The Alternative Finance Industry Report

PUSHING
BOUNDARIES
THE 2015 UK ALTERNATIVE
FINANCE INDUSTRY REPORT
February 2016
Bryan Zhang, Peter Baeck, Tania Ziegler,
Jonathan Bone and Kieran Garvey
In partnership with
with the support of
CONTENTS
Forewords
04
Introduction
10
About this study
12
The Size and Growth of the UK Online Alternative

Finance Market
13
Market Size and Growth by Alternative Financing

Models
14
Increasing Share of the Market for Business Funding
19
Market Trends in Alternative Finance
22
Expanding Base of Funders and Fundraisers
23
Market Entrants and Partnership strategies
25
Seeking Growth Through Awareness, Increased

Marketing and Forging Partnerships
26
Institutionalisation of the Market
27
Cross-Border Transactions and Internationalisation
30
The Geography and Industries & Sectors of

Alternative Finance
31
Industry Perspectives on Regulation, Tax Incentives

and Risks
Size and Growth of the Different Online

Alternative Finance Models
33
38
Peer-to-Peer Business Lending
39
Peer-to-Peer Business Lending (Real Estate)
40
Peer-to-Peer Consumer Lending
41
Invoice Trading
42
Equity-based Crowdfunding
43
Equity-based Crowdfunding (Real Estate)
44
Reward-based Crowdfunding
45
Community Shares
46
Donation-based Crowdfunding
46
Pension-led Funding
47
Debt-based Securities
47
Conclusion
48
Acknowledgements
50
Endnotes
51
ABOUT THE
AUTHORS
BRYAN ZHANG
Bryan Zhang is a Director of the Cambridge Centre
for Alternative Finance and a Research Fellow at the
Cambridge Judge Business School. He has co-authored
five industry reports on alternative finance.
PETER BAECK
Peter Baeck is a researcher at Nesta, where he focuses on
crowdfunding, peer-to-peer lending and the role of digital
technologies in public and social innovation.
TANIA ZIEGLER
Tania Ziegler, Research Programme Manager, Cambridge
Centre for Alternative Finance, Cambridge Judge Business
School. Her research interests include small business
economics and SME utilization of alternative funding
models.
JONATHAN BONE
Jonathan Bone is a researcher at Nesta, where he focuses
on innovation and economic growth with a specific focus
on alternative finance and start-ups.
KIERAN GARVEY
Kieran Garvey, Policy Programme Manager, Cambridge
Centre for Alternative Finance, Cambridge Judge Business
School. His research interests include the application of
alternative finance within developing countries, renewable
energy and early stage ventures.
SPECIAL
THANKS
The Cambridge-Nesta research team
would like to thank Robert Wardrop,
Stian Westlake, Christopher Haley,
Raghavendra Rau and Mia Gray
for their feedback and guidance
throughout the study. We could not
have completed the study without the
support from Alexis Lui and John
Burton who have been instrumental
in analysing and visualising data.
We are also grateful for the help and
support from Warren Mead, Sarah
Walker, Pete Shepherd, Audrey King
and their brilliant team at KPMG in
the UK. We would also like to thank
Christine Farnish and Sam Ridler
from the P2PFA, Julia Groves from
the UKCFA, as well as Janine Hirt
and Julia Morrongiello from Innovate
Finance.
The Cambridge Centre for
Alternative Finance wishes to thank
CME Group Foundation and DFC
Global for their generous donation
towards our research endeavours.
ROBERT
WARDROP
Executive Director
This years online alternative finance industry report follows its predecessors
with a title reflecting the evolutionary state of an industry having a growing
impact on the UK economy and the society in which we live. The Rise of
Future Finance in 2013 described the size and scale of a new channel of
finance emerging from outside of the traditional banking system. In 2014,
Understanding Alternative Finance, analysed the surging participation of
individuals and businesses both funding and fundraising. This years report,
Pushing Boundaries, reflects an industry that is coming of age, increasing its
engagement with traditional institutions while speeding up its own pace of
innovation.
Pushing boundaries is associated with positive change and innovation.
Pushing some boundaries, however, puts trust at risk. The growth of the
industry to date attests to the trust placed in platforms by many funders,
fundraisers, policy makers and the general public. Many tests of this trust are
to come, and the outcomes will shape the industrys growth trajectory and
institutional relevance within the financial system. Tellingly, the platforms
themselves recognise that the greatest risks to the continued growth and
development of the industry are not increased regulation or changes to tax
incentives, but events related to their own conduct: malpractice or a cyber
security breach.
Each years industry research seeks to provide insights into questions raised
in our previous reports. Last year, for example, we noted the arrival of
institutional investors, and this years study analyses the scale and growth
of their activity. Our aim is to continue this cycle of insightful analysis, as
we believe that this years report invites as many questions as it answers,
providing the grist needed to benchmark and analyse the evolution of this
fascinating industry.
STIAN
WESTLAKE
Executive Director of
Policy and Research
2015 has seen another year of remarkable growth for Alternative Finance in
the UK.
When Nesta began working with the sector in 2010, it consisted of a few
plucky startups. The industry such as it was could be gathered around a largish
table. Discussions with policymakers and regulators had to begin with careful
explanations of what crowdfunding and peer-to-peer finance actually meant.
How things have changed. The UK Alternative Finance sector now does
3.2billion of business a year, up 84% on last year. It has its first unicorn,
with Funding Circles latest round of financing valuing at over a billion dollars.
Andother countries look at the UKs policy set-up with interest and sometimes
envy.
As the sector grows, it is sure to face challenges. In the coming year, as equity
crowdfunded businesses mature, investors will be on the lookout for evidence
of actual rates of return. If the economy turns sour, backers will learn more
about the quality of peer-to-peer loans. Bad news on either of these fronts will
be a challenge for the industry. We are also likely to see incumbents playing
an increasing role: both mainstream financial institutions, who are seeking to
learn from their new competitors, and institutional funders, who are providing
significant amounts of the funds available on a growing number of platforms.
If the industry can rise to these challenges, its growth seems set to continue.
So far, the ability of alternative finance providers to harness the power of the
crowd to connect savers, borrowers and businesses has been powerful.
We look forward to seeing how the sector advances in the year to come.
WARREN
MEAD
If 2015 was the year of pushing boundaries, then 2016 will be the year that
so called alternative finance becomes mainstream. The industry is growing
up. It is bigger than ever and it is more sophisticated than ever, building out
an infrastructure including risk, compliance and legal teams to support that
growth.
Partner, Global Co-Lead

of Fintech
This evolution brings both the opportunity of legitimacy and the challenge
of growing pains. The industry has been legitimised through its recognition
by regulators. It has been legitimised by government through the tax and
ISA reforms. Even the establishment is on board, with two of the industrys
pioneers appearing in the Queens New Years Honours list. This, together
with a sharp focus on customer needs and social purpose, provides a great
platform for future growth.
SARAH
WALKER
But for 2016 we have three critical questions.
Director, UK Lead of
Alternative Finance
1.
Will the growth in institutional funding dilute the social purpose of

alternative finance is it no longer finance for the people by the people?
The majority of the market will conceivably be institutionally funded in a
few years, in order to diversify funding and manage conduct risk. In that
sort of world a key differentiator could be lost.
2.
How will the platforms compete for assets when the incumbents are
catching up with their own digital investment and customer service
innovations? Are todays platforms alternative enough?
3.
How will the industry cope with the inevitable platform failures there
are simply too many to be economic. When they start to fail, will the
legitimacy that has been so hard to win, start to crumble.
We are optimistic that the industry can respond to these challenges and thrive.
2016 looks to be another interesting year.
RUMI
MORALES
Executive Director,
CME Ventures
Type bank or finance into any search engine and youll find countless
images of Greco Roman buildings, calculators, stack of gold coins, and the
occasional pen resting on a chart. But the world of banking and financial
services is changing swiftly and dramatically, with alternatives to traditional
products and services being introduced daily, significantly impacting the way
people and institutions use money.
Previously, financial technology could be regarded as applications of
traditional financial services upon existing technologies, but today, we are
witnessing truly novel inventions with participation from previously untapped
markets. Crowdfunding, invoice trading, and peer-to-peer lending are just a
few examples where new participants are accessing technological innovations
to create new marketplaces.
To this end, this report could not be more important or timely. The size
and growth of the online alternative finance market, new entrants and
partnerships, and the impacts on regulation and tax incentives, have the
potential to transform the global economy. But this transformation can be
best achieved only with thoughtful analysis and a thorough understanding of
the alternative finance landscape.
CME Group, as the worlds leading and most diverse derivatives marketplace,
is proud to support the publication of this report through its Foundation. Since
established nearly 170 years ago, CME Group has helped to push boundaries
in the financial system to explore new frontiers in finance. We believe that
it is with informed view of the possible future, we can work to achieve new
opportunities and economic prosperity through financial innovation.
We would like to acknowledge the generous support received from the UK Crowdfunding Association,
the PeertoPeer Finance Association and Innovate Finance.
We would like thank the following platforms for completing the tracking survey.
growthdeck
investUP
DIRECT FINANCE
EIGHT FACTS ON
ALTERNATIVE FINANCE
IN 2015 THE MARKET GREW TO
3.2 BILLION
INCREASED MARKET
SHARE FOR SMALL
BUSINESS LENDING AND
START-UP INVESTMENT
BUSINESS LENDING:
12%
INVOLVING MORE
PEOPLE, PROJECTS AND
BUSINESSES IN FUNDING
AND FUNDRAISING
NUMBER OF
FUNDERS:
1.09 million people invested, donated or
lent via online alternative finance platforms
in the UK
NUMBER OF
FUNDRAISERS:
254,721 individuals, projects, not-for-
profits and businesses raised finance via online

alternative finance models
of the market for

lending to small
businesses in the UK.
START-UP INVESTMENT:
Equity-based
crowdfunding is
15.6%
of total UK seed and venturestage equity investment
REAL ESTATE IS TAKING OFF
The combined
debt and equitybased funding
for real estate
amounted
to almost
700 million
in 2015
THE 2015 UK ALTERNATIVE

FINANCE INDUSTRY REPORT
#ALTFIN16
GROWING INSTITUTIONALISATION
OF THE MARKET
PLATFORMS ARE
HAPPY WITH EXISTING
REGULATION
5.66%
45%
26%
of all platforms
reported some
institutional
involvement
of all P2P
business loans
in 2015 were
funded by
institutions
of all P2P
consumer
loans in 2015
were funded by
institutions
DONATION-BASED
CROWDFUNDING
grew by 507% from
2m in 2014 to 12m
in 2015
EQUITY-BASED
CROWDFUNDING
is the second fastest growing
sector - up by 295% from 84
million raised in 2014 to 332
million (including real estate
crowdfunding) in 2015
7.89%
2.63%
35%
FAST GROWING MODELS:
507%
3.77%
90.57%
89.47%
Adequate and appropriate for my

platform activities
Inadequate and too relaxed for my
platform activities
Excessive and too strict for my
platform activities
RISKS TO GROWTH
FRAUD OR MALPRACTICE
57%
of platforms saw a
collapse of one or
more of the wellknown platforms due
to malpractice as a
high risk to growth.
CYBER SECURITY
51%
295%
of the surveyed
platforms regarded
cyber security as a
factor that could have
a very detrimental
effect on the sector.
1
INTRODUCTION
Rarely a day goes by without a story about the growth of
the online alternative finance market in the UK. In 2015,
many peer-to-peer lenders reported continued growth
and record-breaking financing rounds. At the same time,
the equity-based crowdfunding market saw its first exits,
while donation, reward and community based platforms
funded more good causes than ever before.
Looking beyond the headlines, what is the real state of
the market in the UK?
11
Introduction
In this study by the University of Cambridge and Nesta,

in partnership with KPMG in the UK and supported by
the CME Group Foundation, we show how in 2015, the
combined market activity of the UK online alternative
finance industry grew to 3.2 billion - an 84% increase
compared to the 1.74 billion of 2014. Although the
absolute year-on-year growth rate is slowing down
(the growth rate between 2013-2014 was 161%),1 the
alternative finance industry still recorded substantive
expansion across almost all models. Looking beyond
the total market size, stand-out findings from this study
include:
Increased share of the market for business finance:
In2015, approximately 20,000 SMEs raised alternative
finance through online channels, receiving 2.2 billion
in business funding. Total alternative business lending
reached 1.82 billion - 3.43% of gross national banks
lending to SMEs, based on Bank of Englands 2014
baseline figure (i.e. 53 billion). Alternative business
lending in our data included peer-to-peer business
lending, invoice trading and debt-based securities.
Looking specifically at the small business sector, we
estimate peer-to-peer business lending (excluding real
estate lending) supplied the equivalent of 13.9% of
new bank loans to small businesses in the UK in 2015
(based on BBAs 2014 baseline figure of 6.34 billion).
Institutionalisation is taking off:
2015 saw increased involvement from institutional
investors in the online alternative finance market. This
is particularly significant within peer-to-peer lending
where we estimate that 32% of loans in peer-to-peer
consumer lending, and 26% of peer-to-peer business
loans, were funded by institutional investors.
Donation-based crowdfunding is the fastest growing
model:
Although it started from a relatively small base
(2million in 2014), donation-based crowdfunding is
the fastest growing model in our 2015 study - up by
around 500% to 12 million.
Real estate is the single most popular sector:
It is clear that real estate is the most popular sector for
online alternative finance investments and loans, with
the combined debt and equity based funding for real
estate amounting to almost 700 million in 2015.
Equity-based crowdfunding is growing fast, and

