Today I have a guest blog post from Simon Dixon, CEO of Bank To The Future, the first crowd funded crowd investment bank. What on earth does that mean? The first crowd funded crowd investment bank? I think I'll leave the explaining to Simon.
I met Simon via Twitter and found his business idea interesting, he has politely agreed to share an interview he gave about Bank To The Future on this blog. The article is about his business, in addition there are some important points about the problems in the traditional banking model.
So take it away Simon.
What is BankToTheFuture.com
The major problem with banking today is the lack of transparency. No matter how many regulations are implemented it does not change the fact that depositors, investors and shareholders have no idea what happens with the money. A retail banking licence effectively means that banks own depositors money, can spend that money as they wish and have the ability to create money through the issuance of credit. Bank loans tend to go to either the least risky or most profitable. It is why approximately 80% of the major UK banks loan book go to either property loans (As they are backed by assets) or financial speculations (As it is the most profitable). Last in line is a business, but businesses create most of the UK's jobs and contribute to the non-inflationary productive part of our economy.
What’s the background to bank to the future?
BankToTheFuture was founded to let people invest in private companies starting from as little as £10 and have more say over what happens to their savings and investments. At the moment we focus on the equity markets and it is like an online dragons den, democratising investing so anybody can be a dragon and invest in companies that they like. We wish to expand and offer debt products and secure an investment banking licence in order to give people more options with how they invest their money online.
Tell us about yourself.
I originally started as a tea boy for stock brokers TD WaterHouse, eventually I got my way onto the trading floor as a market maker for investment bank KBC before my final corporate role in Corporate Finance. After meeting successful business owners taking their companies public I decided I was on the wrong side of the desk and set up my first business in 2006 qualifying students to work in investment banking. This was angel funded by billionaire Peter Hargreaves and gave me a first introduction to what it is like to secure angel funding. We had a tough run in the financial crisis so I began to channel my efforts into alternative finance and sustainable banking. I wrote the book ' Bank To The Future' on the future of finance and got more involved in not-for-profits focused on submissions for the independent commission on banking. I then decided to put a team together and build BankToTheFuture.com with our co-founder Bliss Dixon to build our Crowd-Investment Bank. We raised all our seed funding from the Crowd on our own platform and have recently launched a new record bid to raise £2m from the crowd in exchange for shares in BankToTheFuture.com
What are your motivations for doing this?
We have two missions - one to democratise investing so that anybody can be an investor in a responsible way and offer more financial inclusion to an asset class that was previously only available to the rich. Secondly we want to get more money into the productive side of the economy and help businesses get investment ready so they can secure funding from those that are really interested in what they do. It has traditionally been very hard to secure funding for a private company, especially those looking to raise less than £1m.
What will BankToTheFuture.com achieve and how quickly?
We launched into beta in August 2012 after we were endorsed by Sir Richard Branson in the Telegraph and on the Virgin website. Since then we have been working on user experience to make the investing process seamless and easy, as well as incubating businesses to make sure they are investment ready. Since then approximately £700,000 has been invested in UK companies and we are now pitching the crowd on our own platform to raise £2m to grow BankToTheFuture.com into a Crowd-Investment Bank.
Do you think BankToTheFuture.com will follow the path of a firm like Zopa that starts as weird and soon becomes mainstream?
Zopa had a hard time as what they were doing was so new and innovative. In fact some of our team were involved in Zopa very early on and we are going through a similar stage with equity CrowdFunding. I believe very shortly our children will look back at us and ask us what it was like to be alive when financial institutions controlled the purse strings and what the world was like before everybody invested online. We are witnessing every financial product being re-created into a crowd based product and as a Crowd-Investment Bank we want to be a part of making sure that happens. We are shifting from a world where financial institutions determine who gets the money, to people determining who gets the money. Those who adopt early will be ridiculed by the orthodox but eventually will be worshiped as CrowdFunding goes mainstream.
How will you make that happen?
We have a great team that was involved in peer to peer lending and the building of Metro Bank, but to be honest, our destiny is in the hands of the crowd. We think that people want transparency and that in the future what gets funded will reflect the true values of society rather than a few people at a bank or venture capital firm. I am also a director of the UK CrowdFunding Association and we are heavily engaged with the FCA to make sure we get the best regulatory framework to allow this new transparent and inclusive asset class grow. We need the crowd to participate to make this happen though.
Will this really change anything?
The major difference is transparency and the fact that what gets funded will be with the knowledge of those that fund it, but we still need large legislative changes from the government in order to allow us to compete on a more level playing fired with orthodox banks. The government have shown a great commitment to lower the barriers to startup banks and we have been involved in much of the change. CrowdFunding is one part of the change, to get real change we need to change banks so they don't own our money, can't spend our money and can’t create our money. We need a huge stimulation of local community banks like in Germany and we need to let the world know about CrowdFunding, which is essentially ideological based funding, rather than geographical based funding, as investors tend to be those that share a common vision and ideology for the business.
And is BankToTheFuture.com really a bank or a new form of dealing with money, e.g. will you get a banking licence?
We are planning to get a banking licence in a way that has never been done before. What we are doing has never been done, we are creating jobs that have never been created before and that requires new regulations and changes, but yes our plan is to become an investment bank, we have no plans on retail banking though.