The UK’s low carbon economy is now worth more than £200 billion, larger than the manufacturing and construction sectors combined. This is in part thanks to the UK’s thriving cleantech sector which lies at the forefront of the global effort to make life more sustainable.
Cleantech – products or services that reduce the negative impact on the environment – is attracting significant interest from investors across Europe, with the UK hailed as a “leading nation” in this regard, securing £134 billion of investment in 2021. Pair that sum with a general public that is increasingly conscious of their consumption choices, and there is a clear opportunity awaiting cleantech founders.
For founders and entrepreneurs in this thriving space to keep growing, it’s more important than ever to harness the power of ‘the crowd’.
Turning customers into investors
By ‘the crowd’ I mean the multimillion-strong community of retail investors who want to back businesses they think will, and in many cases do, succeed. However, the retail investor often also has a secondary motive for their investments: supporting a company that they want to succeed.
It has become a truism to say that consumers of today are growing ever more conscientious about the financial choices they make. Those who can afford to align their spending with their values are doing so in increasing numbers. What Crowdcube’s success – particularly in the cleantech sector – shows is that these same people aren’t happy with being passive consumers. They also want to take that support to the next level and become active parts of the company, too.
Entrepreneurs in cleantech can leverage that latent consumer demand and turn it into a community of passionate investors. Having such a large number of financial backers brings a number of benefits, chief among which is the fact you have a ready-made army of advocates spreading the word about your cleantech solution. It also provides you with a larger – and often particularly well-informed – network of people discussing and sharing ideas about a company’s cleantech solution and business model.
Take Alayne, a 72-year-old ex-climatologist at Swansea University who invests in dozens of cutting-edge cleantech solutions on our platform, including The Small Robot Company and Orbital Marine Power. She regularly corresponds with the founders or investor teams of the companies she invests in, sharing a career’s worth of academic experience on the climate to the mutual benefit of herself and the founders whose businesses she's invested in.
Alayne is just one of the hundreds of thousands of investors backing green businesses to succeed: our recent data suggests climate-conscious ventures are attracting seven times more investment from retail investors on its platform compared to years ago, and the annual investment into green and sustainable companies has risen from £5.5 million in 2017 to £41.1 million in the year from March 2021 to April 2022.
Bringing the crowd in from the cold
Entrepreneurs and founders know all too well that funding can be the making – or breaking – of their venture, and there is no doubt that equity crowdfunding, alongside traditional avenues like venture capital – should form part of that process. Crowdcube’s own data shows private equity crowdfunding is becoming a particularly fruitful path for green and sustainable businesses: the average green pitch on our platform attracts 29% more investors than those which do not prioritise sustainability.
Portray your purpose
Recent research from Oxford Risk shows that, when it comes to other asset classes, nearly a third of investors’ values are not reflected in their portfolios. In other words, many are being let down by asset managers when it comes to ESG, leading them to underinvest in what matters to them.
With the rise of crowdfunding platforms and investment apps, it has never been easier for people to align their portfolio to their vision for the world. Budding start-ups and scale-ups must be sure they are communicating their purpose clearly in order to speak to the hearts and minds of their investors, not just their wallets.
Last year, global research by the Competition and Markets Authority found that 40% of firms’ green claims could be deemed misleading. With legitimately sustainable companies clamouring for attention alongside greenwashers, well-intentioned consumers and investors alike can struggle to separate the two.
Equity crowdfunding enables customers to become shareholders for the brands and businesses they personally want to support, meaning both sides are united by a shared purpose.
The way forward
Cleantech is a fast-growing and appealing investment choice; one that will only become more attractive and prominent as the effects of climate change become clearer.
By communicating their purpose and vision clearly, founders can tap into a passionate community of investors to see them through their journey. That’s why now is the perfect time for founders to turn to the crowd to help fuel their growth and diversify their funding sources.