secured its first exits:
The second fastest growing sector in 2015 was equitybased crowdfunding, which was up by 295% from
84 million raised in 2014 to 332 million in 2015.
Excluding real estate crowdfunding (87million),
equity-based crowdfunding contributed 245
million worth of venture financing in 2015, which
we estimate is equivalent to 15.6% of total UK
seed and venture-stage equity investment, based on
Beauhursts data during the same period (i.e. 1.57
billion in 2015). In addition to this, 2015 saw the
equity-based crowdfunding market report its first two
exits, although this figure should be understood in
the context of over 1,200 successfully funded deals
between 2012 and 2015.
The industry is satisfied with current regulation:
When asked what they thought of the existing
regulation of peer-to-peer lending and equity-based
crowdfunding, more than 90% of platforms, for which
this was relevant, stated that they thought current
regulation was adequate and appropriate.
The biggest risk is platform fraud or malpractice:
Thestudy asked platforms what they saw as the
biggest risks to the future growth of the market.
Ranking highest was the potential of a collapse of
one or more of the well-known platforms due to
malpractice, which was seen as a high risk to growth
by 57% of surveyed platforms.
Looking at the market trends in this years study, it
is clear that the online alternative finance industry is
pushing boundaries of market growth, business models,
public awareness, corporate partnerships, institutional
funding, product innovation, international expansion as
well as further regulatory support and policy acceptance.
The UK online alternative finance market is growing
increasingly complex, fluid and dynamic. We hope this
study will shed some light on this fast evolving alternative
finance landscape.
ABOUT THIS STUDY
Since 2013, the University of Cambridge and Nesta have collaborated

to systematically benchmark and continuously track the growth and
development of the UK online alternative finance market.2,3 As in our
previous studies, this industry report is aimed at tracking the growth and
development of the market. More importantly, we also look beyond the
sheer numbers to identify the emerging industry trends and analyse the
market dynamics of specific alternative finance models.
In contrast to our previous studies, the Cambridge-Nesta research
team administered the 2015 UK Alternative Finance Industry Tracking
Survey at the beginning of January 2016. This was carried out to collect
actual transactional numbers from all four quarters of 2015, directly
from alternative finance platforms, rather than projected Q4 figures
as in previous studies. With the support from the online alternative
finance industry, and generous help of our partners, which included
the Peer-to-Peer Finance Association (P2PFA),4 the UK Crowdfunding
Association (UKCFA)5 and Innovate Finance,6 the research team was able
to successfully survey 94 leading alternative finance platforms in the
UK, over the course of two weeks, capturing over 95% of the visible UK
online alternative finance market.
All survey data has been cleaned, anonymised and aggregated to
analyse industry growth and market trends. Two additional platform
datasets were generated using web scraping methods and added
to the total survey database, which increased the overall research
sample size to 96 platforms. As described in this study, the alternative
finance industry is growing in complexity, with an increasing number of
platforms operating hybrid models, offering a range of products across
the alternative finance spectrum. For alternative finance platforms
that offered mixed or other financing models/products, their 2015
quarterly transaction volume was then further broken down and added
to its associated model based upon the information provided by that
platform.
For all average data points (e.g. platform acceptance rates, funding
success rates or most funded sectors), weightings (by transaction
volume) were applied in order to produce the most accurate estimates
based on the available data.
13
THE SIZE AND GROWTH OF

THE UK ONLINE ALTERNATIVE
FINANCE MARKET
General Trends and Dynamics within the
Online Alternative Finance Market
Looking at the 2015 quarterly data, the industry has been
growing at a healthy, yet decelerating pace from 20.1%
between Q1-Q2, to 14.9% between Q2-Q3 and 12.22%
between Q3-Q4. Overall, the UK online alternative
finance industry has certainly been testing the limits of
expansion and pushing boundaries of growth. Assuming
a reduced industry growth rate of between 55-60% this
year, the market is still on course to surpass the 5 billion
mark in 2016.
In 2015, the UK online alternative finance market

facilitated loans, investments and donations totalling
3.2billion. Compared to the industry total of 1.74
billion in 2014, this represents a year-on-year growth rate
of 83.91%. This is almost half of the 2013-2014 growth
rate of 161%. Nevertheless, the rapid expansion in the
size of the market in 2015 is still impressive, especially
when compared to the mere 267 million raised in 2012.7
Total UK Online Alternative Finance Raised Between 2013 and 2015

Growth Rates
3500
12%
84%
3000
965.82m
3.2bn
Q4
2015
2500
15%
2000
860.62m
161%
1500
20%
749.02m
1000
666m
2013
Figure 1
1.74bn
2014
3.2bn
2015
500
0
623.65m
Q1
Figure 2
Q2
Q3
MARKET SIZE AND GROWTH

BY ALTERNATIVE FINANCING
MODELS
An Increasingly Complex Market
As the alternative finance market grows in size, it also
grows in complexity challenging how we understand
growth and dynamics within the different models.
The first UK market study, The Rise of Future Finance
(2013), developed a working taxonomy of the online
alternative finance market. Since then, the industry has
evolved rapidly; with innovative business practices and,
consequently, blurred boundaries emerging amongst the
various alternative finance models. This is evident in
2015, with 28% of platforms taking part in this study
reporting that they were operating either a mixed or
other business model, which doesnt easily fit into the
existing taxonomy.
As illustrated in the taxonomy table, for many alternative

finance models, funders can be both individuals and
institutions. Alternative real estate financing, due to its
significant transactional volumes in 2015, from both
debt-based and equity-based models, warrants individual
categories to reflect this important industry development.
A number of peer-to-peer consumer platforms are now

offering substantial volumes of business lending to both
sole traders and SMEs. At the same time, peer-to-peer
business lenders are facilitating increasing volumes of real
estate finance - particularly to real estate developers. The
breakthrough of online alternative real estate financing
is also evident within equity-based crowdfunding, with
a significant number of platforms now offering retail
investors the opportunity to buy shares/securities in
a property. A number of equity-based crowdfunding
platforms are also offering debt-based investment
instruments, from mini-bonds to convertible notes.
Adding further complexity, alternative finance platforms
continue to develop new and innovative products such as
venture/managed funds and real estate investment trusts.
Peer-to-peer business lending remains the largest model

by volume of the UK online alternative finance market.
In total, nearly 1.49 billion was lent to SMEs in the
UK. This represents a 99% year-on-year growth rate and
194% average growth rate between 2013-2015.
The influx of institutional funding from traditional

financial institutions (funds, family offices, governmental
and non-governmental organisations), coupled with the
increasing involvement of high net worth investors, is
also blurring and pushing the boundaries of orthodox
peer-to-peer/crowdfunding models. Outside of the UK,
this market trend has permeated the alternative finance
marketplaces of the Americas, Continental Europe and
Asia-Pacific countries. These different iterations of the
peer-to-peer lending model have spurred debate centering
on how the model should be described; either as peerto-peer, marketplace, hybrid or even balance-sheet
lending.
Therefore, the Cambridge-Nesta research team has
refreshed, and in some cases re-defined our working
taxonomy for the UK online alternative finance industry.
Growth Across Most of the Market, but

Peer-to-Peer Business and Consumer
Lending Remains the Largest Models by
Volume
However, it is worth noting that at least 609 million

of the total peer-to-peer business lending came from the
real estate sector, providing capital for mostly small to
mid-sized property development companies, financing
both residential and commercial developments. Many of
the funders for peer-to-peer real estate lending, which we
will look at as a separate peer-to-peer model in this years
market study, are institutional investors.
Nonetheless, even after excluding real estate lending,
peer-to-peer business lending still recorded a sizable
881 million for the year 2015. Putting this into context,
this was the equivalent of 3.9% of new loans lent to
SMEs based on the BBAs 2014 baseline figure.8 Looking
specifically at new bank loans to small businesses in the
UK, which is the market served by most peer-to-peer
business lenders, the market share is a more sizeable
13.9% if compared with BBA lending figures from 2014.9
Peer-to-peer consumer lending reached 909 million in
2015, compared with 547 million in 2014. With a 66%
year-on-year growth rate and a 78% average growth rate
for the period 2013-2015, the peer-to-peer consumer
lending sector is growing fast and continues to provide
efficient consumer credit to UK borrowers. It is worth
noting that a number of consumer lending platforms
are expanding their borrower base by forging corporate
partnerships, sometimes with disruptors and challengers
15
Market Size and Growth by Alternative Financing Models
Table 1
Working Taxonomy for UK Online Alternative Finance with 2015 Total Volumes
Model name
Definition
Peer-to-Peer Business
Lending
Secured and unsecured debt-based transactions between

individuals/institutions and businesses with trading history; most
of which are SMEs.
Lending
(Real Estate)
Property-based debt transactions between individuals/institutions

to businesses; most of which are property developers.
609m
Peer-to-Peer Consumer
Lending
Debtbased transactions between individuals/institutions to an

individual; most are unsecured personal loans.
909m
Invoice Trading
Businesses sell their invoices or receivables to a pool of primarily

high net worth individuals or institutional investors.
325m
Sale of registered securities, by mostly early stage firms, to both

retail, sophisticated and institutional investors.
(Real Estate)
Direct investment into a property by individuals, usually through

the sale of a registered security in a special purpose vehicle (SPV).
87m
Community Shares
Withdrawable share capital which can only be issued by cooperative societies, community benefit societies and communitybased charitable organisations.
61m
Donors have an expectation that fund recipients will provide a

tangible but non-financial reward or product in exchange for their
contributions.
42m
Pension-led Funding
Mainly allows SME owners/directors to use their accumulated

pension funds in order to re-invest in their own businesses.
Intellectual properties are often used as collateral.
23m
Donation-based
Crowdfunding
Non-investment model in which no legally binding financial

obligation is incurred by fund recipients to donors; no financial or
material returns are expected by the donor.
12m
Debt-based securities
Individuals purchase debt-based securities (typically a bond or

debenture) at a fixed interest rate. Lenders receive full repayment
plus interest paid at full maturity.
6.2m
in other industries.. Several peer-to-peer consumer lending

platforms are also expanding into business lending, driven
by the influx of institutional and government funding.10
As a result, business lending figures were deducted from
the overall peer-to-peer consumer lending figures and
added to the peer-to-peer business lending volume.
Invoice trading, an online alternative financial channel
that facilitates the trading of discounted receivables
between SMEs and individual or institutional investors,
increased by 20% from 270 million in 2014 to 325
million in 2015. While the 2014 2015 growth is slowing
down compared to previous years, the 99% three-year
average growth rate is still substantial.
Volume in 2015
1,490m
(881m excluding real estate

lending)
332m
(245m excluding real estate
crowdfunding)
Equity-based crowdfunding is one of this years fastest

growing models, up by 295%, to 332 million raised
in 2015, compared to 84 million in 2014. A sizable
part, 87 million of the total equity-based crowdfunding
volume, is from real estate crowdfunding, wherein a
syndicate of individuals receive a legal share of a property,
typically through equity into a registered security in a
special purpose vehicle (SPV) that is operated by the
online platform. In addition to property ownership,
investors receive any profits/interests derived from the
property, in proportion to their legal share. Excluding
real estate crowdfunding, equity-based crowdfunding
still raised a sizable 245 million in 2015. Comparably
speaking, according to 2014 data (2015 figures have
not yet been released) from the British Venture Capital
Association (BVCA)11, total venture capital funding

(including seed, start-up, early stage and later stage) from
its members in the UK, amounted to only 293 million,
whilst Beauhursts Seed and Venture stage finance
totalled 874 million in 2014 and 1574 million in
2015, respectively.12,13
Reward-based crowdfunding, is taking hold in the
UK with both national and overseas-based platforms
growing fast in transaction volume and popularity. In
2015, 42 million was facilitated through reward-based
crowdfunding platforms, with a 62% year-on-year
growth rate.
Donation-based crowdfunding grew the fastest amongst

all alternative finance models in 2015, with a 507%
year-on-year growth rate and 12 million distributed.
Although it was growing from a relatively low base (i.e.
just 2 million in 2014), its development over the last
twelve months is still noteworthy. The rapid growth
of this market could have significant implications for
community and voluntary sector organisations.
In 2015, community shares reached 61 million with a
79% year-on-year growth rate, while pension-led funding
was almost flat with 23 million for the year. Debt-based
securities, which allow investors to invest in both shortterm and long-term renewable energy initiatives, achieved
a very respectable 6.2 million with a 52% three-year
average growth rate.
2015 Market Volume by Alternative Finance Model

