IAFEI Quarterly - 33rd Issue

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financing offers both opportunities and difficulties.
Of the initiatives to tackle this issue in the UK, of special
interest one can point to the establishment of AIM, or
Alternative Investment Market of the London Stock
Exchange. Targeting firms without size to access the
traditional market, it offers differentiating conditions
such as: i) regulation adapted to the realities of SME
without letting investor protection go off rail3; ii) a
global investor base and iii) access to a network of
lawyers, accountants, brokers, etc, providing support
to companies that have decided to join AIM. However,
even if AIM is still the largest specific market for SME
public equities, increasing disinvestment perspectives
for venture capitalists, the effects of the global financial
crisis and its aftermath have not gone unnoted to AIM
participants, as can be seen by the diminished issuances,
follow-ups and money raised in recent years4.
Other initiatives worth mentioning include Angel
CoFund, StartUp Loans, Enterprise Finance Guarantee
and Business Finance Partnership; all of which have
in common not only names that hint at their target
approach or investor base, but also the fact that
they are overseen by a single institution, the British
Business Bank, set up in 2012 as an answer to the
need to consolidate and seek synergistic outcomes
for the different programs, acting as a one-stop shop.
This development-like bank focus on providing funds
to innovative partners whereby public money will be
multiplied by private’s. In this manner, the bank seeks at
the same tim Via investments through BBB, where the
bank would provide the remaining funds for applicants
in cases where the first 90% of the credit requested
had been granted by private individual lenders. e to
foster the supply of finance to small business and start-
ups, thus creating a deeper financial market with more
options and suppliers while minimizing the impact on
the fiscal budget, and to build confidence and awareness
on these companies regarding the financial markets as
an alternative and reliable source of funds.
Efforts in this regardhavebeen conducted inBrazil mainly
by the investment banking arm of the development
bank BNDES, through: i) allocation in venture capital,
private equity or mezzanine finance managers, focusing
mainly in IT services growth, education, health and
infrastructure; ii) programs directly supporting IPOs of
medium sized companies; or iii) via its Criatec initiative,
whereby it provides capital to a family of privately
managed funds targeting seed and start-up investments
3 For instance, admission criteria is naturally more flexible,
without a required volume of market cap, free float, and commercial
operational historic
4 For the most up-to-date statistics, please check at: http://
in innovative businesses5. Though these efforts highlight
BNDES’s role in supporting venture capital in Brazil,
they have experienced varying degrees of success at
attracting private capital to multiply public funds and
promoting SME alternative financing.
V. Regulatingandpromotingcollective investment
Crowdlending, equity crowdfunding, peer-too-peer
lending (p2p), mini-bonds, angel syndicates, start-up
incubators. These names, as is often the case in the
world of innovative finance, bring both dazzle and
apprehension. Indeed, there have been cases around
the globe in the segment more broadly termed collective
investment in which platforms showcased stellar growth
rates only matched by their rapid fall to disgrace. This
highlights the need for public support in the form of
discussing and formulating regulation to protect the
interests of private investors and stakeholders, while
paying close attention to entrepreneurial finance
challenges in the age of collaborative economy, and
balancing advantages offered and risks posed by new
technologies. This, rather than simply a one-step
regulatory framework, should be an ongoing process,
as this young industry consolidates. Also, traditional
players can benefit both directly and indirectly with as
successful cases mount.
Turning to specific cases seen in the UK, several institu-
tions noted initiatives of Funding Circle (FC), one of the
leading p2p (aka crowdlending or debt-based crow-
dfunding) platforms in Europe, in obtaining synergies
with both public6 and private players. The key innova-
tion was the Santander deal, through which, in case a
micro or small enterprise loan application was denied
credit, the bank would commit itself to refer FC as
funding alternative. While later a similar deal was an-
nounced with RBS, two further points are worth noting.
First, the deal was basically an anticipation of a new
“bank referral legislation”7 , which institutes that tradi-
tional banks will be obliged to offer credit-denied busi-
ness a referral to a designated, online finance platform.
5 There have been three Criatec funds since 2007, also pro-
viding start-ups with managerial and strategic support. Similar, though
smaller and directly conducted efforts, have also been conducted in
start-up financing by SEBRAE. Though such public funding and guidan-
ce initiatives are obviously welcomed, one could argue that combining
them under the umbrella of a single institution could have synergistic
results, as it has been the goal with the BBB model in the UK.
6 Via investments through BBB, where the bank would pro-
vide the remaining funds for applicants in cases where the first 90% of
the credit requested had been granted by private individual lenders.
7 First aired in 2013 and later called Bank Referral Scheme
but not fully implemented nor enforced at the writing of this article,
and estimated by the portal to be
able to reach over 100,000 small businesses that could get over 2 bil-
lion pounds in loans additional to the amount they would get without
the scheme in place.
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