Digital Investment and Funding

• What are investment opportunities in traditional finance?


  Avenues where money is allocated to assets or ventures with the expectation of earning returns, facilitated by financial institutions like banks, stock markets, or mutual funds.
• What are stock market investments?


  Buying shares of publicly traded companies.
• Name examples of stock market investments


  Tesco or BP shares on the London Stock Exchange.
• What are bonds in traditional finance?


  Fixed-income securities issued by governments or corporations to raise capital.
• Name examples bonds in traditional finance


  UK Government Gilts or Barclays corporate bonds.
• What are mutual funds?


  Pooled investments managed by fund managers to diversify across assets.
• Name examples of mutual funds

  Fidelity UK Growth Fund.
• What are real estate investments?


  Purchasing physical property or investing in REITs (Real Estate Investment Trusts)
• What is an example of a real estate investment?


  Buying commercial property or investing in British Land Company.
• What are savings accounts and fixed deposits?


  Safe, low-risk options to earn interest on deposits.
• What is an example of savings accounts and fixed deposits?

  Fixed-term savings accounts from HSBC or NatWest.
• What is digital finance?


  The integration of online platforms and technologies to transform traditional financial services like investment, funding, and banking.
• What technologies are used in digital finance?


  Mobile apps, AI, blockchain, and cloud computing.
• What are the benefits of digital finance?


  Makes financial interactions more efficient, accessible, and data-driven.
• What are the disadvantages of P2P lending?


  • Higher risk for lenders due to lack of collateral.
  • Limited regulation compared to banks.
• What are examples of P2P lending platforms in the UK?


  Funding Circle: A popular platform for SMEs to obtain loans.
• What are the advantages of P2P lending?

  • Lower interest rates for borrowers.
  • Better returns for lenders compared to savings accounts.
  • Simplified online process.
• How does P2P lending differ from traditional lending?


  It allows individuals to lend to or borrow from others directly, bypassing banks.
• What is peer-to-peer (P2P) lending?


  Model where borrowers are matched with lenders via online platforms or offline brokers.
• What are the disadvantages of crowdfunding?


  • Success depends on the ability to attract and engage backers.
  • No guaranteed funding if the target isn't met.
• What are examples of crowdfunding platforms?

  • Crowdcube (UK): Equity crowdfunding for startups.
  • GoFundMe: Personal and creative projects
• What are the advantages of crowdfunding?


  • Allows businesses and startups to raise funds without traditional loans.
  • Enables direct interaction with supporters/customers.
• How does crowdfunding work?


  It uses social media and crowdfunding websites to connect investors with entrepreneurs, expanding the investor pool beyond traditional circles.
• What is crowdfunding?


  A method of raising small amounts of money from many individuals to finance a new business venture.
• What is equity crowdfunding?


  A form of crowdfunding where individuals invest in exchange for equity (ownership) in a company.
• What does equity mean in equity crowdfunding?


  Ownership of a part of the company, which can grow in value if the company performs well or lose value if it doesn’t.
• What is reward crowdfunding?


  A type of crowdfunding where individuals fund a project without expecting financial returns.
• Why do investors participate in reward crowdfunding?


  They believe in the project and want it to succeed, but they don’t gain or lose money based on its performance.
• What are the types of crowdfunding?


  • Equity Crowdfunding
  • Reward Crowdfunding
• What happens if a P2P loan isn’t repaid?


  The borrower risks having their security repossessed and must repay the loan in full plus interest regardless of project outcomes.
• What does a borrower give up in P2P lending versus crowdfunding?


  • P2P Lending: Borrowers pay interest on loans.
  • Crowdfunding: Borrowers give away equity in their business.
• How does the investor-borrower relationship differ in P2P lending and crowdfunding?


  • P2P Lending: No direct relationship; the platform conducts due diligence, and borrowers remain anonymous.
  • Crowdfunding: Direct relationship; borrowers pitch to investors, who conduct their own due diligence.
• What is the difference in term structures between P2P lending and crowdfunding?


  • P2P Lending: Fixed terms subject to repayment dates.
  • Crowdfunding: No fixed end dates; investors decide how long to hold equity.
• How do returns differ between P2P lending and crowdfunding?


  • P2P Lending: Fixed-rate returns.
  • Crowdfunding: Returns depend on the performance of the business, making them variable
• What is the key difference in the basis of P2P lending and crowdfunding?


  P2P lending is loan-based with fixed-rate returns, while crowdfunding is equity-based with variable returns.
• How does market volatility affect investments?


  Returns are influenced by market trends and economic instability, which can negatively impact outcomes.
• How does lack of regulation pose a risk?


  Some platforms operate in less regulated environments, increasing the risk of fraud or mismanagement.
• What is illiquidity, and why is it a challenge?


  Investments in P2P lending and crowdfunding are not easily liquidated due to the absence of secondary markets.
• What is an example of illiquidity?


  Equity investments on Seedrs may take years to realize returns.
• Why is high risk a concern for investors?


  P2P loans are often unsecured, and startups funded through crowdfunding have high failure rates.