Figure 3
909m
881m
609m
Invoice Trading
325m
245m
61m
332m
87m
Community Shares
Pension-led Funding
1490m
42m
23m
12m
6.2m
0m
200m
400m
600m
800m
1000m
17
As illustrated below, over the course of five years, the

UK online alternative finance industry has increased
both in market size and in diversity. From 2011 to
2015, we have witnessed the rapid development of
alternative financing models such as peer-to-peer
consumer lending and equity-based crowdfunding

as well as the breakthroughs of relatively new and
innovative models such as peer-to-peer lending for
real estate and donation-based civic and community
crowdfunding.
The Development of Online Alternative Finance Models between 2011 and 2015
Figure 4
3500m
3000m
2500m
2000m
1500m
1000m
500m
0m
2011
2012
2013
2014
2015
Community Shares
Peer-to-Peer Lending (Real Estate)
Pension-led Funding
Invoice Trading
INCREASING SHARE OF THE

MARKET FOR BUSINESS
FUNDING
Online alternative business finance has become
an increasingly important channel of financing
for entrepreneurs, start-ups and SMEs in the UK,
promoting economic growth, creating jobs and fostering
innovation.14 In 2015, we estimate that 2.2 billion of
business finance15 was raised through online alternative
finance platforms, providing venture, working, growth
and expansion capital for around 20,000 SMEs in the
United Kingdom. Year-on-year, the total online alternative
business funding rose by 120% from 2014 and the total
number of SMEs served increased by 185.71%.16
Comparing this to the 53 billion the Bank of England

estimates was lent by national banks to SMEs in 2014,17
we estimate that the total online alternative business
lending in 2015 was 3.34% of gross national lending to
SMEs. Alternative business lending in our data included
peer-to-peer business lending, invoice trading and debtbased securities. If we compare the peer-to-peer business
lending volume (including real estate lending) with
the British Banks Associations (BBA) annual data in
new loans lent to SMEs18, the percentage of alternative
business lending has increased steadily from just 0.3% in
2012, to 0.9% in 2013 and 3.3% in 2014.
Total Alternative Business Funding in 2015

Figure 5
1bn
2.2bn
2014
2015
Total Number of SMEs Funded through

Alternative Finance Channels in the UK
Figure 6
7,000
20,000
2014
2015
19
Peer-to-Peer Business Lending in the

Context of Bank Lending to SMEs
(2012-2015)
Peer-to-Peer Business Lending as a

Percentage of New Loans to SMEs
(Based on BBA Data 2012-2014)
Figure 7
Figure 8
60bn
50bn
40bn
30bn
20bn
10bn
0bn
2012
Gross Lending to SMEs

(Bank of England)
2013
2014
New Loans to
SMEs (BBA Data)
2015
0.3%
0.9%
3.3%
2012
2013
2014
Peer-to-Peer
Business Lending
Furthermore, peer-to-peer business lending (excluding real

estate lending) is predominantly catering to small business
borrowers, given the average business loan size stands
at just 76,280 according to our data. Therefore, as the
figure below demonstrates, if we are looking at peer-topeer lending to small businesses specifically (excluding
real estate lending), then its percentage of new bank loans
to small businesses (according to the BBA data)19 has been
increasing steadily from a mere 1% in 2012, to 3% in
2013, 12% in 201420 and an estimated 13.9% in 2015 in
the UK.
From 2011 to 2015, equity-based crowdfunding has

gradually established itself as a valuable provider of
investment to seed, start-up, early stage and fast growing
companies. This is evident when compared with both
the British Venture Capital Associations (BVCA)
aforementioned annual figures for total venture capital
inthe UK and Beauhursts figures for seed-stage and
venture stage equity investment funding in the UK.21
Peer-to-Peer Business Lending as a Percentage

of New Loans to Small Businesses in the UK
(Based on BBA Data 2012-2014)
Figure 9
1%
2012
3%
12%
2013
2014
Equity-based Crowdfunding in the Context of VC/ Equity Investment in the UK

(2011-2015)
Figure 10
1800m
1574m
1440m
1080m
874m
720m
488m
360m
0m
563m
522m
347m
343m
1.7m
3.9m
28m
2011
2012
2013
Total Seed Stage & Venture

Stage Equity Investment
(Beauhurst Data)
298m
293m
84m
2014
Total Venture Capital

Funding in the UK
(BVCA Data)
As the figure below illustrates, the upward trajectory of

equity-based crowdfunding in the UK is evident in the
wider context of Beauhursts equity investment data (seed
and venture stage financing).22 From 2011 to 2015, the
percentage of equity-based crowdfunding as a proportion
of the total UK seed and venture stage equity investment
2015
Equity-based
Crowdfunding
has been growing rapidly from just 0.3% in 2011 to

9.6% in 2014 and 15.6% in 2015. The total number of
equity-based crowdfunding deals has also increased from
175 in 2013, to 323 in 2014 and 720 in 2015 according
to our alternative finance industry tracking data.
15.6%
Equity-based Crowdfunding Share of the

UK Seed and Venture Stage Equity
Investment Market
(Based on Beauhurst Data 2011-2015)
9.6%
Figure 11
5.4%
0.3%
0.7%
2011
2012
245m
2013
2014
2015
21
Looking
specifically
at the small
business sector,
we estimate
peer-to-peer
business
lending
(excluding real
estate lending)
supplied the
equivalent
of 13.9% of
new bank
loans to small
businesses in
the UK in 2015
2
MARKET TRENDS
IN ALTERNATIVE
FINANCE
23
EXPANDING BASE OF FUNDERS

AND FUNDRAISERS
Expanding Base of
Funders and Fundraisers
As the market grows, the number of
fundraisers and funders is naturally
increasing as well. On the funder
side, platform data shows that
around 1.09 million people invested,
donated or lent via online alternative
finance platforms in the UK. This
figure likely includes a high-level
of double counting; nevertheless, it
demonstrates that there is a wide
base of funders participating in the
market.
In 2015, it is estimated that 254,721
fundraisers raised finance through
online alternative finance channels
in the UK. Although the number
of active fundraisers was relatively
low at around 36,000 in Q1 and
48,734 for Q2, the numbers picked
up considerably in Q3 and Q4,
registering 88,779 and 80,351
respectively. While this gives some
indication of the general levels of
participation within the market, it is
important to note that a proportion
of these will be repeat fundraisers
who have raised finance for more
than one business or project in 2015.
Number of Fundraisers in 2015

Figure 12
80,351
254,721
Q4
2015
88,779
48,734
36,857
Q1
Differing Levels of Female Participation

Whilst the online alternative finance industry has pushed
through many boundaries in 2015, the gender gap still
persists in the online marketplace, particularly within
equity-based crowdfunding.
We estimate that approximately 8% of fundraisers/
entrepreneurs that raised capital through equity-based
crowdfunding platforms, were women. This figure is
perhaps higher than that of offline venture capital and
angel investing. However, the gender gap could definitely
be further bridged; especially when considering female
participation rates are so much higher in other online
alternative finance models. For instance, while 21.1% of
SME borrowers on peer-to-peer lending platforms are
female, the percentage of female fundraisers is 46.2%
on reward-based crowdfunding and 65.5% on donationbased crowdfunding platforms.
Q2
Q3
Female participation in the online alternative finance

market is markedly higher on the funder side. 23.2% of
investors using equity-based crowdfunding platforms were
women, in comparison to 29.5% in peer-to-peer consumer
lending, 34% in peer-to-peer business lending and 55%
in donation-based crowdfunding. The percentage of
female funders was also considerably higher in debt-based
securities (45.5%) in contrast to fundraisers (only 5%),
although this finding should be taken with some caution
as it was based on a relatively small sample of data. For
reward-based crowdfunding, the percentage of female
participation on the funding side is almost identical to the
fundraising side at around 46%.
Expanding Base of Funders and Fundraisers
Percentage of Female Fundraisers Across Platforms

(Weighted 2013-2015)
Figure 13
Debt-based Secruities
Pension-led Funding
5.0%
7.8%
11.6%
21.1%
25.5%
46.2%
65.5%
Percentage of Female Funders Across Platforms

(Weighted 2013-2015)
Figure 14
Pension-led Funding
23.5%
25.5%
29.5%
34.1%
45.5%
45.5%
55.5%
25
MARKET ENTRANTS AND

PARTNERSHIP STRATEGIES
New Entrants to the Alternative
Finance Market
This years study suggests that the alternative finance
market is beginning to consolidate. Since previous years
studies, a number of alternative finance platforms have
either gone quiet or disappeared altogether. In addition,
while 24 new platforms started trading in 2014, 2015 saw
only 14 new platforms start trading. This indicates that
the number of new platforms entering the market may be
beginning to plateau. Looking at the platforms facilitating
online alternative finance, it is clear that growth is driven
by both existing platforms increasing their total volumes,
as well as new platforms that are still entering the market.
As illustrated below, large numbers of alternative finance

platforms have been incorporated and started trading
in the last three years, although this number appears to
be starting to stall between 2013 and 2015. The average
number of years between incorporation and actually
starting to trade for a peer-to-peer business lending
platform is 1.16 years and 1.27 years for an equity-based
crowdfunding platform. Although the time gap between
incorporation and trading cannot be entirely attributed
to the FCA authorisation process, these data points could
serve as a useful proxy for authorisation time.
Alternative Finance Platform Incorporation and Trading

(Pre-2004 to 2015)
Figure 15
25
Number of Platforms
20
15
10
Pre2004
2004
Incorporated
2005
2006
2007
Began Trading
2008
2009
2010
2011
2012
2013
2014
2015
SEEKING GROWTH THROUGH

AWARENESS, INCREASED
MARKETING AND FORGING
PARTNERSHIPS
As competition in the market grows, other than
creating innovative models, platforms are utilising new
methods to attract funders and fundraisers. A wide
range of major online alternative finance platforms
were leveraging mainstream and online advertising and
marketing channels, including television.23 Particularly in
London, peer-to-peer lenders, rewards and equity-based
crowdfunding platforms alike have used advertisements
on billboards, buses, taxis or trains to reach new
customers.24
In addition, alternative finance platforms have started
marketing specifically to independent financial advisors
(IFAs), business associations (e.g. The Federation of Small
Businesses) and other financial intermediaries
(e.g. commercial brokers) in an effort to further raise
SMEs awareness and use of their services.25,26
Besides raising general awareness, alternative finance
platforms are also utilising private and public sector
partnerships to source both high-quality borrowers/
fundraisers and institutional funding. For instance, it is
estimated that at least 39 British universities are using
online alternative finance models 27 to engage their alumni
communities in starting and funding various projects. A
large number of regional or local authorities, including
Plymouth,28 Angus,29 Lancashire30 and Manchester,31,32
have either partnered with online alternative finance
platforms to fund local SMEs or have raised alternative
finance to fund community projects.33,34,35,36 Innovative
corporate partnerships are being forged between
alternative finance platforms with the likes of Virgin,37
Amazon,38 Uber,39 Sage40 and KPMG.41 This has certainly
pushed boundaries - fusing the traditional corporate
world with the disruptive models of alternative finance.
Moreover, while the Governments SME referral scheme
is still in development, a number of alternative finance
platforms have formed bilateral referral partnerships with
banks such as Santander,42 RBS43 and Metro Bank44 to
source high quality borrowers and fund more SMEs. As
the alternative finance ecosystem continues to develop, a
number of online aggregators (e.g. ABF, FinPoint, Funding
Options and Informed Funding to name but a few) have
emerged to provide additional channels and services
to connect fundraisers, predominantly businesses, to
alternative finance platforms.45
Besides raising
general
awareness,
alternative
finance
platforms are
also utilising
private and
public sector
partnerships
to source both
high-quality
borrowers/
fundraisers and
institutional
funding
27
INSTITUTIONALISATION OF THE
MARKET
Increasingly Entrenched
Institutionalisation
To reflect the growing interest and involvement from
institutional investors, such as banks and investment
funds in the online alternative finance market, this years
study has sought to quantify the level and volume of
participation by these relatively new funders within the
market.
Based on platform reporting, it is estimated that 1,031

institutional funders were actively involved in financing or
co-financing loans or equity deals on alternative finance
platforms in the UK in 2015. Looking at participation
over time, it is clear that this is a trend that really began
to take off in 2015, with 45% of platforms reporting
institutional involvement, compared to 28% in 2014 and
just 11% in 2013.
Growing Involvement of Institutional Funding in the UK Alternative Finance Market

(2013-2015)
Figure 16
2013
2014
2015
0%
89%
11%
72%
28%
55%
45%
20%
Percentage of platforms reporting

no institutional funding
40%
60%
Percentage of platforms reporting
some level of institutional funding
80%
100%
A quarterly breakdown for institutional involvement in

2015 provides further indications that this is a growing
trend, with more than 50% of platforms reporting
institutional involvement in Q4 compared to 35% in
Q1. Notably, over 10% of surveyed alternative finance

platforms reported channeling over 80% of institutional
funding (as a proportion of their total funding) in Q2 and
Q3 in 2015.
Institutional Funding as a Percentage of Total Volume as Reported by Platforms

