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"Other firms are trying to reinvent small-business financing by providing virtual marketplaces where investors and SMEs can come together. In the world of equity capital the pacesetter is a British firm called Crowdcube, which uses the idea of “crowdfunding” to enable lots of investors to buy up small stakes in start-up firms.

Picking winners among entrepreneurs is notoriously difficult. Venture capitalists’ answer is intensive screening by a small team of dedicated investors, followed by hands-on involvement in the business. The Crowdcube model, which is due to come to America if crowdfunding legislation passes, depends on the ability of thousands of members to ferret out the best ideas. The general public cannot match the expertise and commitment of dedicated “angel” investors if a firm gets funded, admits Darren Westlake, Crowdcube’s founder. But it helps to have lots of investors acting as advocates for a start-up firm." (