3c hapter - Index of

136 Locavesting
pioneer similar to Prosper. “I think people are also coming to us
because they are fed up with the banks. People feel their money is
disappearing into some sort of weird casino which bears no relation
to the real world,” Zopa cofounder and CEO Giles Andrews
told The Independent. 8 Since it launched in March 2005, Zopa’s
half- million members have lent more than £100 million at an average
8.3 percent rate (after Zopa’s 1 percent fee). CurrencyFair,
a web site based in Ireland and regulated by Irish and European
Union authorities, lets individuals exchange currency with each
other rather than banks—“avoid being fl eeced,” the site exhorts.
And in a sign of investor support, Prosper in April 2010
raised another $14.7 million in fi nancing—its fourth round of
funding—from existing investors and newcomers such as Google
executive chairman Eric Schmidt’s venture fund. Lending Club
raised $24.5 million the same month. And the sites have lately
attracted some big money investors and hedge funds in pursuit
of higher yields.
For now, P2P sites that can’t afford to undertake the onerous
process of registering with the SEC are carefully tiptoeing around
securities regulations—especially when it comes to investing
money in small business. Sites such as Grow VC, Virginia- based
WealthForge, and Austin, Texas- based MicroVentures are only
open to accredited investors—those wealthy angels that the SEC
deems sophisticated enough to not need protection. Others are
bypassing the United States altogether. Zopa, for example, briefl y
entered the U.S. market but pulled out in 2008, shortly after
Prosper was shut down.
Indeed, the action in crowdfunding at the moment is taking
place in the United Kingdom, where the combination of a developed
fi nancial and legal system and more accommodating securities
laws are providing fertile ground for exploration. It is here
that the new models for small business funding are being invented
and tested. And they are fi nding an eager audience.
Small businesses employ 60 percent of the United Kingdom’s
private sector workforce and account for half of its GDP. Yet
their lending options are even more constrained than in the
United States. The banking industry in Britain is extremely consolidated,
with the top banks providing 92 percent of small business