(2013-2015)
Figure 17
2013
2014
2015 Q1
2015 Q2
2015 Q3
2015 Q4
0%
10%
20%
30%
40%
Percentage of Total Volume from Institutional Funding
<5%
31%-40%
71%-80%
5%-10%
41%-50%
81%-90%
11%-20%
51%-60%
91%-99%
21-30%
61%-70%
100%
50%
29
In terms of actual institutional funding volume, as the

figure illustrates below, in 2015 32% of the total peer-topeer consumer lending was derived from institutions. The
level of institutional funding for peer-to-peer consumer
lenders was relatively low, at 17% in Q1, and then
increased to a sizeable 30% in Q2 and remained at 38%
throughout both Q3 and Q4, showing clear signs that
institutionalisation is a growing trend which is expected
to continue in 2016.
For peer-to-peer business lending, 26% of total funding

in 2015 could be attributed to institutional funding. In
contrast, peer-to-peer real estate lending recorded 25% of
institutional funding with quarterly percentages increasing
from 22% in Q1 and Q2 to 23% in Q3 to 31% in Q4.
By way of comparison, the level of institutional funding
in equity-based crowdfunding is still relatively low at only
8% for 2015 overall.
The Percentage of Actual Institutional Funding Across Models in 2015 (Weighted)

Figure 18
32%
Peer-to-Peer Consumer Lending Total
17%
Q1
30%
Q2
38%
Q3
38%
Q4
26%
Peer-to-Peer Business Lending Total

28%
Q1
19%
Q2
26%
Q3
30%
Q4
25%
Peer-to-Peer Business Lending (Real Estate) Total
22%
Q1
22%
Q2
23%
Q3
31%
Q4
8%
Equity-based CrowdfundingTotal
Q1
Q2
Q3
Q4
9%
3%
9%
10%
0m
200m
400m
Non-Institutional Funding
The sources of institutional funding vary significantly

from model to model. For peer-to-peer lenders, traditional
banks, mutual funds, pension funds,46 hedge funds
and asset management companies47 are increasingly
important. Public and governmental funders, such as
local authorities48 and the British Business Bank,49 are
also actively lending to SMEs through alternative finance
channels.
Despite developing at a relatively slower rate, and at
a smaller scale than the Pee-to-Peer lending market,
600m
800m
1000m
Institutional Funding
institutional funding and match funding are becoming

increasingly commonplace within the equity, reward and
donation-based crowdfunding models. The involvement of
entities such as the London Co-Investment Fund (LCIF),50
the Department of International Development (DFID)51
and Ben & Jerrys,52 are raising awareness of alternative
finance platforms by attracting both fundraisers and
funding to these models. This year also saw the emergence
of platform-owned and self-managed listed investment
trusts, funds and vehicles,53 a sign that platforms are
beginning to challenge the fund management space.54
CROSS-BORDER
TRANSACTIONS AND
INTERNATIONALISATION
One of the hallmark market developments for alternative
finance in the UK has been the increasing international
expansion in the last few years. Since 2014, we started
witnessing some of the leading peer-to-peer lending
and equity-based crowdfunding platforms pushing
geographical boundaries and expanding operations
throughout Europe55 and as far as the USA56 and
Australia.57 Whether through organic expansion or by
merger & acquisition, there are clear signs that alternative
finance platforms are increasingly looking beyond the UK
to grow their business.
For alternative finance platforms headquartered in the
UK, cross-border activities have picked up with increasing
transnational interactions and engagements. We asked
platforms to give estimates of their overseas funding
inflow (i.e. what percentage of funding raised through
the platform for UK-based fundraisers, came from
funders outside of the UK) and funding outflow (i.e. what
percentage of funding raised through the platform went

to fundraisers not based in the UK). For the vast majority
of UK alternative finance platforms, there is little to no
funding outflow activity. However, more than half of the
surveyed platforms reported a certain degree of funding
inflow from overseas, with around 17% registering
medium (approximately 25%) to high levels (55%) of
funding (as % of total funding volume) from foreign
countries.
Nevertheless, the amount of funding inflow and outflow
varies greatly between models. For peer-to-peer business
lending platforms, there has been little or no crossborder activity reported. Whereas, for equity-based
crowdfunding, the weighted funding inflow and outflow
was reported at 11.55% and 4.86%, respectively. The
high levels of funding outflow from reward-based
crowdfunding could be a reflection of the great success of
a number of US-based platforms in the UK.
Cross-Border Transaction Percentages for the UK Alternative Finance Market

Figure 19
Inflow
Outflow
10
20
30
40
50
60
Number of Platforms
0%
11-20%
41-50%
71-80%
1-5%
21-30%
51-60%
81-90%
6-10%
31-40%
61-70%
91-100%
70
80
31
THE GEOGRAPHY AND

INDUSTRIES & SECTORS OF
ALTERNATIVE FINANCE
London and the South Still Dominate the
Alternative Finance Landscape
While the industry is growing across the UK, there
is a distinct level of variation in where funding and
fundraising takes place. We asked the platforms to identify
and rank the top 5 most active regions in which they
operate, both in terms of funding received and funding
provided.58 London remains the most active UK region by
total transactional volume, in both fundraising (funding
received) and funding (funding provided). The South
East, South West and West Midlands followed thereafter,
with Scotland ranking as the 5th most active region for
receiving funding and the East of England being the 5th
most active region for providing funding.
Ranking
1
2
3
4
5
6
7
8
9
10
11
12
Funding Received
Funding Provided
London
London
South East
South East
South West
South West
West Midlands
West Midlands
Scotland
East of England
East Midlands
East Midlands
North East of England
Scotland
East of England
North East of England
Yorkshire and The

Humber
Yorkshire and The

Humber
Northern Ireland
Northern Ireland
Wales
Wales
North West
North West
Table 2
Real Estate, Technology and

Manufacturing & Engineering are the
Most Popular Sectors
Similar to regional activity within the UK, we also asked
platforms to rank the 3 most popular industry sectors
funded on their platforms. Looking across the range of
the most funded industry sectors, it is no surprise that
Real Estate and Housing constituted the single most
popular sector given the combined debt and equity-based
funding for real estate amounting to almost 700 million
in 2015. Nevertheless, the top ten most funded sectors
outlined below demonstrate the diversity of the UK online
alternative finance industry, from funding for technology,
manufacturing & engineering to food & drink and social
enterprises.
Sector Ranking
1
2
3
4
5
6
7
8
9
10
Real Estate & Housing

Technology
Manufacturing & Engineering
Food & Drink
Retail & Wholesale
Leisure & Hospitality
Community & Social Enterprise
Finance
Construction
Education & Research
Table 3
The Geography and Industries & Sectors of Alternative Finance
Geographic Distribution of Platforms in

the UK
As illustrated by the figure below, the South dominates
the map with respect to the location of platform
headquarters. 58 platforms (which is equivalent to
62% of the platforms who participated in the study)

are headquartered in London, followed by Edinburgh,
Manchester and Cardiff.
The Distribution of Surveyed Online Alternative

Finance Platforms in the United Kingdom
Figure 20
Number of Platforms
>30
4
3
2
1
33
INDUSTRY PERSPECTIVES
ON REGULATION AND TAX
INCENTIVES
Alternative Finance Platforms are Broadly
Satisfied with Existing Regulations
In 2014, the Financial Conduct Authority (FCA)
introduced regulation of peer-to-peer lending and equitybased crowdfunding, which after a period of transition,
will come into full effect in 2017.59 Having now been in
place for more than a year, we were interested in better
understanding the platforms perspectives of the FCAs
regulatory approach.
existing regulation for investment-based crowdfunding is

adequate and appropriate. As with peer-to-peer lending,
where a few (7.89%) surveyed platforms advocated for a
tighter and stricter regulatory approach, only 3% of the
surveyed equity-based crowdfunding platforms thought
the current FCA regulation is too excessive and strict.
It is evident that the vast majority of alternative finance

platforms are satisfied with existing regulation. For
instance, 91% of surveyed peer-to-peer lending platforms
stated that they regard the current regulation as adequate
and appropriate, with only 5.66% suggesting that
tighter and stricter regulation should be introduced. Just
3.77% stated that regulation is excessive and too strict.
A very similar picture can be seen within equity-based
crowdfunding, where 89% of platforms reported that
One particular aspect of FCA regulation that has drawn

some attention is the approach to online and social
media promotion. We were therefore interested in better
understanding the industrys perspective of this specific
part of the regulatory framework. According to our survey
data, while the majority of the platforms (77%) still think
regulation in this area is adequate and appropriate, 21%
of surveyed platforms think that the FCAs approach to
online and social media promotion is excessive and too
strict for their platforms activities.
Industry Perceptions of FCA Regulatory

Approach to Peer-to-Peer Lending (2015)
Industry Perceptions of FCA Regulatory

Approach to Investment-based
Crowdfunding (2015)
Figure 21
Figure 22
5.66%
3.77%
7.89%
90.57%
Adequate and appropriate for my platform activities

Inadequate and too relaxed for my platform activities
Excessive and too strict for my platform activities
2.63%
89.47%
Adequate and appropriate for my platform activities

Inadequate and too relaxed for my platform activities
Excessive and too strict for my platform activities
Industry Perspectives on Regulation and Tax Incentives
Industry Perceptions of the FCAs Regulatory Approach

to Online and Social Media Promotion (2015)
Figure 23
76.47%
20.59%
2.94%
Adequate and appropriate

for my platform activities
Excessive and too strict for

my platform activities
Inadequate and too relaxed

for my platform activities
Tax Wrappers and the Innovative

Finance ISA
In comparison to many markets around the world, the
UKs government is known for its support of the online
alternative finance market. The government has supported
the growth of this market through direct investments
(such as the more than 60m lent to SMEs by the British
Business Bank via peer-to-peer lending platforms) to the
application of tax incentives, such as the EIS and SEIS60
which have been used by a large proportion of investors
using alternative finance platforms particularly within
equity-based crowdfunding.
In 2016 the government will introduce the Innovative
Finance Individual Savings Account (IFISA).61
This will allow for peer-to-peer loan agreements to

be included within the tax-free ISA tax wrapper. Our
study asked alternative finance platforms to estimate the
percentage of additional growth in transaction volume
they would expect from the introduction of the IFISA
in 2016. The surveyed alternative finance platforms
anticipate the IFISA to have a significant impact. Peer-topeer consumer lending platforms expect the IFISA to add
26.43% to their annual volume and peer-to-peer business
lenders expect a 27% increase. Moreover, Peer-to-peer
business lending for real estate platforms are expecting a
very substantial 51.9% growth in transaction volume.
Expected Growth in Volume Following the Introduction

of the IFISA in 2016 by Models
Figure 24
51.90%

30.31%
27.39%
26.43%

6.19%
0%
10%
20%
30%
Expected Percentage Growth in Volume
40%
50%
60%
35
Perceived Risks to the Continued Growth

of the Alternative Finance Sector
As discussed throughout this chapter, there are many
indications that the online alternative finance market will
continue to experience significant growth in the years to
come. In light of this, we were interested in understanding
what platforms perceived as the biggest risks to the future
growth of their market.
The potential collapse of one or more of the well-known
platforms due to malpractice was seen as the highest risk to
future growth, with 57% of surveyed platforms considering
this factor as a high or very high risk. While the UK
industry to date has seen very few incidents of systematic
fraud or malpractice at the platform level, the growth
of the industry will inevitably bring with it examples of
platforms not playing by the rules. In Europe, we saw the
first significant example of this when a Swedish platform
suspended its business due to suspicion of misconduct,
including misuse of client money.62 Very recently, there have
also been high-profile collapses of well-known Internet
finance platforms reported in other much less regulated
markets.63 Looking ahead, it will be interesting to see what
impact that a collapsed platform(s) might have on the
future development of the industry, in terms of investor
confidence, public sentiment and regulatory implications.
For an industry based almost entirely around online
intermediaries, funding channels and payment systems,
unsurprisingly a cyber security breach was also viewed by
51% of the surveyed platforms as a factor that could have a
very detrimental effect on the sector.
A notable increase in default rate/business failure rate
was also ranked as a high risk, which is connected to
the broader issues around platforms credit scoring,
underwriting and due diligence (particularly for
crowdfunding models) capabilities that likely will determine
the long-term sustainability of these business models.
A robust risk management infrastructure and business
practice will also help prevent, or at least, limit the cases
of fraudulent fundraising activities on platforms, which
is also ranked highly as a potential risk factor. Of course,
one also cannot equate failure with fraud. Businesses do
fail, particularly if they are early-stage companies; and
inevitably some proportion of peer-to-peer loans will
default on platforms. The key issues are whether platforms
are doing their utmost to lower the chances of malpractice/
fraud by borrowers and fundraisers, and whether investors,
backers, donors and funders clearly understand the risks
associated with their investment and funding activities.
The potential
collapse of one or
more of the wellknown platforms
due to malpractice
was seen as the
highest risk to
future growth, with
57% of surveyed
platforms
considering this
factor as a high or
very high risk
severe incidents in the past year linked to the collapse
of the company after successfully raising 2.3 million
for a mini drone.65 An education piece is clearly missing,
to ensure that consumers understand the inherent risk
of backing often yet to be realised ideas or projects.
Furthermore, it is necessary to educate fundraisers about
the common challenges of reward fulfilment and how to
manage expectations and to be realistic in their business
plan and capabilities.
As mentioned previously, the past year saw the equitybased crowdfunding market deliver its first two exits,
indicating the potential of this online model to deliver
a financial return to investors. However, it is important
to put these two successes into greater context, as these
are only two exits against the backdrop of more than
1,200 successfully funded equity-based crowdfunding
For instance, one of the big challenges for many projects
campaigns, in the UK over the last three years funded through reward-based crowdfunding is project
amongst several significant failures.66 The equity-based
delivery, with one study estimating that 75% of rewardcrowdfunding model is certainly showing promises, but is
based projects are delayed (with overfunded campaigns
still unproven. The long-term viability of this model can
being particularly prone to delay). 64 As the volume of
only be tested with longitudinal data and to see whether
reward-based projects go up, so do stories about campaigns
equity crowdfunding deals can deliver consistent returns
struggling to deliver on their promises, with one of the most
over a longer horizon.
Industry Perceived Risks to Future Growth of the Alternative Finance Sector

