IT’S ALWAYS been tough to raise investment for a start-up company but over the last few years it has got much worse. The banking crisis and collapse of the property market has meant that the old methods for raising smallish amounts of informal finance, such as re-mortgaging your home or putting debt on to your credit card, is no longer a viable option.

It used to be possible to raise money from venture capitalists, but they have become an extinct species. Thank goodness for ‘angel’ - personal high net worth - investors who have taken up the slack. And since Scottish Enterprise launched its co-investment scheme which will match the investment by an Angel syndicate, their numbers have grown substantially; last year Angel groups invested £22.5m in 80 Scottish companies.

However, Angels can also bring problems, as they often encourage companies to sell relatively early so that they can get a return, rather than taking the extra risks of raising further investment and striving to grow a substantial international business.

But the Internet is revolutionising many established business models and a powerful new method for raising risk finance, crowdfunding, has emerged. As its name suggests, crowdfunding uses social media methods to collect lots of relatively small investments from a large number of people - the Obama election campaign used it to great effect. And it works - last year $2.7Bn was raised through crowdfunding methods worldwide, and this is predicted to rise to $5Bn this year.

A recent report for the Glasgow Chamber of Commerce by Twintangibles (bit.ly/15jOxy7) looked into this phenomenon from a Scottish perspective, but its conclusions were not encouraging. Although NESTA has estimated that £200m was raised using crowdfunding methods in the UK last year, the Twintangibles report estimates that less than £1m of that was raised for Scottish opportunities.

There are a few Scottish success stories, the most famous of which is undoubtedly BrewDog. Their ‘Equity for Punks’ campaign raised its first money in 2011 and is aiming to raise a further £4m this year from individuals to fund the expansion of their Aberdeenshire brewery, bottle shops and bars. For £95 a share, investors receive lifetime discounts at their pubs and online shop. Their shares are not listed on any market and may prove difficult to sell, but that doesn’t put off their fans. Their AGMs look like becoming the ultimate ‘piss-up in a brewery’ party with rock bands to entertain the literally hoards of shareholders that show up.

In February this year, Edinburgh-based software tools company RunRev successfully raised £493,000 using Kickstarter. RunRev didn’t offer any equity but rather it sold its investors on what exciting new features would be developed with their money and provided various tangible benefits, such as training courses, or commercial use licenses, for those donating various amounts of money.

And the leading Scottish crowdfunding site, BloomVC has had quite a bit of success in raising smaller amounts of money, mainly for social projects such as sports teams or film productions.

Needless to say all this ‘unregulated’ financial activity has attracted the attention of the Financial Conduct Authority which has announced a consultation exercise about how this should be regulated. After all, these methods could be open to abuse by those who just want to make a fast buck.

In the meantime, more Scottish projects should perhaps be looking to more innovative methods of raising risk capital, and calling on the crowds.