UK energy newcomer raised £487,000 through reward crowdfunding

UK energy newcomer raised £487,000 through reward crowdfunding

The UK consumer energy market is dominated by six companies who between them supply over 90% of the market. Newcomer and disruptive brand People’s Energy raised almost £488,000 last year through reward crowdfunding on Crowdfunder UK, and started trading in August 2017.  They needed startup cash, and offered savings against future bills as rewards. Their eventual aim is to really shake up the market through acquiring a million customers who will all be shareholders, making company decisions and receiving a slice of refunded profits.

Here’s the “gap in the market” they want to exploit. None of the current “Big Six” energy companies are recognisably customer-centric. There is a generally critical public perception that they offer complicated tariff structures making it difficult to find the best prices or to compare different suppliers, and that they deliver similarly uninspiring levels of customer service – no more than 43% of any of the Big Six’s customers would recommend their supplier.

There is also public resentment over their “profits before people” ethos: consumer prices never drop when wholesale energy prices do, and energy prices have risen at three times the rate of general inflation over the past 20 years. Amid unproven accusations of collective price-fixing, in April 2017 the Government put in place a price cap on each suppliers’ top tariffs, possibly remaining in force until 2023.

A relatively uncompetitive market dominated by a few large, unresponsive companies who lack customer trust is a ripe target for disruptive new entrants, which is what People’s Energy aims to be. Karin Sode, People’s Energy’s head of marketing, kindly answered some questions for me.

People’s Energy launched by using donations-for-rewards crowdfunding to raise over £487,000 and generate 2,055 customers. What was the thinking behind this?

We differ from all the other suppliers in that we want to give our customers shares in the company and pay back the profits to them, not to some other faceless shareholders. For that reason, we turned down potential investors who wanted equity in return for their investment.

Equally, equity crowdfunding was not an option because although it would have been easier for us [than reward-based crowdfunding] it would dilute the model and our unique offering of ownership to customers. We knew that it was a tall order but we were determined, worked very hard at it, and are pleased that we succeeded and were able to launch the company on 1 August 2017.

Was it difficult to get an operator’s licence given you will operate very differently from the Big Six?

Ofgem (the UK energy market regulator) has been very welcoming and appreciative of the very different model we offer to help shake up a market that suffers from real trust issues. Getting the initial licence was not the hardest thing, a bigger challenge was one of initial funding to get started, and we resolved that through our crowdfunding campaign.

After receiving the licence, we then went through a probationary period called ‘Controlled Market Entry’. We could take on only a limited number of customers while we proved to Ofgem we had the operational capability to serve them well. We went through that period fast, and successfully, and I’m very pleased to say we are now fully licensed to operate and welcome as many customers as we can.

A stated aim is to put 1 million people in charge of their own energy as shareholders in People’s Energy. Will you need to raise more money to achieve this?

We will operate on a “cost plus model” based on wholesale prices and our fixed costs, plus a small buffer that allows us to be robust. We’re a new business with no legacy costs to have to cover. There will be a single tariff for all customers, with our prices always in the lowest 30% of other tariffs on offer. Right now we’re in the lowest 10%. We are now broadly self-funding.

However, there will be a need for some further funding to realise other ambitions to invest in innovative renewable and energy storage solutions. In the meantime, a key interim aim is to sign up 20,000 customers within 18 months of our launch, which is a deadline of February 2019.

Where will People’s Energy customers come from?

We hope to appeal to younger customers through our sharing economy model. Market research shows that the more innovative companies operate in a more community/membership way, such as Giffgaff (a mobile/cell network) and Monzo (banking services).

We plan to build out the community approach and encourage people to share what we offer through personal endorsement to their contacts. This will help us grow the numbers at pace. In addition, we are currently in talks to establish partnerships with various bodies that will help drive up customer numbers more quickly.

A sharing economy newcomer aims to disrupt the UK consumer energy marketIn terms of offering your customers control, what sort of issues will they have a say in?

A key aim is to rebuild trust between consumers and energy providers. That can’t be done through words and promises but has to grow through the actions we take. Offering customers an element of control is therefore a direct attempt to make people feel heard and valued, really given a voice.

We want customers to have a say in whether or not we use the profits to purchase renewable generation facilities (including wind and solar farms), invest in development of power storage, or if they prefer to have the profits repaid to them.

We also plan to consult customers on whether they want profits shared depending on their energy usage or if every customer should get the same rebate. The latter option would support individuals in lower income households, but may not be considered fair for people with large usage such as small businesses. We believe the customers should have a chance to decide for themselves rather than us deciding on their behalf in a remote boardroom.

People’s Energy will provide electricity only from renewable sources. Will residential prosumers be able to sell back to you energy they produce from renewable sources?

We are not yet able to accommodate this, though it is absolutely something we want to facilitate as soon as we possibly can. For now, after switching over to People’s Energy for their energy supply, people will be able to continue to sell back surplus energy they produce to their current supplier.

If you are considering a crowdfunding project, whether offering equity or providing rewards, please get in touch if you’d like an objective assessment of your ideas from an independent crowdfunding adviser. Please email me at [email protected] or contact me through Twitter, @Cliveref.

Swedish Crowdfunding

Swedish Crowdfunding

Alongside my role as an independent crowdfunding adviser I also source and create original content for a global organisation that covers trends and developments in the crowd and sharing economy, Crowdsourcing Week. The various forms of crowdfunding make up some of its 14-part crowd economy landscape. As part of the build-up to a March 2018 conference in Swedish Lapland I took a look at the current state of crowdfunding in Sweden.