Figure 25
20.80%
36.50%
28.10%
12.50%
2.10%
Collapse of one of more

well known platforms due
to malpractice
18.80%
32.30%
35.40%
12.50%
Cyber security breach

13.50%
33.30%
41.70%
10.40% 1.00%
41.70%
11.50% 1.00%
Notable increase in default

rates/business failure rate
11.50%
34.40%
Fraud involving one of more

high profile
campaigns/deals/loans
4.20%
33.30%
45.80%
15.60%
1.40%
Cancellation/removal of tax
incentives (i.e. SEIS, EIS,
SITR, IFISA)
10.50%
21.20%
38.90%
21.10%
8.40%
Changes to regulation
(beyond what is been
specified by the FCA)
Potential 'crowding out' of
retail investors as
institutionalisation
accelerates
3.10%
0%
Very High Risk
21.90%
20%
High Risk
A further risk to the alternative finance market may

come from policy changes in regard to tax incentives
for investors (rated high or very high risk by 37% of
the platforms), such as SEIS, EIS, SITR and IFISA. The
market has already seen how changes to tax-incentives
can negatively affect a platforms business model. In
response to government cuts to renewables subsidies,
one crowdfunding platform has pivoted away from their
model focusing solely on renewable energy. 67
30.20%
40%
Medium
33.30%
60%
Low Risk
11.50%
80%
100%
Very Low Risk
As described earlier in this chapter, the market is also

experiencing increased involvement from institutional
investors, such as banks and investment funds. Despite
this trend, few platforms saw crowding-out of retail
investors by institutions as a high risk to the growth of
the market.
The key issues

are whether
platforms are
doing their
utmost to lower
the chances of
malpractice/
fraud by
borrowers and
fundraisers,
and whether
investors,
backers,
donors and
funders clearly
understand the
risks associated
with their
investment
and funding
activities
37
3
SIZE AND
GROWTH OF THE
DIFFERENT ONLINE
ALTERNATIVE
FINANCE MODELS
39
PEER-TO-PEER BUSINESS
LENDING
Peer-to-Peer Business Lending Market

Volume by Year and by Quarter
(2013-2015)
All Quarters
Figure 26
Lending (Real Estate)
Q1
Lending (excluding Real
Estate)
Q2
Q3
Q4
Growth Rates
99%
1490m
609m
288%
881m
881m
267.88m
193m
749m
2013
2014
2015
224.28m
200.82m
188.44m
2015
(excluding real estate)
The peer-to-peer business lending sector has grown

considerably over the last year, nearly doubling from
749 million in 2014 to 1.49 billion in 2015. Whilst
the year-on-year growth rate of 99% is slower than the
288% jump between 2013 to 2014, this is expected as the
market levels and fewer new entrants join the market. For
instance, six new peer-to-peer business lending platforms
began trading in 2014, compared to just one in 2015.
The largest segment of the peer-to-peer business lending
market is for real estate mortgages and property
development, which accounted for 609 million in 2015,
around 41% of the total volume of peer-to-peer business
loans. Given the large volume and that this is quite a
distinctive type of lending product compared to the rest
of business lending, peer-to-peer real estate lending was
analysed separately from other business lending.
Excluding real estate lending, in 2015 peer-to-peer
business lenders facilitated loans to around 10,000 SMEs
in the UK totalling 881 million. Data on transaction
volumes between 2013-2015 show that peer-to-peer
business lending platforms accepted, on average, 22.7%
of loan applications. The average size of a peer-to-peer
business loan was 76,280 and was funded by an average
of 347 lenders.
On average, our survey data indicates that 42.3% of

lenders on peer-to-peer business lending platforms have
used auto-bidding/auto selection68 functionalities, whereas
lenders need only to specify the lending amount, duration
and risk appetite but do not choose individual loans to
invest in. This figure is likely to rise in the future, as many
peer-to-peer lending platforms have moved away from
the reverse-auction model to, in some cases, exclusive
use of automatic-bidding. Automatic bidding can
enhance market efficiency, as both the lenders and SME
borrowers know the applicable interest rate with a greater
certainty. Nevertheless, auto-bidding challenges peer-topeer business lending platforms to constantly improve
their own underwriting and credit risk management
capabilities, as the platform must now make loan
selections on behalf of the lender.69
In 2015, we also saw an increase in secured-lending across
the peer-to-peer business lending model, particularly
against fixed assets such as machinery and property.
Secured lending has translated into larger, more complex
loans. This, coupled with auto-bid lending, has driven
platforms to either update or create their own in-house
underwriting facilities or seek external underwriting
partners to deal with the influx of secured lending.70
Additionally, with the increase in institutional funding
within peer-to-peer business lending (around 26%),
the scrutiny and demand for more robust due-diligence
processes and credit risk management capabilities will
only increase going forward.
In terms of the most popular sectors funded on peer-topeer business lending platforms, besides real estate and
housing, the second highest funded industry sector was
manufacturing & engineering, followed by transport &
utilities and then finance and retail.
On the SME borrower side, the most active regions
receiving funds were the East Midlands, London and the
South East. Although it may seem surprising that the East
Midlands received more investment from peer-to-peer
business lending platforms from amongst all the regions,
this may be explained by the fact that manufacturing
makes up a larger part of the East Midlands economy
than any other region in the UK.71 The most active regions
for providing peer-to-peer business lending were London,
the South East and the South West.
PEER-TO-PEER BUSINESS
LENDING (REAL ESTATE)
Peer-to-Peer Business Lending (Real

Estate) Market Volume by Quarter (2015)
Figure 27
2015
Growth Rates
200
23%
4%
150
22%
100
50
120.78m
146.81m
152.96m
188.12m
Q1
Q2
Q3
Q4
In 2015, peer-to-peer business lending for real estate

grew to 609 million, which amounts to 41% of the total
volume of peer-to-peer business loans. For this reason,
this and future studies will look at peer-to-peer real estate
business lending as a separate alternative finance model.
On a quarterly basis, this market segment increased from
120.78 million in Q1, to 146.81 million in Q2, 152.96
million in Q3 to 188.12 million in Q4. Overall, peer-topeer real estate lending financed over 600 commercial and
residential developments in the UK in 2015, mostly by
small to medium sized property developers.72
Peer-to-peer business for real estate lending is comprised
of a variety of financing models and products: ranging
from short-term (typically 12-18 months) bridging
finance, to longer term (e.g. 3-5 years) commercial &
residential mortgages and construction & development
debt finance. With an average level of 25%, the level of
institutional funding participation in this model is high;
and for some platforms, this can be as high as 75%.
With the prospect of the introduction of the Innovative
Finance ISA, some of the peer-to-peer real estate lending
platforms are lowering their minimum investment
thresholds in anticipation of the influx of retail investors.73

Indeed, a recently published study stated that, 44% of
UK retail investors would like to increase their exposure
to the property market, not only through owning their
home, but also in other ways, such as investing through
peer-to-peer lenders.74 Peer-to-peer lending platforms
that specialise in real estate finance were particularly
optimistic about the introduction of the Innovative
Finance ISA, reporting that they expected the IFISA to
result in a 51% increase in market volume in 2016.
According to our survey data, peer-to-peer business
lending for real estate accepted an average of 27.5% of
loan applications. The average size of peer-to-peer loans
for real estate was 522,333 in 2015, slightly less than the
662,425 reported in 2014. The average loan size in 2015
was closer to the average house price in the UK compared
to the previous year,75 perhaps reflecting a growing use
of peer-to-peer lending to fund residential or commercial
mortgages rather than larger developments. It should be
noted that, at present, peer-to-peer real estate lending
cannot be utilized for an individuals own residential
mortgage (i.e. a mortgage based upon the primary
residence of the borrower) due to regulatory constraints.76
On average, it takes 490 lenders to fund a typical loan for
this model.
41
PEER-TO-PEER CONSUMER
LENDING
Peer-to-Peer Consumer Lending Market

(2013 to 2015)
Figure 28
All Quarters
Q1
Q2
Q3
Q4
Growth Rates
66%
91%
908.67m
261.42m
253.02m
287m
547m
2013
2014
217.63m
176.60m
2015
In a similar fashion to peer-to-peer business lending,

the peer-to-peer consumer lending market continues to
grow, albeit at a slightly slower year-on-year growth
rate of 66%. In total, 909 million worth of loans
were facilitated through peer-to-peer consumer lending
platforms in 2015, providing consumer credit to more
than 213,000 individual borrowers. The weighted average
size of a peer-to-peer consumer loans was 6,583. As
with most of the peer-to-peer consumer lenders, it is
common practice to offer almost exclusive auto-bid/autoselection features for lenders in order to improve market
efficiencies and reduce credit risk through diversification.
Ninety-eight per cent of lenders used the auto-bidding/
auto-selection functions. The weighted average acceptance
rate for peer-to-peer consumer lending platforms is
15.84%.
Institutional lenders continue to increase their activity
within this market segment. The surveyed peer-to-peer
consumer lending platforms reported that institutional
funders lent out 288 million in total via their platforms,
accounting for 32% of the total market volume in 2015.
The institutionalisation of consumer lending began
relatively slowly in 2015 with only 29 million being
lent in Q1, but then rapidly increased to 98 million

by the end of the year in Q4. Nevertheless, unlike their
counterparts in the USA,77 the UK peer-to-peer consumer
lending market is still largely dominated by retail
investors.
The introduction of the Innovative Finance ISA could
have substantial impact on the market, with peer-to-peer
consumer lenders expecting around a 26% increase in
total volume. Regarding loan origination, a number of
peer-to-peer consumer lending platforms have struck highprofile partnership deals with a number of corporates.
These partnerships help to increase public awareness of
the sector and could have considerable implications for
deal origination; attracting high quality borrowers, with
potential to gather additional borrower data to enhance
credit scoring and risk management.
Looking at activity by regions, London, the South
East and the East Midlands had the most peer-to-peer
consumer lending borrowing activity. On the lender side,
the three most active regions in the UK were London, the
South East and the South West.
Institutional
lenders
continue to
increase their
activity within
peer-to-peer
consumer
lending
INVOICE TRADING
Invoice Trading Market Volume By Year and

