According to Mark Hollingworth, director at Integral Finance, the information required to pitch a project to investors simply isn’t detailed enough. He says: “Currently, very few of the business cases on the main platforms are providing a competitive analysis of their proposition versus existing companies or potential competitors. Many of the pitches are also unclear in terms of their USPs and how they will distinguish themselves against the competition and only a handful describe a possible exit.”
There is also a significant lack of detail surrounding the issue of the long term funding requirements for each venture, which will impact on the total investment required to produce a positive trading cash-flow.
Hollingworth continues: “Unless investors understand clearly how much funding is needed and for how long, there is a serious risk that they will not fully understand how much of the company they have actually bought. Amidst all the hype, there is a genuine risk that a wave of naïve investors will part with their money, only to come forward at a later date complaining that they thought they did not understand what – or how much – they were actually buying.”
“These platforms need to insist on better information for potential investors from the projects they allow on their platforms. They need to recognise the risks that come with providing incomplete information and systematically ensure that the projects using their platforms answer the key questions required to make an informed decision about where to invest.
“The main platforms seem to be deliberately hiding behind generic warnings, self certifications and cursory due diligence on factual claims and investors will almost certainly lose their money as a consequence of the poor information being provided.”