Crowdfunding in Sweden

Crowdfunding in Sweden continues to grow and make headlines, from startups using donations-for-rewards crowdfunding as a sales channel for innovative products to quickly achieve high turnover, to the electric vehicle manufacturer Uniti raising €1.2m through its own equity crowdfunding just last month. It also took pre-order sales deposits on 915 units (main image).

The Swedish government wants to generally encourage crowdfunding as a credible way for small and medium size businesses to raise money and conduct business, and is scheduled to publish a report in December 2018 to propose new legislation which will hopefully create a more secure and better defined crowdfunding market. Source: ECN Review of Crowdfunding Regulation 2017.

There is no central professional body for the Swedish crowdfunding platforms and the precise number of them is open to interpretation under the existing vague rules as to what exactly is or is not a crowdfunding platform. There are also international platforms that operate in Sweden, including Kickstarter and Indiegogo in the rewards-for-donations sector and the Finnish platform Invesdor in the debt and equity sectors. General estimates reckon there are 20 to 25 players in the market. Here are the key ones.

Rewards-for-donations

As in many countries, entrepreneurs with an eye on international markets gravitate towards Indiegogo and Kickstarter, with domestic platform providers reaching a primarily internal audience.

  • A recent Swedish tech success at an international level was the Trippy wireless docking speaker for smartphones that operates through electromagnetic induction. 165 backers supported the project, raising €15,390.
    Swedish crowdfunding
  • In numerical terms a far more popular product was a range of cutaway, odour-free socks for men that aren’t visible outside shoes. William & Sterling raised over €153,000 from 4,418 backers in August 2017.
  • CrowdCulture, which launched in 2010, combines crowdfunding with citizen engagement. It has around 5,000 registered supporters who donate to cultural projects around the country and claim their rewards. Each donation is match-funded by regional or local funding sources operating within corresponding parts of the country. “This civic involvement in allocation of public funding has so far seen 152 projects funded, a success rate of 45% with a total allocation of over €800,000 (SEK8m), “ said Gustav Edman.

Equity and debt crowdfunding (p2p lending)

These two categories are combined as there are platforms that provide both services.

  • The biggest Swedish operator is FundedByMe which launched in 2011. They have a network of over 100,000 registered investors who have so far invested over €46.3m in equity and loans. FundedByMe is considering an IPO in 2018 (Initial Public Offering) to be listed on the Swedish stock exchange, and are running their own equity crowdfunding campaign through to mid-December 2017. If the IPO goes ahead there will be an early exit point for shareholders.
    In August FundedByMe joined forces with Finnish investment company Privanet. Their first joint venture raised €1.2m for the Finnish media-platform builder BCaster.
  • In a reverse situation, the Finnish crowdfunding platform Invesdor, which already operated across other Nordic countries and in the UK, opened its first Swedish office in Stockholm in September.
  • Toborrow is a p2p lending platform based in Stockholm and since its launch in 2011 it has provided entrepreneurs with over €6m. Borrowers have to be already trading with a turnover of over SEK1m (around €100,000) and secure the loans with personal guarantees. It isn’t an option for anyone who requires seed or early stage funding.
  • Tessin is a property crowdfunding platform. It gives people opportunities to invest in a number of properties to spread any risks alongside other investors.
  • In June 2017 Trine, a platform based in Gothenburg, raised €6m to pursue its aim of tackling energy poverty through closing the gap between private capital in developed countries and local solar partners in emerging markets. A subsequent project in Kenya then raised over €145,000 (17 million Kenyan Shillings) to deploy solar energy systems for 6,000 townspeople.

Swedish CrowdfundingWhat does the future look like? In addition to a likely new regulatory framework for crowdfunding in Sweden, right now everyone’s talking about ICOs being “the new crowdfunding.” Funds raised through ICOs now exceed early stage venture capital (VC) investments.

In Sweden, Uniti CEO Lewis Horne has set out plans to launch the first green ICO, Uniti Green Tokens (UGTs). The company will use the upfront income to accelerate its work with the open source community. Early investors will gain access to data generated by the first vehicles on the road in 2019. Further options on how to redeem UGTs could potentially include access to mobility services and car charging options – watch this space!

 

10 Top Tips for Crowdfunding

10 Top Tips for Crowdfunding

In my role as an independent crowdfunding adviser I attend many live pitching events and meet plenty of people who have run successful crowdfunding projects. My 10 Top Tips are based on many meetings and conversations with people working at crowdfunding platforms and with entrepreneurs who have run successful crowdfunding campaigns, mainly equity based and some donations-for-rewards projects. This is intended more for commercial enterprises than fundraising for worthy causes, though many aspects would still apply.

  1. Examine projects by other crowdfunding users in your business sector.
  2. Build your own networks of relevant people for as long as possible before going live. Every person you have ever met is a potential backer! This crowd-building includes making professional media contacts to ensure a good response to press releases in your local area and sent to relevant trade/business sectors.
  3. Thorough planning and preparation is vital. Decide on who (the types of people) you want to tell about your offer; create in advance what you’re going to tell them (the content); plan when to tell them (don’t overload demands on your own time by telling everyone all at once, stagger it); decide which communications channels to use – social media, PR to secure media coverage, meetings and events, content marketing, paid-for advertising. You might want to start getting media coverage months in advance to allow time for items to be published so you can refer to them in your crowdfunding pitch.
  4. Pre-sell to your closest contacts and supporters so that you can count on at least 30% of your funding target or pre-orders arriving in the first few days. This gives the project vital momentum and encourages other would-be backers to get off the fence. Also check for opportunities through your crowdfunding platform (when your project is accepted by one) to identify and contact backers in their network with a relevant investment/product history.
  5. Ensure you and your partners/support team (a team of people is important because most crowdfunding attempts by a sole individual fail) have appropriate social media skills, or have a budget to access some.
  6. Crowdfunding can be a fulltime role. Why wouldn’t it be? Success is possibly going to transform your life for the better. Organise your day job, maybe by taking on temporary support, so you have the time to answer questions, send out information, and personally meet prospective backers. Don’t forget – people invest in people, get out and meet some would-be equity investors or people who could place large orders.
  7. Set weekly targets to monitor progress and check that you are doing enough, and establish what’s working well and what isn’t. Change your plans based on your weekly assessments to do more of what’s working best.
  8. Make it easy for your backers to tell their own networks about your crowdfunding project, provide them with content to use by email and in various social media formats.
  9. Be flexible to accommodate other opportunities that may arise, such as offers of retail distribution or interest from an angel investor.
  10. Invest some time on your new backers because they could turn in to important brand ambassadors for your business.

