In early 2015, a welsh-based biotech company claimed a UK
record for crowdfunding in the life sciences segment (Ward, 2015). The company,
Cell Therapy Limited, focuses on stem cell medicine and is co-founded by Nobel
Prize winning Professor Sir Martin Evans. They have so far raised over £650,000
of a £250,000 target for 1.07% of equity (Crowdcube, 2015). This significant
method of raising money, has in modern days allowed hopeful business persons to
raise finance via a large amount of people investing small amounts, rather than
relying on a few investors for large amounts of money (UK Crowdfunding, no
date). Crowdfunding sits between three measures: financial management, tribal
marketing, and entrepreneurial strategy.
So why did Cell Therapy opt to go down the route of
crowdfunding in search of investment rather than seeking a more traditional
view of finding fewer investors to put up larger amounts? Let’s take a quick
look at crowdfunding history.
One of the earliest examples of crowdfunding was in the US,
following their gift from French for their independence. Although the statue
was a gift, the US still had to raise $250,000 for the plinth. Group tasked
with raising the money fell well short, and had exhausted themselves of suitable
options until a New York publisher, Joseph Pulitzer, launched a fundraising
campaign in The New York World. The campaign was a huge success as after five
months the money was raised with over 160,000 donators (BBC News, 2013).
Although crowdfunding seems an exciting method of raising
capital, resulting in at times limited equity for investors there are some
negatives regarding the concept. For example: if a company wants to raise
£50,000, they have to do so within a certain time frame, and even if they raise
£49,000 of the £50,000 needed, the money will return to investors. This is the
case in the biggest crowdfunding website, Kickstarter, but not for Indiegogo
which implies a keep it all system where all funds are kept regardless of
target. So it is important to be realistic in your target amount. Also, if you
opt to crowdfund a specific product or area without a patent, then someone
could easily copy the idea (Finance Scotland, no date). In regards to Cell
Therapy, a patent on stem cell medicine could be vital in ensuring their
medical knowledge is not copied, however medical research commonly takes years
to conduct so this would not be an issue for them.
Cell Therapy has reached a UK record, but why? Lots of
companies achieve thousands of pounds from crowdfunding, and have failed to
return dividends to investors. In my opinion, the fact that the company was
medical based was a major factor. Rather than the common perception of creating
a business to generate wealth, this company has its goal of saving lives, and
is backed by a Nobel Prize winning Professor. If they were to decide to seek
out wealthy business persons for investment, they could simply take a
life-saving medical concept, and turn it into a money driven corporate company.
However, the fact that the investors will receive a combined equity stake of
just 1.07% makes me question their underlying morals. This could yet be a major
medical development, which in time could be purchased for huge amounts of money
to major pharmaceutical firms. Hopefully, this is not the case, and the company
has its priorities of saving lives rather than self-wealth.
Reference List
BBC News (2015). The
Statue of Liberty and America’s crowdfunding pioneer. Retrieved from:
http://www.bbc.co.uk/news/magazine-21932675
Crowdcube (2015). Cell
Therapy. Retrieved from: https://www.crowdcube.com/investment/cell-therapy-17426
Finance Scotland (no date). Crowdfunding: pros and cons. Retrieved from: http://www.finance.scotland.gov.uk/types/equity/crowdfunding/pros-and-cons#
UK Crowdfunding (no date). What is crowdfunding? Retrieved from: http://www.ukcfa.org.uk/what-is-crowdfunding
Ward, A. (2015). Biotech
company hits crowdfunding record for life sciences. Retrieved from: http://www.ft.com/cms/s/0/5d0c91d8-ae38-11e4-8d51-00144feab7de.html#axzz3Zg2ksdQ1