SyndicateRoom, a fast-growing crowdfunding platform, is also the name of a study area at Cambridge Judge Business School. Goncalo de Vasconcelos, the entrepreneur who hit on the idea while at the historic university, has much to thank his MBA for.
He is at the forefront of a revolution in financial services. Banks are ripe for disruption with the innovative technology that peer-to-peer lenders use to facilitate investments.
“Equity crowdfunding is a beautiful thing,” says Goncalo with a smile, flashing a neat row of white teeth.
SyndicateRoom is an investor-led equity platform that helps entrepreneurs raise cheap capital, providing better rates than banks for both consumers and investors.
It has raised nearly £17 million for users through its platform since launching in 2013.
In a short pace of time, UK P2P platforms have raised nearly £1.5 billion of funding for British businesses and individuals. The Peer-to-Peer Finance Association, a trade body, forecasts that lending will exceed £2.5 billion this year alone.
But in the US, the nascent consumer loans industry is rapidly growing. P2P lenders have already raised a total of $8 billion-plus for consumers and businesses.
Lending Club, the US’s biggest P2P lender, recently listed on the New York Stock Exchange, surging to a valuation of $8.5 billion. The company recently topped $5 billion in loans since its inception.
Renaud Laplanche, Lending Club’s founder and chief executive, graduated from the MBA at HEC Paris, a leading French business school, in 1995.
Renaud says its goal is to transform the banking system. “We believe we can make the system more cost-efficient, more transparent and more customer friendly,” he says.
Renaud is one of a bevy of MBA graduates at the helm of ventures leading the battle against banks.
In addition to SyndicateRoom and Lending Club, both CrowdBnk and Indiegogo, one of the biggest US crowd funders, were also founded by MBA graduates, the latter by Danae Ringelmann, who earned an MBA at Berkeley’s Haas School of Business.
While each business is slightly different in its approach, all four are led by entrepreneurs who count some of their success to the world’s top business schools.
Without an MBA, Ayan Mitra says he would not have launched his venture. “It changes your outlook towards life,” says the founder and chief executive of CrowdBnk, an equity and structured debt crowdfunding platform.
Ayan, who spent 17 years working in technology at companies including supermarket chain Marks & Spencer and Orange, the telecoms group now known as EE, launched CrowdBnk in 2011, after graduating from London Business School.
In that time it has raised and co-invested £7.4 million in funds for mostly SMEs, including the £1.5 million raised for LumeJet, a company that develops inkless printing technology.
Ayan acknowledges he would have a higher salary and a higher-profile job if he had stuck with his corporate tech roots, but an MBA spurred him to take what he calls a “journey”.
CrowdBnk differs from some other crowdfunding platforms because it directly invests in companies alongside the investors on its platform. As a result, it takes a minimum of three weeks for a project to get funded, “a lot slower than what the industry is used to”, Ayan says.
While other alternative finance providers are strictly equity-based, CrowdBnk also handles structured debt.
Debt is more liquid and less risky than equity, Ayan says, the latter a market in which angel financers are looking for the next Facebook or Google – so rare that investors call them “unicorns”.
Ayan believes that debt is the segment of the P2P lending industry that will “disrupt” traditional lenders, which cannot move as quickly and often lack technology.
“Alternative finance platforms are here to stay and [they] will change how the world works,” he says.
Many crowdfunding platforms are moving into the debt market. This includes Crowdcube, the world’s first equity crowdfunding platform, says Kieran Garvey, business development manager.
“It is always going to be far bigger than equity,” says Kieran, who studied a business-related MSc at Imperial College in London.
Crowdcube last year raised £36.5 million for more than 100 businesses, he says. “We’ve grown extraordinarily rapidly over the last few years." The platform expects to have 200 businesses funded by the end of 2015, he adds.
Traditionally, equity crowd funders have raised finance for small companies and start-ups.
But the trend today is that much larger companies are looking to raise substantial amounts of money in the alternative market, Kieran says. “That’s the really exciting area that we’re going to see a lot of over the coming year and beyond.”
The key to the sector’s growth is to generate sustainable returns for investors, say platform founders.
“It has to work for investors for it to be sustainable,” says Goncalo at SyndicateRoom. The company boasts success stories, such as Apta, a biosciences business that raised £1.85 million in funding through the platform, and e-Go, a maker of lightweight aircraft, which raised £950,000.
Goncalo believes his MBA has benefited the business greatly. He values the mind-set and confidence that business schools tend to spur, and also the network – his met his co-founder at Cambridge.
“Everyone wants to chip in with ideas. We had really valuable feedback,” he says. It also acts as a safety net. If his venture doesn’t ultimately succeed, he knows that he has the academic credentials to find a job and get back on his feet, he adds.
“It gives you that credibility. It opens doors,” says Goncalo, who worked as a senior engineer at Transport for London, the UK capital’s public transport network, before beginning his MBA.
This is a sentiment echoed by Ayan at CrowdBnk, who has hired heavily from London Business School in the past, he says. “The network has come in good. People back each other; that’s what you buy into.”