In short, you will need:

  • soft ‘people skills’ and confidence to engage persuasively with potential backers;
  • an ability to segment audiences and identify key prospects;
  • skills to harness the power of the written word;
  • social media skills;
  • an easy-to-deliver and understand SMART business plan and financial projections (Specific, Measurable, Achievable, Realistic, Timetabled);
  • a budget to bring in extra help and any skills or capabilities you lack within your immediate team (such as video production, effective use of social media, writing press releases, organising events);
  • a campaign plan with KPIs to monitor progress;
  • and maybe a campaign manager to help you hold it all together and make it work, if you think you need one.

Or contact me, an independent crowdfunding adviser, at [email protected] or on 07788 784373. I can take you through a seven-stage assessment of your readiness to start crowdfunding and identify areas that ought to be strengthened before you go ahead. Then we can start planning how you will achieve success.

How Digital Tokens and Initial Coin Offerings Work for Video Gamers

How Digital Tokens and Initial Coin Offerings Work for Video Gamers

Independent game designers and smaller-scale publishers often use reward crowdfunding platforms including Kickstarter and Indiegogo to launch new products. In the 10 years since the iPhone was introduced the computer and video gaming industry has been shifting from stand-alone offline platforms (consoles and PCs) to a $multi-billion online industry with a host of new benefits and possibilities. Mass direct connectivity has disrupted yet another market.

Research released earlier this year shows mobile gaming (on smartphones and tablets) is now the largest market segment, accounting for 42% of the total global market and worth an estimated $46.1bn. Mobile gaming is expected to have a 50% share by 2020.

Global Games Market By Segment
How Digital Tokens and Initial Coin Offerings Work for Video Gamers
Source: Newzoo Global Games Market Report 2017

Benefits of online gaming for game enthusiasts include opportunities to compete against other players. Tournaments have also drawn back in as spectators plenty of former players who can no longer invest sufficient time to excel personally. For game creators, they can connect directly with gamers rather than rely on expensive intermediaries, which is particularly good news for smaller publishers and independent game developers.

As a business model, game companies rely almost entirely on direct consumer spending, rather than an advertising-based model used by many digital or broadcast media companies. In addition to the initial game purchase, players buy advantages such as superior weaponry or access to exclusive content that gives them an edge over other players. Natural ability ultimately hits a ceiling, and serious players can spend considerable sums of money amassing virtual goods to be competitive at the top level.

An example of this is Chronicles of Elyria, the highest earning game crowdfunded on Kickstarter when 10,752 backers had pledged $1.36m by June 6 2017. It was created by Soulbound Studios based in Bellevue, Washington. In addition to enhanced weaponry and other accessories, or accelerating progress by starting the game at a superior level, the biggest backers were able to name locations and characters in the game which made them co-creators in the process.

This income was achieved via cash-only pledges through the Kickstarter platform, though a significant online benefit for game developers is to move away from a direct cash-purchase system to the creation of game-specific tokens. Purchasing tokens can be incentivized with savings against ‘retail prices’ when they are later used, thus encouraging gamers to invest larger sums in advance, boosting the early income stream for the developers. Game developers may also choose to award tokens as prizes to expand the token user base, and a strictly finite supply of tokens for any game also drives demand through FOMO – fear of missing out.

Tokens can usually be purchased with cash or cryptocurrencies including bitcoin and ether. The game tokens can be stored alongside the cryptocurrencies in crypto-wallets until they are required. The same underpinning blockchain technology ensures the tokens cannot be used fraudulently or duplicated, and keeps transaction costs to a minimum.

Age of Rust, a futuristic game of intergalactic warfare and rogue artificial intelligence developed by Space Pirate Games, uses Rustbit tokens as a means for players to enhance their performance. In addition to setting a fixed limit of 100 million Rustbits they were sold at an escalating price equivalent to 100,000 tokens for the value of a bitcoin in week 1 to 50,000 tokens pegged to the value of a bitcoin by Week 5.

The emergence of this market has attracted entrepreneurial fintech innovators. Rustbits were created for SP Games by Counterparty. Counterparty-generated tokens can be used for a wide range of purposes and act as their own cryptocurrency, while still running on the Bitcoin blockchain. In effect, game developers are thus releasing their own ICOs – Initial Coin Offerings.

Other providers in this market include GameCredits Inc whose ambitious mission is to create and provide game developers with GameCredits that become a globally-recognized universal currency of the entire gaming world, and thus inter-changeable from one game to another. TokenMarket operates on a wider scale with any blockchain-based business or organization that wants to raise funds for projects through a token or ICO crowdsale.

If you are considering crowdfunding in any of its reward, debt or equity formats and would like an objective overview of the possibilities and benefits relevant to your business or idea then please contact me for an initial no-charge conversation. Please drop me a line at [email protected], I am an independent crowdfunding adviser and not tied to any particular platforms.