Quarter (2013-2015)
Figure 29
All Quarters
Q1
Q2
Invoice trading platforms have also integrated accounting

add-ons into their service packages with providers
such as Sage,79 XERO and KashFlow, in addition to the
aforementioned partners.80 This allows invoice trading
platforms to have greater insight into the business trading
history of their SME clients by better integrating their
accounting systems to ensure they are more aligned to the
borrowing process.
Q3
Q4
Growth Rates
20%
324.66m
106.76m
178%
86.94m
97m
270m
73.77m
57.19m
2013
2014
2015
Invoice trading continues to be a popular financing tool

for small and medium sized enterprises wanting to trade
their invoices or receivables at a discount, in exchange
for the speedy procurement of working capital. However,
while the 270 million market size in 2014 grew by
178% compared to 2013, growth from 2014 - 2015 was
more modest, with a 20% growth rate to 325 million.
However, there are signs that the momentum for growth
could be increasing, with 107 million traded in Q4
compared to 57 million in Q1.
Invoice trading platforms, on average, accepted 84.7%
of all businesses who approach them to trade their
invoices, with the average invoice traded amounting to
57,094 and an average of just 12 investors involved
in each transaction. A total of 5,015 businesses utilised
invoice trading to raise finance in 2015. Businesses that
used invoice trading mainly came from the construction,
technology and manufacturing & engineering sectors.
Reflecting the broader trend of corporate partnership
integration observed across the industry, invoice trading
platforms have joined forces with large accounting firms,
such as KPMG in the UKs Small Business Accounting
services, to enhance their deal origination.78
There are
signs that the
momentum
for growth
in invoice
trading could
be increasing,
with 107
million traded
in Q4 compared
to 57 million
in Q1
43
EQUITY-BASED
CROWDFUNDING
Equity-based Crowdfunding Market Volume

by Year and by Quarter (2013 to 2015)
Figure 30
All Quarters
(Real Estate)
Q1
(excluding Real Estate)
Q2
Q3
Q4
Growth Rates
295%
331.64m
86.58m
245.03m
81.70m
200%
28m
2013
245.03m
84m
2014
2015
69.58m
54.99m
38.76m
2015
(excluding real estate)
2015 was another year of significant growth for the

equity-based crowdfunding market with the total value
of all investments up by 295%, from 84 million in 2014
to 332 million. A substantial proportion of the market
volume for equity-based crowdfunding came from real
estate investments, contributing 87 million in 2015.
Thevolume and characteristics of equity-based real estate
crowdfunding will be discussed in a separate section below.
Excluding real estate projects, equity-based crowdfunding
for seed, start-up and early-stage financing reached 245
million in 2015. High growth rates were maintained
throughout all four quarters of 2015, with the amount
invested more than doubling from Q1 (38.76 million)
to Q4 (81.7 million). The average deal size stood at
523,978, a considerable increase from the 2014 average
of 199,095. This perhaps demonstrates the maturing
of the equity-based crowdfunding model, by which
bigger, later stage and co-financing venture investment
deals are increasing on the platforms. A typical equitybased crowdfunding campaign included investment from
77 investors on average. Each investor had an average
portfolio size of four to five (4.73) investments across the
platform.
London, the South East and the South West remain the
most active regions, both in terms of fundraisers receiving
and funders providing investment. In total, 720 businesses

successfully raised investment through equity-based
crowdfunding platforms in 2015. The average acceptance
rate across platforms was 20.59%, with 40.24% of
platform-listed campaigns successfully securing investment.
The most popular industry sectors funded on equity-based
crowdfunding platforms in 2015 were technology, food
& drink, Internet & e-commerce, real estate & housing as
well as media & publishing.
2015 was a particularly important year for equity-based
crowdfunding as it began to demonstrate its potential
for delivering financial returns to investors. The industry
recorded its first two exits in the UK crowdfunding
market.81 At the same time, there were inevitably business
failures within this relatively high-risk asset class, some
of which were high profile cases reported widely by
the media.82 According to our survey, equity-based
crowdfunding platforms reported a weighted average
business failure rate of 5.5% in 2015. However, that figure
should be taken with some caution as the majority of
equity-based crowdfunding investments have taken place
within the last 2 -3 years.
On the investor side, 68,306 investors used equity-based
crowdfunding platforms in 2015, with 27% (14,446) of
those being sophisticated or high-net-worth individuals.
An increasingly interesting development within equitybased crowdfunding that mirrors industry-wide trends is
the increasing involvement of more traditional investors. A
growing number of venture capital and angel investors are
co-investing alongside or in parallel with crowd investors.
In certain cases, venture capital firms are investing directly
through equity-based crowdfunding platforms, but more
commonly in partnership with them.83 This enables venture
capital firms to increase the total capital raised for each
company, in addition to demonstrating market validation
and benefitting from increased brand awareness of their
investee companies. Allin all, this is helping businesses to
raise larger rounds as evidenced by the 15 largest deals of
2015, raising a total of 37,775,031.84
An important development within equity-based
crowdfunding is continued product innovation driven by
the platforms efforts to further differentiate and grow.
New financial products, such as mini-bonds, convertible
notes, real estate investment trust (REIT), accelerator funds
are examples of the kinds of product innovations initiated
and further developed by crowdfunding platforms over
the course of 2015. This year looks set for the continued
development of these financial products and indeed more.
EQUITY-BASED CROWDFUNDING
(REAL ESTATE):

Market Volume by Quarter (2015)
Figure 31
2015
Growth Rates
40
54%
35
-59%
30
25
77%
20
15
10
5
0
13.09m
23.16m
35.70m
14.63m
Q1
Q2
Q3
Q4
To reflect the relatively large proportion of the equity

based crowdfunding market that is focused on real
estate, this years study will look at this new subset of
equity-based crowdfunding independently. Equity-based
crowdfunding for real estate enables investors to acquire
ownership of a property-asset via the purchasing of shares
of a single property or a number of properties. In 2015,
equity-based crowdfunding for real estate raised 87
million in total for 174 fundraisers/development projects.
Growth rates increased rapidly over the first three
quarters of the year registering 13.09 million, 23.16
million and 35.7 million in Q1, Q2 and Q3 respectively.
This indicates that equity-based crowdfunding for real
estate has the potential to become a substantial segment
within the UK alternative finance industry, as it has
become in other markets such as the United States.85,86
Other notable hallmarks from 2015 include setting the
record for fastest funding, with a 843,100 raise filled in
10 minutes, 43 seconds from 319 investors.87
Though growth rates increased throughout the first
three quarters of the year, the weighted average platform
acceptance rate was relatively low, with only 2.9%
of deals making it onto the platform. However, once
accepted on a platform, deal success rate was 87% and

average deal size was 820,042 with an average of 150
investors participating per equity deal.
The most active regions receiving funds were London,
the North West and the North East, respectively. One
trend noted in 2015 was the emphasis on real estate
crowdfunding within areas for regeneration. Regeneration
areas are potential investment opportunities that will
cost investors less than prime locations, and are likely to
experience the highest levels of growth in coming years. It
is therefore not surprising that leading regions include the
North East and North West, as these regions economies
have been transformed in recent years with a number of
regeneration projects and development funding from the
public and private sectors.88,89 The most active regions
providing funds came from London, the South East and
the North West.
Throughout this report, we have discussed the prevalence
of institutional funding in 2015. However, unlike other
models where there has been substantial institutional
involvement, this model has been, by and large, contingent
on retail, sophisticated and high-net-worth individuals.
Of the 10,626 funders participating in real estate
crowdfunding, only 3% were categorized as institutional
funders by the platforms, while 77% were categorised
as either sophisticated or high-net-worth. The emphasis
on individual investors is supported further by the recent
inclination to lower minimum investment thresholds,
which is likely to further entice retail investors.90
45
REWARD-BASED
CROWDFUNDING
Reward-based Crowdfunding Market

(2013 to 2015)
contributed most to reward-based crowdfunding

campaigns, followed by the South East, the East
Midlands, the East of England and the West Midlands.
Figure 32
All Quarters
Q1
Q2
Q3
Q4
Growth Rates
61%
24%
41.96m
8.42m
13.12m
21m
26m
2013
2014
12.21m
8.21m
2015
Reward-based crowdfunding is often perceived as being

synonymous with crowdfunding itself, with fundraising
campaigns and models dating back to the turn of the
Millennium.91 In spite of being one of the oldest online
alternative finance models, reward based crowdfunding
continues to grow from 26 million in 2014 to 42
million in 2015. This represents a 61% year-on-year
growth rate, a significant increase compared to the 24%
growth rate between 2013-2014.
On average, reward-based crowdfunding platforms
accepted 32.34% of projects that approached them
and 33.7% of these listed campaigns then went on to
successfully achieve their fundraising target. In total,
6,633 projects successfully raised finance using rewardbased crowdfunding in 2015, with an average campaign
size of around 1,379. We estimate that 858,553
contributors backed reward-based campaigns in the UK,
with a typical crowdfunding campaign being backed by
an average of 326 contributors.
London received the lions share of funding, followed by
the South East, the West Midlands, the East Midlands
and the South West. In terms of the regions from which
funding was provided, again London-based backers
The survey showed that projects within the creative

economy tend to be the most popular funded rewardbased crowdfunding categories. For instance, film is the
most popular category followed by technology, media
& publishing and community & social enterprises.
Akin to the trends within peer-to-peer lending and
equity-based crowdfunding, there are an increasing
number of major corporations partnering with rewardbased platforms. Examples include Ben & Jerrys Join
Our Core92 program which trained, supported and
promoted social enterprise campaigns across Europe
and JC Decaux which created an innovative partnership
involving reward-based crowdfunding campaigns for
advertising and has raised over 1 million to date.93
Another important development over the course of 2015
within reward-based crowdfunding was the increased
prevalence of match funding from various public and
private sector organisations. For example, the Department
for International Development launched their Crowd
Power94 research initiative to explore the efficacy of
crowdfunding models to fund renewable energy projects
in the developing world. Likewise, Big Society Capital
established the foundations for a 5 million match fund
to support UK social enterprises.95
In 2015, local authorities, universities and even political
parties were also utilising reward-based crowdfunding
platforms in order to fund various projects within
their respective areas of interest. Plymouth council, for
example, has allocated 60,000 in match funding to
reward-based crowdfunding projects that benefit the
city.96 One of the other key developments within this
sector, which is likely to evolve in 2016, is the evolution
of enterprise crowdfunding wherein major corporations
use reward-based crowdfunding platforms in order to test,
gather feedback and drive interest in products by engaging
and involving early adopters.97
COMMUNITY
SHARES
DONATIONBASED
CROWDFUNDING
Community Shares Market Volume by Year

and by Quarter (2013 to 2015)
Donation-based Crowdfunding Market Volume

by Year and by Quarter (2013 to 2015)
Figure 33
All Quarters
All Quarters
Q1
Q1
Q2
Q2
Q3
Q3
Q4
Q4
Growth Rates
Growth Rates
79%
507%
60.79m
13.17m
15m
34m
13.17m
2013
2014
2015
In 2015, 61 million worth of Community Shares, a

unique form of share capital regulated by co-operative
and community benefit society legislation were issued in
the UK. This represents a growth of 79% compared to the
34 million worth of shares that were issued in 2014.
Ninety-seven organisations, including co-operative
societies, community benefit societies and charitable
community benefit societies successfully raised finance
using community shares in 2015. It is interesting to
observe that unlike most of the other alternative finance
models, the majority of fundraising activity is taking
place outside London. The South West is the most active
fundraising region, followed by the North West, the South
East and Scotland. The average deal size for a successfully
funded community shares fundraising campaign is
309,342, and energy is the most popular funded sector,
followed by leisure & hospitality, retail & wholesale,
sports and food and farming.
12.13m
5.53m
21.28m
13.17m
127%
Figure 34
4.16m
150%
0.8m
2013
2m
2014
1.52m
0.92m
2015
While it remains a relatively small market compared to

other models, donation-based crowdfunding is the fastest
growing area within the UK alternative finance landscape.
In total, the market grew by 500%, up from 2 million
in 2014, to 12 million in 2015. This suggests that
community and voluntary sector organisations, the primary
users of this model, have started to adopt crowdfunding as
a viable fundraising tool for good causes. The growth in
donation-based crowdfunding has primarily been driven by
activity in Q3 and Q4, where 4 million and 5.5 million
were raised respectively. This is a significant increase on the
920,000 raised in Q1 2015.
London, the North West, the West Midlands, the South
West and Yorkshire were the five most active regions, both
in terms of fundraiser and funder activity. Unsurprisingly,
the most popular sector funded through donation-based
crowdfunding, is charity & philanthropy, followed by
health & social work and community & social enterprise.
Donation-based crowdfunding platforms accept, on
average, 66% of all campaign projects that approach them.
In total, 16,978 projects raised finance through donationbased crowdfunding platforms with an average raise of
7,718. On average, it takes 41 donors to fund a given
campaign. Donation-based crowdfunding has a fundraiser
repeat rate of just 2.5%.
47
PENSION-LED
FUNDING
DEBT-BASED
SECURITIES
Pension-led Funding Market Volume by Year

and by Quarter (2013 to 2015)
Debt-based Securities Market Volume by

Year and by Quarter (2013 to 2015)
Figure 35
Figure 36
All Quarters
All Quarters
Q1
Q1
Q2
Q2
Q3
Q3
Q4
Q4
Growth Rates
Growth Rates
-8%
25m
25m
23m
41%
7.33m
3.68m
5.58m
2013
2014
2015
2015 proved to be a stagnating year for pension-led

funding when compared to the rest of the alternative
finance sector. 23 million was raised in total, a decrease
of 2 million or 8% from the 25 million raised in 2014.
In Q1, total funds raised amounted to 5.58 million.
This subsequently fell to 3.68 million in Q2 before
rising steadily to 6.41 million and 7.33 million in Q3
and 4 respectively. 32.3% of businesses were accepted
onto pension-led funding platforms with an average deal
size of 82,131. 12.3% of total fundraisers were repeat
customers, who are mostly SME directors or owners
investing their pension fund into their own businesses
through SIPP or SAPP mechanisms.
2.75m
63%
6.41m
6.2m
2.7m
4.4m
2013
2014
1.28m
1.26m
0.91m
2015
Debt-based securities, such as bonds and debentures,

