Companions2travel.com is a small social networking business in the UK that wants to secure funding for its next phase of development. Unfortunately, it’s also battling strangling regulations that prevent it from seeking investment from its own members (or outside investors either), without first having to spend £75,000 to start the process. EVCJ editor Angela Sormani has 5 Questions for company exec Nathan Green:
1. What are the regulations affecting the further expansion of your business, and is this an issue other small businesses in the UK are facing?
Green: C2T is a small private limited company that wishes to offer its 16,000 members the chance to invest in and own part of it. In 2005, the government introduced legislation/regulations to enable businesses seeking investment to make public share offers without the need to produce a prospectus or be a plc. Unfortunately, although this was intended to enable fastrack investment (specifically for sums less than £60k), it has had the opposite effect. It will still cost in excess of £75k to have a suitably FSA accredited agent check the offer out before making it public (despite the fact that no formal share offer prospectus is required). The maths is simple – to offer our members the chance to invest in the business will cost us £15k+ assuming we obtain the full investment. Hmmmm……
Yes, this affects ALL businesses in the UK that are seeking investment and wish to make use of the legislation that was supposed to help them do so.
2. Can you see the situation changing in the near future?
Green: No. Not unless the legislation and regulations are immediately changed to actually help rather than hinder business.
3. What are the other options for Companions2travel now if the business can’t secure funding at the moment?
Green: The reason we looked at this route to investment was that we wanted to be the first social networking site to enable its members to share the future of the business and all that will bring in time. As we cannot even offer our members the chance to invest in the business then we will now have to look at private investment, venture capital etc. But it kind of misses the point!
4. Where do you see the business going from here?
Green: Onwards and upwards! Not as quickly as it would if we could do the 100,000 euro public offer which in theory we can but in practice will leave us well out of pocket.
5. Any final words on the matter, as you are obviously extremely fired up about it?
Green: It appears that the only people the legislation will benefit are the FSA agents….certainly not the businesses it was intended to assist. It is a crying shame that a little more thought was not applied to this when it was rolled out. Please, can we get this sorted out and stop strangling UK businesses trying to grow in a competitive global marketplace.