 

Does Marketing need marketing to startups and SMEs?

Does Marketing need marketing to startups and SMEs?
At #IoTUKInvestorDay on July 17 I heard 10 tech startup entrepreneurs with a business related to The Internet Of Things pitching to raise in most cases hundreds of thousands of pounds. Several wanted to make a transformational step by setting up Sales & Marketing teams and start B2C marketing. Sounded like some scaleup work opportunities for nimble marketing professionals.

Does Marketing need marketing to startups and SMEs?

Although it’s hard to be certain in a quick-fire series of five minute pitches, a repeated inference to the potential investors in the audience seemed – to me – to be “we’ve done the hard yards getting this far with our invention/discovery/vision/app/idea, and now all we need to scaleup is [your] money to pay for some marketing, then sales will inevitably follow, and we’ll all be sharing the rewards.”

The marketing function with its complexities and uncertainties was mentioned almost as an afterthought, even though it would be the untested new element in the mix to take some of these companies on a transformational step to the next stage of their development. One speaker had indeed used up his allotted time without getting to what a large chunk of the money he was raising was going to be used for – so he settled for an almost dismissive “marketing and all that jazz.” This shows little regard for the skills and expertise required to organise and execute effectively an organisation’s marketing and contribute to achieving its overall business goals. It thus also underestimates a good marketer’s value to an organisation.

Should the marketing profession, perhaps through its representative bodies like The Marketing Society and IDM (Institute of Direct and Digital Marketing) market the business discipline of Marketing to the entrepreneurial, startup, SME sectors?

If you are an entrepreneur with a business you want to either startup or scaleup and would like to understand more about benefits and opportunities provided by reward, equity or debt crowdfunding then please get in touch, [email protected]. I am an independent crowdfunding adviser, not affiliated to any particular platforms. I have over 30 years of varied marketing experience and have specialised in crowdfunding for the last three – making me almost an industry veteran!

How to have more by owning less

How to have more by owning less

Mass digital connectivity and the personal tools that have enabled the sharing economy to flourish have created a climate of transformational change in which many business sectors have been disrupted almost beyond recognition.

Many retail brand names have virtually disappeared from urban high streets as book, record and camera shops are largely bygone relics of the age when shopping experiences were concentrated there. Renting videos and DVDs in person, going to a bank, saving up to buy a car and searching for affordable hotels to stay in are actions that are either obsolete or in decline now that we can go online to use LoveFilm, Netflix, Spotify, banking services, Uber, Airbnb and many other time saving, on-demand and improved value services that a myriad of entrepreneurs want to offer us.

Or if we are among the people with a spare room, attic space or a car parking space to rent out, or even largely unused clothes and furniture, then we can earn some money by offering them for hire to people we are matched up with online. A surplus of personal residential space (a big house!) and a wardrobe of designer label clothing are still regarded by many people as status symbols, helping them feel comfortably higher up Maslow’s hierarchy of needs. Now they are loaned out to strangers.

In crowdfunding – the ‘alternative finance’ area in which I operate as an independent crowdfunding adviser, mentor and personal trainer – those with sufficient disposable income are prepared to support startup businesses launched by people who in some cases they have never even met, either through ordering products that can be at still a prototype stage or for equity in a company they like the look of but which provides no guarantee of successfully providing a return on investment.

So it’s not just a case of technology and connectivity making it easier to behave the same way that we did before. There has been a well-documented and fundamental shift of attitudes towards more emphasis and value on what we can do with money that makes us feel good about ourselves, rather than primarily what we can buy and keep to ourselves to support and project our self-esteem.

Two news items I recently came across in the crowdsourcing/sharing economy heartland of cars and accommodation brought this home to me.

How to have more by owning lessUber commissioned some research among a sample of 2,000 Londoners. 34% of Londoners used an app to book a car in the last 12 months, rising to over 55% of 16-34 year olds. 22% of current car owners would consider giving up their vehicle if they could even more easily get a car on demand by app. 13% of adult Londoners under 30 don’t have a driving licence and have no intention of getting one. London may well not be typical of the whole UK, though the trends appear deeply entrenched among a population that is bigger than that of countries such as Austria, Denmark or Hungary.

While working for a client in the construction sector I read about planning permission approval for a 19-storey tower block in Stratford, London, the main venue for the 2012 Olympic Games. This would be a residential tower block with a difference. Personal space in the 250 units will be scaled down to a minimum that can still satisfy privacy and security issues, to the point of each unit having a “kitchenette” without some of the supposed essential white goods we rely on. The trade-off for limited personal space is that residents will have access to a comprehensive range of communal facilities that not so long ago were the lifestyle trappings of only the better-off. These include a gym, cinema, roof terrace, sauna and hot tubs, library and a food market. It will open late 2018 or early 2019 and rooms will start from £230 a week including utility bills, council tax, wifi, cleaning and gym access

I have spoken with people from several large property developers recently. Planning and building design trends include wider corridors to make it easier to more regularly bring furniture in and out depending on whether a multi-purpose spare room is going to need a hired bed for friends to stay over, or a borrowed table and chairs to invite guests to dinner. In response to recent public consultations, residential projects at planning stages are also often reducing the amount of car parking space to provide more provision for safe and secure storage of bicycles.

These signs of largely Millennial-influenced lifestyle changes may not be for everyone, though they are certainly more than passing fads. This includes using more money, perhaps through supporting crowdfunding projects, to feel good by helping others achieve a personal ambition rather than pursuing a blinkered path more restricted to the acquisition of personal possessions.

If you are one of the growing number of people who seek funding to transform a personal business ambition in to a satisfying reality, then please get in touch for a free initial discussion (in person in London or via Skype) on whether some form of crowdfunding could do the job for you: [email protected], an independent crowdfunding adviser.