are regulated investment products. They are issued by
companies with a fixed maturity and interest rate, akin
to the so-called bullet payment at maturity, when the
original capital invested is repaid in full alongside interest.
Most debt-based securities issued, are fully tradable and
transferable.
Platforms which offer debt-based securities are
regulated under the FCA rules governing investmentbased crowdfunding. They carry out due diligence and
verification of any offer made through their platform and
usually manage the repayment of cash to investors and
registration of the debt-based security, (when a DBS is
sold, the platform will manage the transfer of ownership
and facilitate any payments).
In 2015, a total of 6.2 million was raised via debtbased securities equating to a growth rate of 47.6% on
the 4.4 million raised in 2014. Across all quarters in
2015, there was a steady increase from quarter to quarter
with 910,000 raised in Q1, 1.26 million in Q2, 1.28
million in Q3 and 2.75 million in Q4. The average
deal size stood at 880,000, with an average number of
investors of 496 per deal.
4
CONCLUSION
For the UK online alternative finance industry, 2015
was a year of pushing boundaries. As we show
throughout this study, the market is not only growing
in size, but also in complexity and diversity. Platforms
are continuing to diversify into new sectors, with real
estate now making up a substantial part of the lending
and equity marketplace. Institutional investors,
such as banks and investment funds, are increasingly
getting involved in lending and investing through online
alternative finance channels.
49
Conclusion
For the UK online alternative finance industry, 2015

was a year of continued growth and rapid market
development. From our findings, it is evident that the
industry is going through a transformation. Existing
taxonomy and business models were challenged and
expanded. New market segments such as the peer-topeer real estate lending and equity-based real estate
crowdfunding are making their marks. The influx of
institutional funding is likely to be further entrenched
and augmented across models, from both private and
public sector sources. A wide range of marketing, deal
flow and investment partnerships were forged and arrays
of innovative products are now on offer for lenders,
borrowers, investors and fundraisers. With increasing
public and business awareness and the introduction of
the Innovative Finance ISA, opportunities are abundant
for the alternative finance industry in 2016 as well
as challenges. From the peer-to-peer lending side, the
challenges for 2016 are likely to be deal origination,
credit risk modelling and underwriting. For equity-based
crowdfunding, the challenges are not too dissimilar. The
focus is likely to be on deal flow, due diligence and dealing
with business failures as much as successes.
While this report has hopefully helped shed some light on
the development of the UK alternative finance industry,
inevitably our research has led to more questions which
merit further exploration.
For instance, how will the industry manage the
relationship between institutional and retail funders? Will
incumbent institutions (e.g. banks) behave and operate
increasingly like alternative finance platforms and vice
versa? How will the equity crowdfunding market handle
exits and failures; can reward-based crowdfunding
sustain growth and overcome the inevitable backer
apathy? How will fraud, or a platform collapse, affect
the trajectory of the entire industry? Can alternative
finance facilitate greater equality in terms of gender
participation and regional development? Will matched
funding from public funders become a catalyst for positive
social transformation or an excuse for underinvestment
in our communities? Will advanced credit risk modelling
and analytics become too intrusive? How would the
continued advancement of payment systems, including
mobile payments and block chain technology, impact
the development of alternative finance? What will a

regional and a global online alternative finance market
look like with increasing cross-border transactions and
internationalisation?
These are indeed big questions and answering them will
require the undertaking of a whole host of empirically
based studies, both in the short term and over the longer
horizon. Indeed, it is only with time that we will be able
to see what is really setting the alternative finance industry
apart, be it market efficiency, transparency, credit scoring
or customer experience. Through continued research, we
will be able to determine whether the new paradigm that
the industry is trying to fashion, is really that different to
the status quo and whether the frontiers can be further
expanded upon and boundaries pushed beyond their
assumed limits.
Only with time

will we be able
to see what
really sets the
alternative
finance
industry apart
from traditional
finance
ACKNOWLEDGEMENTS:
We would like to thank the following platforms and individuals for sharing data and
distributing surveys:
Andrew Adcock (Crowd for Angels (UK) Limited), Rezaah Ahmad (Wisealpha Technologies),
Sheeza Ahmad (HelpingB),Hussain Al Hilli (Byoot),Giles Andrews (Zopa), Owen Angel
(Propnology Limited), Navdeep Arora (Crowd2Fund Ltd), Ben Aronsten (Seedrs),
Vic Arulchandran (Crowdaura), Iain Baillie (Asset Match Limited), Brian Bartaby
(Proplend),Carolynn Blaxcell (Fleximize), Aldwyn Boscawen (Wellesley & Co), Liam Brooke
(SavingsStream.co.uk), Theresa Burton (Trillion Fund), Richard Bush (CrowdLords),
Kevin Caley (ThinCats.com), Callum Campbell (Fireflock), Sanjay Choudhary (Crowd
Investments Limited), Ben Cohen (UK Bond Network), Jude Cook (ShareIn Ltd), Paul
Crayston (MarketInvoice), Alison Dagwell (Ezbob Ltd), Bruce Davis (Abundance Investment
Ltd),John Davies (Just Cash Flow), Goncalo de Vasconcelos (SyndicateRoom), Jane
Dumeresque (Folk2Folk), Brendan Earley (Hubbub), Frazer Fearnhead (The House Crowd),
Bill Fleischmann-Allen (The Route Finance Private Debt Platform),Henry Freeman
(CrowdShed), Juan Guerra (StudentFunder Ltd), Andrew Holgate (Assetz Capital), Nicola
Horlick (Money & Co), Tracey Horner (Lendwithcare), Justin Hubble (Property Partner). , Tim
Hughes (Crowdbnk Ltd), Mike Jessop (Invest & Fund), Sam Jogi (QuidCycle), Sally Johnson
(Madiston LendLoanInvest),Natalie Jonk (Walacea), Natasha Jones (Funding Circle), Clare
Joy (Landbay), Monica Kalia (Neyber), Filip Karadaghi (LandlordInvest Limited), Deepika
Kassen (FutSci), Dan Kieran (Unbound), Simon Krystman (CrowdPatch CIC), Toby Lanyon
(TradeRiver (UK) Ltd), Caroline langron (Platform Black Ltd), Adam Lewthwaite (Ethex),
Caroline Lister (VentureFounders), Ben Lloyd (Property Moose Limited),Stuart Lucas (Asset
Match Limited), Richard Luxmore (FundingSecure), Heather Mackay (LendingCrowd),
Paul Maske (CrowdProperty), Craig McKenna (Crowd Racing), Alex Miller (InvestingZone),
Nkem Mpamah (TechBnk), Scott Murphy (RateSetter), Dave Mutton (PrimaryBid), Trevor
Nelson (Amplifi Capital), Matt Novak (InvestDen), Parag Patel (Funding Empire), Ed Pearce
(Moneything.com), Norm Peterson (GrowthFunders), Atuksha Poonwassie (Simple Backing),
Matthew Powell (Lending Works Limited), Daniel Rajkumar (Rebuildingsociety.com),
Adrian Reeve (YesGrowth), Alexander Rimmer (SME Capital), Chris Rose (Karadoo), James
Sherwin-Smith (Growth Street), Carly Shute (Clifton Asset Management Plc), Paul Skillen
(Mayfair & Morgan), Martin Smulian (FundingKnight), Hugo Smyly (ArchOver Ltd), Sean-kid
Song (Lendinvest), Fred Tarr (Spacehive), Arya Taware (Real Funds), Will Tindall (Emerging
Crowd),Paul Toon (Elevate Capital), Kathie Treen (Crowdcube), Jonathan Waddingham
(JustGiving Crowdfunding), Owen Wallis (Crowdfunder.co.uk), Alice Wharton (Community
Shares Unit /Microgenius), Andrew Whelan (Sancus Limited), Stan Williams (Angels Den),
Dom Wolf (investUP), James Wrighton (Growthdeck), Tony Xhufi (i-Invested), Lior Zaidner
(Cogress)
51
ENDNOTES
1.
Understanding Alternative Finance The UK Alternative Finance

Industry Report, (Zhang, Z., Collins, L., and Baeck, P., 2014), Nesta and
the University of Cambridge: London, https://www.nesta.org.uk/sites/
default/files/understanding-alternative-finance-2014.pdf.
2.
The Rise of Future Finance The UK Alternative Finance Benchmarking

Report, (Zhang. Z., Collins, L., and Swart, R, 2013)
3.
Understanding Alternative Finance The UK Alternative Finance

Industry Report, (Zhang, Z., Collins, L., and Baeck, P., 2014), Nesta
and the University of Cambridge https://www.jbs.cam.ac.uk/fileadmin/
user_upload/research/centres/alternative-finance/downloads/2014-ukalternative-finance-benchmarking-report.pdf
21.
Beauhurst, the Deal, Making Sense of UK Equity Investment 2014/15
22.
The total 2015 seed stage and venture stage equity investment in the UK
data was kindly provided by Beauhurst in advance for our report. We are
very grateful for their help and support.
23.
Edwards, N. (2015), 7 major marketing challenges faced by

the alternative finance sector The Marketing Eye,http://www.
themarketingeye.com/blog/marketing_financial_services/post/7_major_
marketing_challenges_faced_by_the_alternative_finance_sector.html
24.
Examples including CrowdCube, RateSetter, Zopa and FundingCircle

etc.
25.
Intelligent Partnership (2015), Alternative Finance Industry Report 2015,

https://intelligent-partnership.com/research-hub/alternative-financeindustry-report-2015/
26.
Grey, E. (2015), Is low awareness of alternative finance hurting SMEs?

RealBusiness, http://realbusiness.co.uk/article/29749-is-low-awarenessof-alternative-finance-hurting-smes
27.
Several universities of note that utilize crowdfunding platform, Hubbub:

Surrey, Westminster, Plymouth, Nottingham Trent, Oxford, York, Exeter
and Southampton Hubbub (2016), Hubbub Clients https://hubbub.net/
clients/
4.
http://Pee-to-Peer fa.info/
5.
http://www.ukcfa.org.uk/
6.
http://innovatefinance.com/
7.
Zhang, Z., Collins, L., and Baeck, P., (2014).
8.
BBA Bank Support for SMEs (2014 New Loans to SMEs data) https://
www.bba.org.uk/news/statistics/sme-statistics/bank-support-for-smes3rd-quarter-2015/#.VrOruetx1HE
9.
ibid
10.
https://www.ratesetter.com/borrow/business-loans
28.
http://www.plymouth.gov.uk/citychangefund.htm
11.
BVCA (2015), BVCA Private Equity and Venture Capital Report on

Investment Activity 2014, http://www.bvca.co.uk/Portals/0/library/
documents/IAR%20Autumn15.pdf.
29.
http://www.thecourier.co.uk/news/local/angus-the-mearns/good-causesin-angus-vie-for-crowdfunding-cash-1.897045
30.
12.
The 2014 and 2015 Beauhurst data includes all visible Seed and Venture
stage deals including equity crowdfunding in the UK.
http://www.lancashirelep.co.uk/the-lancashire-offer/funding-andbusiness-support/funding-circle.aspx
31.
13.
http://about.beauhurst.com/report-the-deal-2014-15
http://www.manchester.gov.uk/news/article/7181/makemcr_-_the_
crowdfunding_plan_to_make_manchester_a_greater_city
14.
OECD (2015), New Approaches to SME and Entrepreneurship

Financing: Broadening the Range of Instruments, http://www.oecd.org/
cfe/smes/New-Approaches-SME-full-report.pdf
32.
15.
Total alternative business lending includes peer to peer business lending,

peer to peer business lending (real estate,) invoice trading and debt-based
securities.
Manchester City Council (2016), Crowd funding - raising funds for

your ideas http://www.manchester.gov.uk/info/827/growing_and_
maintaining_a_business/6285/crowd_funding_-_raising_funds_for_your_
ideas
33.
16.
To calculate total online alternative business funding, the CambridgeNesta research team aggregated the 2015 volumes from peer-to-peer
business lending (with real estate lending), invoice trading, equity-based
crowdfunding (with real estate crowdfunding), debt-based securities,
pension-led funding and 35% of the reward-based crowdfunding
volumes (to exclude fundraising for individual, creative or communal
projects etc.).
Crowdfunder.co.uk, Case Study: Crowdfund Plymouth with Plymouth

City Council, http://www.planningofficers.org.uk/downloads/pdf/
Crowdfunding%20for%20Councils%20-%20short.pdf
34.
Alois, JD (2015), Funding Circle & Lancashire County Council

Partnership Boosts 230 Local Businesses Crowdfund Insider, http://
www.crowdfundinsider.com/2015/03/65047-funding-circle-lancashirecounty-council-partnership-boosts-230-local-businesses/
35.
Edinburgh council installs 25 community owned solar arrays with

energy4all
36.
Bennett, P. (2015), Edinburgh Council to install community-owned

solar arrays on 25 council buildings Solar Power Portal, http://www.
solarpowerportal.co.uk/news/edinburgh_council_to_install_community_
owned_solar_arrays_on_25_council_253
37.
Alois, JD (2015b) Richard Bransons Pitch to Rich Competition Has

Multiple Crowdfunded Companies in the Running to Win, Crowdfund
Insider, http://www.crowdfundinsider.com/2015/06/69370-richardbransons-pitch-to-rich-competition-has-multiple-crowdfundedcompanies-in-the-running-to-win/
17.
Bank of England, Bankstats (Monetary & Financial Statistics) - Latest

