes on the platform. Our corporate finance team are all qualified accountants with many years of experience, so we know what to look for.
Overall, we are very selective and getting an investment offer onto our platform isn’t something which happens overnight. However, if all the right information is in place we can move quickly.
Making an offer live on the platform is exciting for everyone involved, but the preparatory work and investment readiness is, we believe, the key to success for all parties, and we are confident our track record is testament to this which makes the ‘impact’ from these investments even more satisfying.
Dan Hird Head of Corporate Finance at Triodos Bank