Top 10 US Reward and Equity Crowdfunding Platforms

Top 10 US Reward and Equity Crowdfunding Platforms

Mass digital connectivity has significantly disrupted the business investment market. Online crowdfunding enables company owners to trade equity for funds to invest in growth. Who’d have thought 10 years ago that it would be possible for business owners to raise seven-figure sums from people they didn’t know, or even have as a customer? The vital stepping stone was the sometimes massive sums raised on reward crowdfunding platforms. Except early backers are unable to invest in the companies themselves, only acquire their often innovative products.

Reward crowdfunding

  1. Kickstarter is the world’s largest reward crowdfunding platform. It was launched on April 28 2009 in New York as an alternative way to raise funding for performance arts projects and productions. Its model is to encourage low value donations from a large group of people rather than a lot of money from a few individuals.
    It quickly expanded to cover many other hobby, craft and product categories, and has raised almost $3.05bn through hosting 124,935 successful projects (the figures are updated daily by Kickstarter).
    It has an “all or nothing” policy meaning projects that fail to reach their target don’t receive any funding and the backers who made pledges don’t pay anything. Successful projects pay a 5% commission plus up to 3% transaction charges.
  1. Indiegogo actually launched first in January 2008 in San Francisco, again as an alternative way to raise funds for arts projects. Indiegogo also quickly grew to host projects in many different categories.
    A significant difference is that Indiegogo allows projects to receive the money that’s pledged even if they fail to reach target. When this happens their regular 5% commission rises to 9%, plus there are always transaction fees of approximately 3% on every project.

Top 10 US Crowdfunding Platforms (Reward and Equity)Since 1 January 2014, Indiegogo has hosted slightly more projects than Kickstarter: 231,900 vs 218,896 (as measured by crowdfundingcenter.com on May 17 2017). However,  Kickstarter has hosted significantly more that reached their target – 68,984 vs 26,272.

Based on these figures Kickstarter has an average success rate of 31.5% and Indiegogo achieves 11.3%.

These two broad scale platforms dominate the US reward crowdfunding market and to have a point of difference the next largest platforms focus on specialist business sectors.

  1. PledgeMusic is third placed behind these two giants, as measured by website traffic. It launched in August 2009, aiming to do for the music industry what Indiegogo and Kickstarter were doing at the time for other arts genres. It is used by all types of people from hopeful wannabes to established performers with an existing fanbase.
    It operates like Kickstarter on an “all or nothing” basis for people raising money to complete a project like record an album, and on a “keep what you raise” basis when people use it as a sales channel for any finished content that can be downloaded. It charges a flat and all-inclusive 15% commission on “sales” and fundraising projects that hit or exceed target. This looks expensive though they claim a success rate of over 90% for the average 100 projects they carry per month.
    The platform operates globally by accepting payments through credit cards and Paypal.
  1. Seed&Spark is an industry specific crowdfunding platform for the tv and film industry and is based in Los Angeles. It launched in December 2012 and within an overall aim to build an independent film community it provides filmmakers with a reward-based crowdfunding facility. They claim a 75% success rate.
    Projects must reach a minimum 80% of target to keep the money pledged by backers. Then upon completion of a film, any project that also gathered over 500 backers is automatically eligible for distribution through Seed&Spark and their partners including all major cable and digital platforms such as iTunes, Comcast, Verizon, Netflix, and Hulu.
    Seed&Spark charges a 5% fee on successful projects, though offers project backers the opportunity to add this to their pledge. Many choose to do this and on average the crowdfunding projects themselves pay just 1.9% of funds raised to the platform.
  1. Barnraiser is a platform for artisan food producers, small farmers and exponents of sustainable, healthier living. It encourages its community of over 30,000 like-minded people to crowdsource advice and contacts from each other, and also provides a rewards crowdfunding facility they claim has a 65% success rate.
    It launched in 2014 and 187 projects have been successful. The largest amount raised was $93,190.
    Successful projects are charged a 5% fee based on the amount raised plus payment processing fees of 3-5%. If funding isn’t successful there are no fees.

Equity crowdfunding
Title III of the JOBS Act came in to effect in May 2016 and extended online equity crowdfunding opportunities to Americans earning under $200,000 per year, though included limits on the amounts that could be invested. New platforms were launched to provide a full online equity crowdfunding facility to this wider market, whereas the previous ones serving higher net worth individuals (“accredited investors”) required transactions to be made offline.

The Wefunder platform tracks progress of this new retail equity crowdfunding sector based on mandatory Form CU filings on the SEC’s EDGAR database. Since May 16 2016 to May 23 2017, just over $35.8m has been raised through Regulation Crowdfunding offerings.

Top 10 US Crowdfunding Platforms (Reward and Equity)

  1. Wefunder is the early market leader and it launched in 2012. The minimum investment size is $100, and Wefunder has created internal Investor Clubs in order that part-time investors in its network can access the wisdom and leadership of more experienced and professional investors and combine their investments with them on equal terms.
    Wefunder members have provided 55% of all online equity crowdfunding investments through Regulation Crowdfunding in the first 12 months of online equity investment trading being open to non-accredited investors.
  2. Investments made through StartEngine, which is based in LA and launched in June 2015, represent nearly 22% of the Regulation Crowdfunding total raised so far, according to SEC figures. StartEngine also raised $17m from 6,600 investors under Regulation A+ for its client Elio Motors.
  3. In 2016 Indiegogo ventured into equity crowdfunding in partnership with Microventures to launch a platform called First Democracy VC. To date it has accounted for 9% of the sector’s total $35.5m.
  4. NextSeed is based in Houston and its investor network has invested $2.8m in equities, 8% so far of the combined Regulation Crowdfunding. Investors can put in as little as $100 and NextSeed’s equity crowdfunding projects have ranged from as low as $25,000, typically for personal leisure/entertainment/service providers such as bars, restaurants and hairdressers.
    NextSeed also provides companies with debt facilities which contribute to their claim of having provided their clients with total funding of $3.8m.
  5. Three other platforms in this sector tie for fifth place as they have each raised in the region of $1m for clients from equity investors:
  • Republic (offers Reg CF only and investments can begin at just $10);
  • SeedInvest (which mainly focuses on non-Reg CF raises of over $1m);
  • FlashFunders (where Reg CF investments can start at $50 and they also handle Reg D raises over $1m and Reg A+ raises up to $50m).

