Bank to the Future: the first crowdsourced investment bank

For some time now I’ve known Simon Dixon, the founder of
Bank to the Future. 

Bank to the Future
aims to be the first crowd sourced investment bank to make a serious dent in
the way we look at banking.  Here’s the
pitch:

After seeing this and thinking about what Simon was
doing, I decided to interview him and see what the aims and objectives of Bank
to the Future really are.  Here’s what we
discussed …

What are the
issues with banks today?

The major problem with banking today is the
lack of transparency. No matter how many regulations are implemented it does
not change the fact that depositors, investors and shareholders have no idea
what happens with the money. A retail banking licence effectively means that
banks own depositors money, can spend that money as they wish and have the
ability to create money through the issuance of credit. Bank loans tend to go
to either the least risky or most profitable. It is why approximately 80% of
the major UK banks loan book go to either property loans (As they are backed by
assets) or financial speculations (As it is the most profitable). Last in line
is a business, but businesses create most of the UK's jobs and contribute to
the non-inflationary productive part of our economy. 

What’s the
background to bank to the future?

BankToTheFuture.com
was founded to let people invest in private companies starting from as little
as £10 and have more say over what happens to their savings and investments. At
the moment we focus on the equity markets and it is like an online dragons den,
democratising investing so anybody can be a dragon and invest in companies that
they like. We wish to expand and offer debt products and secure an investment
banking licence in order to give people more options with how they invest their
money online. 

Tell me about
yourself.

I originally started as a tea boy for stock brokers TD
WaterHouse, eventually I got my way onto the trading floor as a market maker
for investment bank KBC before my final corporate role in Corporate Finance.
After meeting successful business owners taking their companies
public I decided I was on the wrong side of the desk and set up my first
business in 2006 qualifying students to work in investment banking. This was
angel funded by billionaire Peter Hargreaves and gave me
a first introduction to what it is like to secure angel funding. We
had a tough run in the financial crisis so I began to channel my efforts into
alternative finance and sustainable banking. I wrote the book ' Bank To The
Future' on the future of finance and got more involved in not-for-profits
focused on submissions for the independent commission on banking. I then
decided to put a team together and build BankToTheFuture.com
with our co-founder Bliss Dixon to build our Crowd-Investment Bank. We raised
all our seed funding from the Crowd on our own platform and
have recently launched a new record bid to raise £2m from the crowd
in exchange for shares in BankToTheFuture.com

What are your
motivations for doing this?

We have two missions - one to democratise
investing so that anybody can be an investor in a responsible way and offer
more financial inclusion to an asset class that was previously only available
to the rich. Secondly we want to get more money into the productive side of the
economy and help businesses get investment ready so they can secure funding
from those that are really interested in what they do. It has traditionally
been very hard to secure funding for a private company, especially those
looking to raise less than £1m.

What will BankToTheFuture.com
achieve and how quickly?

We launched into beta in August 2012 after we were endorsed
by Sir Richard Branson in the Telegraph and on the Virgin website. Since then
we have been working on user experience to make the investing
process seamless and easy, as well as incubating businesses to make
sure they are investment ready. Since then approximately £700,000 has been
invested in UK companies and we are now pitching the crowd on our own platform
to raise £2m to grow BankToTheFuture.com
into a Crowd-Investment Bank. 

Do you think BankToTheFuture.com
will follow the path of a firm like Zopa that starts as weird and soon becomes
mainstream?

Zopa had a hard time as what they were doing was so new and
innovative. In fact some of our team were involved in Zopa very early on and we
are going through a similar stage with equity CrowdFunding. I believe very
shortly our children will look back at us and ask us what it was like to
be alive when financial institutions controlled the purse
strings and what the world was like before everybody invested online. We are
witnessing every financial product being re-created into a crowd based product
and as a Crowd-Investment Bank we want to be a part of making sure
that happens. We are shifting from a world where
financial institutions determine who gets the money, to people
determining who gets the money. Those who adopt early will be
ridiculed by the orthodox  but eventually will be worshiped as
CrowdFunding goes mainstream. 

How will you make that happen?

We have a great team that was involved in peer to
peer lending and the building of Metro Bank, but to be honest, our destiny is
in the hands of the crowd. We think that people want transparency and that in
the future what gets funded will reflect the true values of society
rather than a few people at a bank or venture capital firm. I am also a
director of the UK CrowdFunding Association and we
are heavily engaged with the FCA to make sure we get the best
regulatory framework to allow this new transparent and inclusive asset class
grow. We need the crowd to participate to make this happen though. 

Will this really change anything?

The major difference is transparency and the
fact that what gets funded will be with the knowledge of those that fund it,
but we still need large legislative changes from the government in order to
allow us to compete on a more level playing fired with orthodox banks. The
government have shown a great commitment to lower the barriers to startup banks
and we have been involved in much of the change. CrowdFunding is one part of
the change, to get real change we need to change banks so they don't own our
money, can't spend our money and can’t create our money. We need a huge
stimulation of local community banks like in Germany and we need to let the
world know about CrowdFunding, which is essentially ideological based funding,
rather than geographical based funding, as investors tend to be those that
share a common vision and ideology for the business.

And is BankToTheFuture.com
really a bank or a new form of dealing with money, e.g. will you get a
banking licence?

We are planning to get a
banking licence in a way that has never been done before. What we are doing has
never been done, we are creating jobs that have never been created before and
that requires new regulations and changes, but yes our plan is to become an
investment bank, we have no plans on retail banking though. 

If you would like to know more about Bank to the Future,
Simon and the project, he will be our guest speaker at the Financial Services
Club meeting on 19^th February 2014. 
Please register with our website as a member http://fsclub.net/r.cfm?e=384&w=1&t=Member
or non-member http://fsclub.net/r.cfm?w=0&e=384&t=NonMember
if you wish to come along.