New rules for Open Capital in the UK

The FT on Mar 11 on Open Capital - with links to The 10 Principles

The UK's Financial Conduct Authority (part of what the FSA used to be) yesterday confirmed new rules on crowd funding (or as we prefer to call it in The 10 Principles of Open Business, Open Capital).

At first glance they appear sensible - and not a million miles away from how Seedrs operates (which as of time of writing Open Business, was the only FSA approved platform in the UK).

Like Seedrs the FCA rules impose a limit on how much you can invest - as a percentage of your investable assets. The FCA sets that limit at 10%. In other words it won't let you bet your farm on a Crowd Funding proposition (and the FCA are talking about security and loan-based crowd funding, not simply funding the production and purchase of an item) no matter how passionately you may believe in it.

This is actually a higher level of restriction than that placed on most people taking a punt on the stock market. For example, when I recently invested in Royal Mail shares, no one made me sit an exam to check I could afford to lose the amount I was putting up. You may therefore reasonably ask why this test is being applied to the crowd, and how indeed this crowd differs from the one making online share transactions every day?

Having said that, I'd be all for the retro fitting of this test to anyone investing in the stock market. It may prevent the odd crash or two... (imagine it applied to the banks)

My only concern with singling Crowd Funding out in this way is that it leaves it in the 'hobby money' field - a place where people dabble for a bit of fun - which doesn't feel quite a match with backing your beliefs and all the attendant generation of new kinds of businesses which mean more to more of us, that my chapter on Open Capital describes.

That said, the FCA is not closing the door to those who really want to push the boat out. If you want to invest more than the 10% of the assets you have available you can - you just have to prove you are doing so having conducted due diligence and been given professional advice.

Edelman trust barometer results align with Open Business approach

Edelman's 2014 Trust barometer survey is out and with it vindication of a key trend we've been observing in Open Business.
The clear majority of respondents to the annual survey (84 percent) believe that business can pursue its self-interest while doing good work for society.

This very much aligns with what we explore in The 10 Principles of Open Business - particularly in the chapters on Purpose and Open Capital. Indeed - The 10 Principles argues that doing good for society offers a competitive advantage in our connected world.

More evidence that 2014 really could be the year of Open Business, perhaps?

From the chapter on Purpose:

There have never been greater drivers for businesses to become Purpose-led.

Apart from anything else, it will reconnect you with the world, re-tying those strands cut loose when CEOs first decided that shareholders mattered more than anyone or anything else.

“It’s a reversal back to the old days,” says Mark (Earls), “when corporations felt part of the world and felt a responsibility to it."

And from the chapter on Open Capital:

Peer-funded partnerships also offer the opportunity to create value beyond the back slap in the boardroom and the bottom line on the balance sheet; value creation which acknowledges resources are finite, that people, communities, societies and ecologies are connected and matter to each other.

And this in itself provides a genuine competitive advantage that the wisest global entrepreneurs are quick to identify. As Sir Richard Branson puts it: “…the boundaries between work and higher purpose are merging into one – where doing good really is good for business.”

In a connected world, where to win is to work together with ever greater numbers of people who care about the same things you do, few are going to sign up to support businesses which are damaging the ecosystem in which they exist – let alone support those organisations with their own money. Open Capital will therefore be a key driver of ‘doing good is good for business’.

• Pre-order The 10 Principles of Open Business now for delivery on launch day - January 28 UK/February 28 US.

Open Business Principle 2: Open Capital

I've just published the third in 90:10 Group's series of blog posts on the 10 Principles of Open Business.
Those familiar with this blog will find some familiar themes.

A portion of it is very close in spirit to a post I published here early in June 2012 - Create Value As If The World Exists.

Here's an excerpt from Principle 2: Open Capital.

"In line with the needs of the industrial age, Capital was organised on the principles of mass and centralised control; Big blocks of cash held by small groups of decision-makers fitted that world.

"But the networked world requires something new, something which delivers faster decisions together with wider distribution of both risk and reward, something which moves the role of the customer from ‘end user’ to participant and partner; something which is a better fit with networks.

"We call this Open Capital: Using crowd-funding platforms or principles to raise capital through micro-investments... today’s entrepreneurs opt for Open Capital knowing that the advantages go far beyond a new route to capital... Open Capital shares the costs and risks and therefore the ownership and the passion. It democratises innovation."

Read it in full.

Related articles

• The 10 Principles of Open Business
• Open Business: Principle 1 - Purpose
• The Principles of Open Business: Principle 1 - Purpose
• The 10 Principles of Open Business and why they are demanded by the networked world
• Collaboration And Crowd-Funding Are Keys to Raising Capital For...
• Crowdfunding the modern startup
• Online Crowd-funding platforms for Innovative Concept and Startups
• Doing Equity Crowd Funding Right