Whilst equity crowdfunding is now at least possible to some degree for everyday Americans, and there are some equity crowdfunding platforms that at last provide the single “one stop shop” we are accustomed to in the UK, there are still some built-in restrictions that impede faster growth. These include businesses cannot use Regulation Crowdfunding to raise more than $1m (about £833,000).

If you are based in the UK and considering any form of crowdfunding to raise money for a business startup, to scaleup an existing business, or to use a crowdfunding platform as a sales channel for your products, then please get in touch if you’d like a free and confidential consultation with an independent crowdfunding adviser – which is me! Call 07788 784373 or send an email to [email protected]

How crowdfunding can turn a holiday idea in to business reality

How crowdfunding can turn a holiday idea in to business reality

Let me guide you through the inspiring journey of The Cheeky Panda, a business idea to make toilet tissue from bamboo pulp that started on a 2015 holiday in China and then used rewards crowdfunding to test product viability and financially de-risk setting up a company, plus much more. Successful equity crowdfunding completed in August 2017 has given the company founders a business valued at over £5m.

The founders of The Cheeky Panda are Chris Forbes and Julie Chen, based in Essex. In 2015 they took a holiday to China for Chris to meet Julie’s family. They couldn’t help but notice huge quantities of unused and unwanted bamboo lying around. Bamboo is a grass not a tree, and grows so fast there are three crops a year. Local communities had a requirement for only 10% of the bamboo that grew around them, and how to develop a commercial opportunity from the 90% literally left lying around became something that intrigued Chris and Julie.

How crowdfunding turned a holiday idea in to a business realityTheir eventual idea was to make tissue paper, and the first version was toilet rolls. This was a great choice, as tissue made from bamboo pulp rather than paper is stronger, softer, and naturally more hygienic. Their idea also had strong economic and ecological benefits: it would create work, benefit the local ecosystem to clear away some of the surplus bamboo being left to rot, and making tissue from bamboo produces a 65% lower carbon footprint than making it from trees or recycled paper.

Beginning the manufacturing process for a first trial quantity needed an order for a minimum viable volume, and without any distribution outlets lined up for an as yet unproven product it would have been a gamble to go ahead. Rewards crowdfunding de-risked the process.

A six week campaign on Crowdfunder in early 2016 required £10,000 of donations and pre-orders to trigger the first production run. If support didn’t reach this level there would be no obligation to fulfil any pre-orders, and it would tell them their idea wasn’t such a good one after all. And without product validation Chris and Julie would have put their entrepreneurial efforts in to other business ideas instead.

The volume of toilet tissue they would receive from China would be enough to meet the crowdfunding pre-orders – priced at just enough below the cost of premium paper products to be attractive yet provide a sufficient yield – and give Chris samples to take to potential retail stockists. This really emphasises they were using rewards crowdfunding as a stepping stone to launch a business, and not using it as an end in itself as a limited project to just make a quick and short-term return as a side issue.

Success could transform their lives, and they believed it was worth some considerable effort. While continuing with their regular jobs they put in an estimated 20 hours of work a week for four months to product research, planning and eventually execute their crowdfunding campaign. And they set aside £2,500 to make an animated video, create a website and conduct their marketing.

Their marketing strategy relied on stunts, parties and personal appearances, always wearing their photogenic Cheeky Panda hats to generate media coverage How crowdfunding turned a holiday idea in to a business realitythey amplified through their website and social media. They also courted relevant trade and professional media, and through a flexible content plan achieved coverage in Management Today and FMCG News (fmcg = fast moving consumer goods, a “must read” for anyone in the supermarket business) as well as local media in Essex, the Daily Mail and Huffington Post. I met Chris and Julie at an event at Brand Exchange, a business networking club in The City, where their distinctive headgear invited people to approach them.

My contribution of independent crowdfunding advice to their already well-advanced efforts was to suggest a corporate angle, to approach Chinese companies based in London such as Cathay Pacific airline as potential customers, and to contact the Chinese Business and Social Networking organisation, which Julie signed up to within a few days.

In reality, they had left little to chance. Chris had used his contacts and business skills to personally pre-sell their new product and gain pre-commitments to begin their crowdfunding with high impact. Strong early support creates momentum and confidence to encourage other unknown people to become involved. By just eight days in to their six week crowdfunding campaign on Crowdfunder they had hit 67% of their £10,000 target.

Their further marketing efforts closed the campaign on a high as they reached almost £13,000 of orders and donations. As a crowdfunding backer I received an e-mail with an expected delivery date of my ‘reward’ (45 rolls!), but then received a second one to say there would be a delay. It was for a very positive reason, they were changing from cheap plastic to biodegradable packaging.

This was affordable, and would be a positive note for longer-term reputation and growth, after a financial backer who had tracked their progress asked to be involved in the company. Their rewards crowdfunding with its well-planned and professionally executed marketing had also found them an angel investor.

