The Key, the core, the pivotal part – such and similar expressions which describe the role of transparency in crowdlending can be found in the first pages of Google search alone. The platforms in the P2P and P2B industries have certainly noticed that this is more and more often demanded by investors. However, what exactly does this transparency mean and what do the parties expect from each other?
Not to get tricked again
Until recently, the Crowdfunding industry has been seen as a new and alternative industry, however, now it is becoming more and more mature, and so are the demands of all involved parties. Recent experience only exacerbates this. Starting with China’s peer-to-peer Ponzi scheme (Ezubao) who collected $7.6 billion USD from 900,000 people, continuing with the cases of the Baltic States (Envestio & Kuetzal) experienced at the beginning of 2020. It has made people more careful, cautious, and wiser before making investments. While we recognize this has been unfortunate for the investors who have lost money in these fraudulent companies, it has also been diminishing trust and reputation for legitimate business platforms, At the same time, while investors have become more cautious and do more serious due diligence before investing, platforms are forced to be even more transparent in order to be competitive, regain and salvage the trust of investors.
Although all platforms are aware of the importance of sharing information, the level of transparency varies from platform to platform. While some platforms publish voluminous and detailed data that sometimes are understandable only by financially experienced peers, other platforms still have a longer or shorter way to go to meet the basic requirements. However, there is no doubt that simply publishing large amounts of data will not lead to the desired outcome. Platforms need to know what their investors want - what information and how much is needed to make smart and confident investment decisions. As investors are demanding more from the platforms, providing relevant and good quality data helps to ensure a mutually beneficial relationship.
Of course, we also feel an increased demand for transparency from our investors. Even though it requires additional effort and resources, this fact actually makes us grateful. We do not support the situation that existed some time ago in the industry when a huge number of investors in fact did not seek transparency, but simply an easy way to make a higher return. Investors are now getting smarter in their investment decisions and platforms need to work harder on transparency - all this leads to what we are most committed to - a competent and reliable crowdfunding industry.
It is in the human nature
American business executive Denise Morrison has said – “the single most important ingredient in the recipe for success is transparency because transparency builds trust.” And trust is the basis of successful human relations that people seek for. Investors do not give the money to the platform or software, but to the people who operate it. Any platform has a team of employees in different roles. Finding information about the platform’s management team and staff on the website or through LinkedIn searches indicates a desire for relations with the successful outcome for both sides. It is the basis for transparency.
The human wish for transparency is not limited only to this industry. It lasts as long as the desire for a mutually trusting relationship. “A lack of transparency results in distrust and a deep sense of insecurity” – Dalai Lama’s quote also confirms that the desire for it is as natural as a sense of survival.
Each platform chooses its own path to transparency. We realize that still there is a long way to reach the top, but we also know that it is our goal - to reach towards full transparency for CROWDESTOR and we will move ahead to achieve this goal. Of course, it will not be enough only with the desire and determination. But as an important milestone, we can mention the latest investor visits as one of the trails towards it.
Investors visit CROWDESTOR
Recently, we were visited by 7 investors and their family members from different countries, who wanted to see the operations of the platform and how our cooperation with borrowers is reflected. After visiting the CROWDESTOR office and getting acquainted with the team, investors visited a couple of borrowers. Within 2 days, 12 different projects were reviewed, such as Inch2, Energy Plant, Trompowski Quarter, Meat Chef, Beetroot Lab, Meat Processing Factory, The Catch, Street Pizza, Wrahunt office & studio, Miera Street, Eclectism Style Building & Old Town-Kaleju. In each of these objects, a borrower's representative introduced with the company and explained in detail about the development of the project and their daily operations. Investors did not miss the chance to ask questions to borrowers or to any member of the CROWDESTOR’s team. Such visits are useful for all involved parties. For investors - it is an opportunity to see the legitimacy of businesses; for the platform - it is an opportunity to gain more profound feedback and develop stronger trust and relationships with investors; while for borrowers - it is another reason not to relax and realize that they are accountable in front of all these people who have entrusted their money in their business.
Even though we understand that transparency is the key allowing investors to conduct assessments prior to making investment decisions, platforms cannot limit themselves only to providing the necessary information. Transparency is just the first step towards accountability. And extreme accountability is exactly what the crowdfunding industry seeks for