Revolution not evolution

 

Technology. Isn’t it great! In recent years it has helped both create and nurture a number of markets which would never have thrived without it. For instance, technology has helped make pricing more transparent and accessibly to products and services more fluid – take Just Eat, AirBnB or Uber - all three of which have revolutionised the markets in which they operate.

 

The same goes for the alternative funding industry. It has, arguably, never been easier for businesses to find money, and not just any money, but the right money. As an observer sitting on the side-lines of the industry but utilising it to help my clients, I’ve witnessed a staggering rate of change in the market. But what exactly has instigated such drastic change? I put it down to three things: the drive and entrepreneurialism of those setting up funds, the supply of money, and technology that has enabled funds to set up quickly and market their offer easily to large audiences.

 

Entrepreneurs are a new and welcome breed of financiers who look at businesses differently to the long-established debt and equity institutions. Not only have these newcomers embraced and utilised the technology at their disposal, this utilisation has more specifically enabled them to clearly identify the markets they want to target and, in turn, made it easier to reach them. Furthermore, technology has helped entrepreneurs clearly differentiate their offerings in such a competitive market, accelerating the stages of processing and decision making. Technology has essentially created efficiencies that simply weren’t achievable 10 years ago.

 

The current-day combination of expertise and technology enables the alternative funding industry to generate better returns at a lower risk than has traditionally been achieved. This has resulted in an increased supply of funds and new entrants. Supply only works if there is demand, and that is why the market is so great for businesses. No longer do business owners have to live with ‘one size fits all’ solutions – they can find the right solution for them. They can create the right capital structure for their business – whether debt, equity or a mix, whether short, medium or long-term. Those active in the industry can now tailor their capital structure so that it falls in line with their specific sector or the products and services they are supplying. The most significant benefit is that this all increases a business’s willingness to participate in the funding market, which is ultimately good for their long-term growth prospects.

 

A cooperative regulatory environment has undoubtedly encouraged growth in the sector, but how long this will last is uncertain. More importantly, where to next for the sector? As is the case with other rapidly growing sectors, will there be consolidation – either with a few dominant owners of products and/or brands to maximise efficiency and therefore profit? Or alternatively, will one or two platforms end up dominating and increasing the efficiency of the market - like Just Eat has done for the takeaway market. Whatever happens, I welcome the challenge of keeping up with the revolution in the sector and ensuring that, as an adviser, I stay up to speed with what financing options are out there for my clients.

 

You can find out more about Matthew and Buzzacott’s corporate finance offering at: 

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Matthew joined Buzzacott as a Partner in March 2015 where he heads up the Corporate Finance team. He is experienced in advising owner-managed businesses on a range of corporate finance activities including acquisitions, disposals, management buyouts and fundraising from banks, private equity firms and high-net-worth individuals. Matthew is also responsible for developing the existing Buzzacott valuations business.