In summary, The Cheeky Panda team invested £2,500 and lot of effort in a rewards crowdfunding project that achieved:
• Product validation from 67 backers who supported them to the tune of £12,785 of donations and pre-orders;
• A visible media profile in local and national press, general business management and specific supermarket retail media, and online in ecological and current affairs platforms;
• Stock samples for discussions with retailers and other stockists;
• An angel investor.

The Cheeky Panda range has now expanded with facial tissues, their products are available on Amazon and through a number of ‘health stores’, and I gather they are currently (as at March 2017) in negotiations with a major supermarket chain.

September 2017 update
In August The Cheeky Panda ran an equity crowdfunding campaign on the Seedrs platform. Based on a pre-crowdfunding company valuation of £4,653,000 they were seeking to raise £350,003 in exchange for 7% equity. They over-funded and reached a figure of £521,314. With this amount added to the pre-crowdfunding valuation The Cheeky Panda is now a company with a value exceeding £5million. Quite a stunning achievement given the co-founders had a business idea on a holiday just two years ago.

What do you do with inspired business ideas you have on holiday? Please share them with me, in confidence, if you’d like some independent and objective insight on using crowdfunding. Let’s assess the viability of using some form of crowdfunding – whether rewards, equity or debt – to make your dream become a reality. It could change your life for the better, like it has done for Chris and Julie at The Cheeky Panda. Drop me a line at [email protected]

Networking with crowdfunders in London (Part 2)

This is the second part of a two-piece blog on attending five crowdfunding-related events in eight busy days in London. As an independent crowdfunding adviser such events give me great insight in to crowdfunding motivations from the perspective of the crowdfunders, the crowdfunding platforms, and investors whether they are high net worth individuals, angel investors or venture capitalists. Here is a link to Part 1.

Networking with crowdfunders in London (Part 2)The fourth event in my sequence of five was a visit to The London Business Show 2016 at Olympia. Among hundreds of exhibitors and scores of seminar presenters I heard Henrik Ottosson of equity crowdfunding platform Invesdor and Bill Morrow, CEO of angel investment platform Angels Den.

Angels Den also ran two live crowdfunding sessions during the day and at one of them I saw pitches from three businesses that were seeking investment. The levels of investment being sought ranged from £60,000 to £250,00 (which had £175,000 already pledged).

  • Networking with crowdfunders in London (Part 2)TrooGranola, a family business making fresh granola and offering 12% equity for £60,000 investment. Already on Tesco’s radar.
  • Flexiapp, a free app for people to find and book a wide range of yoga, dance and fitness classes with a variety of smaller, specialist instructors as well as mainstream providers. Offering 15% for £150,000. Free for users, 30% commission payable from class instructors.
  • Eat Grub, what it “says on the tin” – highly nutritious energy bars made from insects and kinder to the environment than cereal bars. They were chasing the final £75,000 of a £250,000 investment target for 20% equity.

The final event was a combination of entrepreneur and investor perspectives. Equity crowdfunding platform VentureFounders staged an event hosted by Pennington Manches LLP, a leading UK law firm.

Keynote speaker was Justin Urquhart Stewart, co-founder and Head of Corporate Development at Seven Investment Management LLP. SIM “helps individuals and their families manage capital to meet their financial needs and aspirations,” and now looks after over £7 billion of their own and their clients’ money. He gave an entertaining quickfire summary of his take on topical political and economic global developments. Some of his comments included:

  • The Euro is ultimately bound to fail, he said, though not quite yet while Angela Merkel is on the scene. What happens if she isn’t re-elected in 2017?
  • The growth rate of manufacturing in China is slowing down, but not dropping as some media have mistakenly reported. And their services economy is growing too.
  • The emerging economies not doing so well are the ones whose economies rely on exporting natural resources – such as Russia and Brazil. The nations doing better are the ones that import resources and make things, particularly China and India.
  • Trump wants an annual growth rate in the US economy of 5% – but it’s impossible to grow an economy that big that fast.
  • The world’s overall business growth rate is about 3%, which is also the average of the last 50 years or so. To have reached 3% so soon after the 2008 financial crisis shows the world’s major economies are in relatively good shape.

VentureFounders specialise in equity crowdfunding for companies already in business, so their platform is for scaleups and not startups. There were pitches from four companies whose crowdfunding was at the time hosted on the VentureFounders platform, and between them they were seeking from £500,000 to £1.1m

  • Samba Networks, a mobile software company that addresses advertising avoidance for advertisers and app developers, aiming for £500,000 for 10% equity
  • Fatsoma, an ‘influencer marketing network’, on the day of this pitch they had received pledges of £650,000 out of a target of £1.1m
  • freemarketFX, a peer-to-peer currency exchange for companies with better rates and lower fess than banks
  • Lightpoint Medical make imaging equipment enabling cancer surgeons to remove all affected material in the first operation, reducing the need for repeat operations which is good for both the patients, the hospitals, and other cancer victims who won’t have to wait so long for a hospital bed. Without it, 1 in 4 prostate and breast cancer patients still have cancer left behind after their first surgery. CEO Dr David Tuch received the 2016 Start-up Entrepreneur of the Year Award.

I’m often asked how much equity a client should make available. Or how much money to ask for. Of course the answer is “it depends”, and it depends on a variety of factors, including the company valuation, target market share of the specific business sector any company operates in, and an investor assessment of the likelihood of achieving it. This was adequately brought home by seeing 19 sophisticated equity crowdfunding pitches in 8 days.

If you are considering equity crowdfunding and want to talk with an independent crowdfunding adviser not tied to any particular platform, or maybe you’ve already decided to go ahead and want to get a second opinion on some aspects, please e-mail me at [email protected] or send a Tweet to @Cliveref.