Tables, www.bankofengland.co.uk/statistics/Pages/bankstats/current/
default.aspx.
18.
BBA (2015), Bank support for SMEs 4th Quarter 2014, https://www.
bba.org.uk/news/statistics/sme-statistics/bank-support-for-smes-4thquarter-2014/#.VrEB0bKLTDc
19.
ibid.
20.
BBA (2015).
End Notes
38.
Burgess, M. (2015), Amazon brings startup Launchpad to the UK ,

Wired, http://www.wired.co.uk/news/archive/2015-11/16/amazonlaunchpad-uk
63.
See: http://www.reuters.com/article/us-china-fraud-idUSKCN0VB2O1
64.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2088298
39.
Zopa (2015).
65.
http://www.bbc.co.uk/news/technology-34926371
40.
Dunsby, M. (2015), Sage partners with MarketInvoice and Funding

Circle to help businesses access finance, Startups, http://startups.co.uk/
sage-partners-with-marketinvoice-and-funding-circle-to-help-businessesaccess-finance/
66.
http://www.crowdfundinsider.com/2015/11/77630-research-equitycrowdfunding-status-report-in-the-uk/
67.
https://www.trillionfund.com/StaticPages/whatistrillionfund.aspx
68.
Auto bidding/selection is a function offered by many peer-to-peer lending

platforms, where lenders specify investment amount, duration and risk
appetite and the platform then allocates funds across loans based upon
the pre-set preferences, opposed to the lender manually selecting who to
lend to.
41.
Terrelonge, Z (2015), KPMG backs alternative finance and fintech to

deliver small business growth, Realbusiness, http://realbusiness.co.uk/
article/30898-kpmg-backs-alternative-finance-and-fintech-to-deliversmall-business-growth
42.
FT (2014) http://www.ft.com/cms/s/0/b8890a26-f62a-11e3-a03800144feabdc0.html#axzz3zBlHE600
69.
43.
RBS (2015), RBS to become biggest player in the peer-to-peer lending

referral market RBS, http://www.rbs.com/news/2015/january/rbs-tobecome-biggest-player-in-the-p2p-lending-referral-market.html
Davis, A. (2015), AFN Blog: The Captivating Questions About

Captive Funds Informed Funding, http://www.informedfunding.com/
networks/107/ifeblog_thread.html?threadid=505
70.
Freedman & Partners (2015) Underwritten loans the way ahead for Peeto-Peer lending, Freedman & Partners, http://www.freedmanpartners.
com/underwritten-loans-way-ahead-p2p-lending/
71.
In 2009, 16 per cent of the regions gross value added (GVA) was
generated by the manufacturing sector, the largest percentage in this
sector of any region or country Office for National Statistics (2012),
Regional Profiles: Economy - East Midlands, May 2012, http://www.ons.
gov.uk/ons/rel/regional-trends/region-and-country-profiles/economy--may-2012/economy---east-midlands--may-2012.html
72.
From conversations with leading peer-to-peer real estate lending

platforms.
73.
SWNS (2015), LendInvest sees surge in investment after lowering

minimum stake to just 1,000 SWNS, http://swns.com/news/
lendinvest-sees-surge-in-investment-after-lowering-minimum-stake-tojust-1000-64501
74.
] De Stefano, G. (2015), Pee-to-Peer investors pine for property

exposure, Altfi, http://www.altfi.com/article/1513_p2p_investors_pine_
for_property_exposure
75.
Land Registry (2016), House Price Index Land Registry, https://

www.gov.uk/government/uploads/system/uploads/attachment_data/
file/488368/November_2015_HPI.pdf
76.
From conversations with leading peer-to-peer real estate lending

platforms.
77.
http://www.morganstanley.com/ideas/p2p-marketplace-lending
78.
Terrelonge, Z. (2015), KPMG backs alternative finance and fintech to

deliver small business growth, RealBusiness, http://realbusiness.co.uk/
article/30898-kpmg-backs-alternative-finance-and-fintech-to-deliversmall-business-growth
79.
Sage (2016), Alternative Finance for SMEs, http://www.sage.co.uk/~/

media/markets/uk/downloads/guides/alternative-finance-guide.pdf?la=engb;
80.
Dunsby, M (2015).
81.
Innovate UK (2015), Crowdfunding investors celebrate successful exit

from E-Car Club, https://www.gov.uk/government/news/crowdfundinginvestors-celebrate-successful-exit-from-e-car-club
44.
Dunkley, E (2015), Metro Bank strikes deal to lend through Pee-to-Peer

site, Financial Times, http://on.ft.com/1Fv2ePl
45.
For instance see: http://www.alternativebusinessfunding.co.uk
46.
http://www.ft.com/cms/s/0/bd3ecab0-507a-11e4-8645-00144feab7de.
html#axzz3z6G3DXJA
47.
https://www.morganstanley.com/ideas/p2p-marketplace-lending
48.
http://www.nesta.org.uk/blog/crowdfunding-public-services-tappingcrowd-finance-public-projects
49.
http://british-business-bank.co.uk/british-business-bank-calls-forpartners-to-help-transform-smaller-business-finance-markets/
50.
https://www.london.gov.uk/press-releases/mayoral/mayor-launches-fundto-help-budding-tech-start-ups
51.
http://www.gvepinternational.org/en/business/crowd-power
52.
http://www.benjerry.co.uk/values/join-our-core
53.
Dunkley, E (2015b), Funding Circle launches first Pee-to-Peer

investment trust, Financial Times, http://on.ft.com/1lTC2Wu
54.
Grote, D. (2015) Trading kicks off in Funding Circle Pee-to-Peer trust

after 150m raising Citywire Money, http://citywire.co.uk/money/
trading-kicks-off-in-funding-circle-p2p-trust-after-150m-raising/a863645
55.
http://www.ft.com/cms/s/0/74954e66-770b-11e5-a95a-27d368e1ddf7.
html#axzz3zBlHE600
56.
http://www.standard.co.uk/business/seedrs-plans-us-launch-a3104536.
html
57.
For instance: http://www.smh.com.au/business/ratesetter-targetsaustralian-savers-with-new-lending-website-20141111-11kf2m.html
58.
To calculate total online alternative business funding, the CambridgeNesta research team aggregated the 2015 volumes from peer-to-peer
business lending (with real estate lending), invoice trading, equity-based
crowdfunding (with real estate crowdfunding), debt-based securities,
pension-led funding and 35% of the reward-based crowdfunding
volumes (to exclude fundraising for individual, creative or communal
projects etc.).
82.
FCA (2015), A review of the regulatory regime for crowdfunding and

the promotion of non-readily realisable securities by other media, http://
www.fca.org.uk/static/documents/crowdfunding-review.pdf
Altfi (2015) Where are they now? Altfi, http://www.altfi.com/

downloads/WhereAreTheyNow.pdf
83.
https://learn.seedrs.com/top-venture-capitalists-talk-about-why-theyreinvesting-in-peerindex-on-seedrs/
60.
https://www.gov.uk/topic/business-tax/investment-schemes
84.
61.
Jones, R. (2015), Savers could unlock 300m in extra interest with IFISA
, Financial Reporter, http://www.financialreporter.co.uk/savings-andinvestments/savers-could-unlock-andpound300m-in-extra-interest-withifisa.html;
Davidson, L. (2015), The 15 biggest equity crowdfunding rounds of

2015, The Telegraph, http://www.telegraph.co.uk/finance/newsbysector/
banksandfinance/12068605/The-15-biggest-equity-crowdfundingrounds-of-2015.html
85.
62.
http://www.ft.com/cms/s/0/8342ca10-71a2-11e5-ad6d-f4ed76f0900a.
html#axzz3zD20l41L
Lash, H. (2015), Crowdfunding of U.S. real estate deals gains

momentum, Reuters, http://www.reuters.com/article/us-usa-propertycrowdfunding-analysis-idUSKCN0SK2FG20151026
59.
End Notes
86.
DealIndex (2015), Democratising Finance; Digital Real Estate Investment

Demystified Volume 2: Digital Real Estate Investing: An Overview of the
Key Players, Investors and Trends that are Shaping the New Model of
Real Estate Funding https://www.dealindex.co/research.html
87.
Shoffman, M. (2015), Gone in 643 seconds! Lincolnshire block of

flats pulls in 843K from property investors in fastest crowdfunding
yet, This is Money, http://www.thisismoney.co.uk/money/buytolet/
article-3304931/Gone-643-seconds-Property-Partner-sets-crowdfundingrecord.html
88.
BNP Paribas Real Estate (2015), BNP PARIBAS REAL ESTATE

GUIDE TO INVESTING IN LONDON 2015, https://www.realestate.
bnpparibas.co.uk/upload/docs/application/pdf/2015-04/investing_in_
london_guide_2015_-_bnp_paribas_real_estate_uk.pdf
89.
Regeneration Investment Organisation (2015), Regeneration Projects:

Opportunities for investment and development partners, https://www.
gov.uk/government/collections/regeneration-projects-opportunities-forinvestment-and-development-partners
90.
Ratcliffe, M. (2016), Crowdfunding site Property Moose has just

lowered its minimum investment to 10, CityAM, http://www.cityam.
com/233413/crowdfunding-site-property-moose-has-just-lowered-itsminimum-investment-to-10
91.
https://en.wikipedia.org/wiki/ArtistShare
92.
Ben and Jerrys (2016), Join our Core, Ben & Jerrys, http://www.
benjerry.co.uk/values/join-our-core
93.
Briggs, F. (2015), Crowdfunder and JCDecaux launch a search for

Britains 100 hottest tech start-ups to accelerate their growth curve,
Retail Times, http://www.retailtimes.co.uk/crowdfunder-and-jcdecauxlaunch-a-search-for-britains-100-hottest-tech-start-ups-to-acceleratetheir-growth-curve/
94.
GVEP International (2016), Crowd Power, GVEP International, http://

www.gvepinternational.org/en/business/crowd-power
95.
Big Capital Society (2015), Big Society Capital requests proposals for
Crowd Match Fund Big Capital Society, http://www.bigsocietycapital.
com/sites/default/files/pdf/07.12.15%20Big%20Society%20Capital%20
requests%20proposals%20for%20Crowd%20Match%20Fund.pdf
96.
Crowdfunder.co.uk, Crowdfund Plymouth, http://www.plymouth.gov.uk/

crowdfund_plymouth_leaflet.pdf
97.
Rawlinson, K. (2016), Indiegogo tries to sell crowdfunding to major

firms, BBC News, http://www.bbc.co.uk/news/technology-35258160.
53
Notes
Notes
55

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PUSHING

with the support of

About this study

The Size and Growth of the UK Online Alternative

Market Size and Growth by Alternative Financing

Increasing Share of the Market for Business Funding

Market Trends in Alternative Finance

Expanding Base of Funders and Fundraisers

Market Entrants and Partnership strategies

Seeking Growth Through Awareness, Increased

Institutionalisation of the Market

Cross-Border Transactions and Internationalisation

The Geography and Industries & Sectors of

Industry Perspectives on Regulation, Tax Incentives

Size and Growth of the Different Online

Peer-to-Peer Business Lending

Peer-to-Peer Business Lending (Real Estate)

Peer-to-Peer Consumer Lending

Equity-based Crowdfunding (Real Estate)

Partner, Global Co-Lead

But for 2016 we have three critical questions.

Will the growth in institutional funding dilute the social purpose of

profits and businesses raised finance via online

of the market for

of total UK seed and venturestage equity investment

REAL ESTATE IS TAKING OFF

THE 2015 UK ALTERNATIVE

FAST GROWING MODELS:

Adequate and appropriate for my

In this study by the University of Cambridge and Nesta,

Equity-based crowdfunding is growing fast, and

ABOUT THIS STUDY

Since 2013, the University of Cambridge and Nesta have collaborated

THE SIZE AND GROWTH OF

In 2015, the UK online alternative finance market

Total UK Online Alternative Finance Raised Between 2013 and 2015

MARKET SIZE AND GROWTH

As illustrated in the taxonomy table, for many alternative

A number of peer-to-peer consumer platforms are now

Peer-to-peer business lending remains the largest model

The influx of institutional funding from traditional

Growth Across Most of the Market, but

However, it is worth noting that at least 609 million

Market Size and Growth by Alternative Financing Models

Secured and unsecured debt-based transactions between

Property-based debt transactions between individuals/institutions

Debtbased transactions between individuals/institutions to an

Businesses sell their invoices or receivables to a pool of primarily

Sale of registered securities, by mostly early stage firms, to both

Direct investment into a property by individuals, usually through

Donors have an expectation that fund recipients will provide a

Mainly allows SME owners/directors to use their accumulated

Non-investment model in which no legally binding financial

Individuals purchase debt-based securities (typically a bond or

in other industries.. Several peer-to-peer consumer lending

(881m excluding real estate

Equity-based crowdfunding is one of this years fastest

Market Size and Growth by Alternative Financing Models

Association (BVCA)11, total venture capital funding

Donation-based crowdfunding grew the fastest amongst