Crowdfunding offers alternative to traditional investments

Ploughing a similar furrow are sites such as ArtistShare, Indiegogo and SellaBand.

Energy/solar

Solar Schools is a UK project helping communities crowdfund the cost of solar panels for their school by gathering lots of small donations from parents, pupils past and present, local businesses etc. Run by 10:10, the climate change campaign the Guardian helped launch, it provides the resources, training and support to attract donations and get everyone on board.

Solar panels can be a great investment for a school – a 7kW system could give a £400-a-year saving on energy bills and provide feed-in tariff payments totalling almost £950 a year, says the website. But for many schools, the upfront costs can be prohibitive.

Those participating in Solar Schools usually have to raise a minimum of £8,000 to instal a solar system, and the scheme allows you to chip in £5 or more to sponsor a virtual solar tile.

Solar Schools was rolled out nationally a year ago and is now looking for about 100 schools to come on board. Applications are open, though you need to register before 15 May.

Green-minded individuals, who would like to receive a regular cash return, can check out Abundance, which lets people invest as little as £5 in UK renewable energy schemes. Three projects – two solar and one wind – are now fully funded, with five more in the pipeline. You buy debentures, which are like IOUs issued by the individual projects and, in return, the project commits to pay you a share of the profits from generating green energy. Abundance is regulated by the Financial Conduct Authority, though in the event that an energy project went bust, you could lose some of your money.

Small businesses and entrepreneurs

A string of new UK crowdfunding sites are giving ordinary people the chance to invest, Dragons’ Den-style, in start-up businesses. These sites include Seedrs and Crowdcube, both of which offer a minimum investment of £10. Investing in start-ups is about picking new businesses you think have the potential to succeed. Invest, and you become a shareholder.

However, this isn’t for the faint-hearted; as Seedrs points out, “if a business you’ve invested in succeeds, the shares you own will become worth more than you paid. However, if the business fails – as the majority of start-ups do – you’ll lose your investment”.

To use sites such as these two, you will usually have to complete a questionnaire and show you fully understand the high-risk nature of this type of investment, plus commit to build a portfolio with a spread of investments.

There are also sites such as Peoplefund.it and Crowdfunder, which are arguably hybrids of the Kickstarter and Seedrs/Crowdcube models in that they feature creative business ideas seeking backing in return for rewards from those behind the projects. For example, Kat Jackson, who runs a natural soap and skincare products business based in Cornwall called RelaxAhh, has been trying to raise £4,000, including £2,000 from crowdfunding, in an attempt to rescue her business and set up a new shop after an “extremely tough winter”. She is on Crowdfunder and is offering rewards including a pack of soaps for a £5 investment or a gift hamper for £25. At the time of writing, with just a few days to go, she had raised £632 on the site.

Also look at Buzzbnk, which specialises in helping social enterprises and charities raise funds, and CrowdBnk, which launched yesterday and aims to include a variety of projects, from charities to “for-profit” businesses.

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