Networking with crowdfunders in London UK (Part 1)

It was a busy few days of networking for me as an independent crowdfunding adviser in London in November 2016. This is the first of a two part recap of 19 equity crowdfunding pitches at five events I attended in eight days that show the diversity of businesses working towards a brighter future through this route to funding for startups and scaleups. These events were free to attend and if you are an entrepreneur considering equity crowdfunding I’d say they are an indispensable research opportunity. Get out there and get involved!

Busy networking with crowdfunders in London UKThe run of five events began with a busy evening of eight live pitches organised by Crowdcube, the UK’s largest equity crowdfunding platform, at the green and leafy Barbican Centre Conservatory. Crowdcube co-founder and CMO Luke Lang introduced the speakers to an audience made up mainly of personal investors, professional service providers such as myself, and some other entrepreneurs who were considering their own crowdfunding campaign and wanted to get some tips and make some useful contacts.

The sums of money sought by these companies ranged from £250,000 to £1.75m. Some were about to start their crowdfunding while others were nearing the end and chasing the final amounts of money to reach their target. The companies and range of business sectors covered were:

  • Clive Jackson of Victor, a private jet charter business for high net worth individuals. In early November they were seeking £1.75m. By 29 November they had reached just 3% of target, and the campaign can no longer be found on Crowdcube’s site.
  • Bluebella, an upmarket lingerie brand that more than doubled its £500,000 target when it went on to raise over £1m.
  • MUSH, a social media platform for mums to find others with kids of the same age. They were targetting £650,000  for 15.66% and had raised over two-thirds of it in the first week. By December 5 they had overfunded to almost £850,000.
  • AltFi, a media platform that reports on the alternative finance market. They were offering 7.69% for £250,000.

Thankfully there was also a craft brewery seeking investment, Innis & Gunn from Scotland, who went on to successfully smash their target of £1,005,000 and eventually raised almost £2.5m from 2,000 investors for 4.79% equity. Plenty of samples were available during the evening while the crowd of potential investors also heard pitches from:

  • StepJockey, a company that encourages office workers to take the stairs and get fitter (resulting in a reduction in staff sick days). Targetting £500,000 for 11.76% equity. Currently used in more than 11,000 buildings around the world by clients including Disney, Pearson, JLL, UBS, Channel 4, NBC and The Wellcome Trust. Raised £279,290 in four weeks after launch, though no details available on the full outcome. Crowdcube don’t like to keep details online of the projects that fall short.
  • Happy Finish, a creative technology and visual content agency seeking £395,000 for 4.45%. No details still available on the Crowdcube site, have to fear the worst that they failed to reach target.
  • Hurree, a marketing automation platform seeking £300,000 for 20% equity. Their crowdfunding closed on 16 December and 187 investors backed them to the tune of £320,290

A few days later I was at an event organised by Crowdfinders. They are not a crowdfunding platform though they do help companies secure their first 30% of investment offline. They also organise events featuring live equity crowdfunding pitches with real-time investment opportunities, and also deliver industry insights and provide “extraordinary entertainment.” And just to emphasise that money invested through crowdfunding is at risk they held their event in a central London casino.

Busy networking with crowdfunders in London UK
At the half way point of the Crowdfinders’ event crowdfunding pitches there was time for some entertainment from burlesque dancer Miss Polly Rae.

The audience saw pitches from four companies seeking investment, with some unusual half-time entertainment. The target investment levels ranged from £150,000 to £500,000.

  • ScreenLimit Ltd, a parenting app to remotely manage children’s use of electronic devices. Seeking £300,000 of angel investment for 20% equity.
  • FUBAR Radio, an irreverent online radio station targetting 18-34 year olds and operating outside of OFCOM’s regulatory content controls. Set themselves a minimum target of £250,000 for 8.3% equity which they achieved, up to a maximum overfunding target of £500,000 that they are still chasing to 31 January 2017 on the Envestors platform.
  • Sense Products, produce a range of supplement products that includes one to “enhance the body’s response to drinking.” Seeking £350,000, the project closed at the end of 2016 having received £40,000 of pledges.
  • 365 Talent Portal, an online community and career hub for Microsoft technology consultants and companies looking to hire them. They had a target of £150,00 and closed 31 December 2016 after receiving pledges of £65,614.

Event Three was an opportunity to view equity crowdfunding more through the eyes of investors than entrepreneurs when I went to the offices of Kingston Smith, a firm of chartered accountants and business advisers to entrepreneurial businesses, not-for-profit organisations and private clients. A panel of four included Kingston Smith’s Corporate Finance Director and their Partner and Head of Technology, along with Jonathan Keeling, Head of Partnerships at Crowdcube and Amer Hasan, CEO and founder of minicabit.com which raised £1.4m from investors in 2015. He had previously reached a £150,000 target through equity crowdfunding on the Seedrs platform in 2014.

Commenting on the overall UK business investment market, Kingston Smith reported that:

  • In the first nine months of 2016 over £1 billion has been raised by UK private companies in equity raises of over £1 million
  • Institutional fund managers account for the majority of activity by value
  • Technology and online business sectors continue to dominate
  • There was no slowdown in Q3 after the Brexit vote and prospects for 2017 are good

There were no live equity crowdfunding pitches at this event, though here is a link to Part 2 of this two-piece recap of business investment events with another 7 equity crowdfunding pitches.

If you are considering equity crowdfunding and want to talk with an independent crowdfunding adviser not tied to any particular platform, or maybe you’ve already decided to go ahead and want to get a second opinion on some aspects, please e-mail me at [email protected] or send a Tweet to @Cliveref.