The Business Show 2015 on December 3 and 4 in London provided great opportunities for aspiring crowdfunders to check out several aspects of what’s involved.
On the topic of business start-ups, Daniel Murray spoke about raising £2m to launch online fashion shop Grabble without previous fundraising experience, and some of the important lessons he learned along the way. Like no matter how clever he thought he’d been in his advertising job he quickly realised that he knew next to nothing about running a business, and that there was possibly something to learn from everyone he met. This included leaving every meeting with the name of at least one person who might be able to help him.
Also on the subject of start-ups, Nidhima Kohli, founder of online beauty products site My Beauty Matches, talked about how she built from nothing a community of 85,000 people. Big lessons from her also included the personal sacrifice necessary to build a successful business, which involved quitting her job, renting out her flat and moving back in with her parents. Nidhima also strongly recommended working with students hungry for work experience rather than burning money using agency advisers
Three different aspects of crowdfunding were represented at the show. Bill Morrow, CEO of Angels Den, explained that angel investors are often looking for fun reasons to get out of bed in the morning rather than focussing exclusively on their return on investment. Expect mentoring involvement from Angels Den investors, know how much money you need and what you are going to do with it so that you give a good pitch, and also show some good social skills when you pitch to them so that investors want to work with you on a personal basis.
A different ‘money only’ option is provided by the investment loan platform Funding Knight. Chief Exec Graham Marshall explained it matches multiple lenders – not investors – with borrowers. This means lenders are able to diversify their investment loan across numerous businesses, and they can also benefit from a secondary market to trade investments as they have fixed, known returns. And the people seeking investment can retain their equity.
In between these two alternatives is Crowdcube, the world’s largest equity crowdfunding platform with 52% of the UK market. Head of Equity James Chalk explained that earliest investors in equity crowdfund projects are often quite small-scale, though when enough of them have created momentum behind a crowdfund project it is not uncommon for serious high net worth individuals to then step in with significant investments in which they may want to take an active interest. 19% of Crowdcube’s registered investors earn over £200k p.a., and HNWIs have been responsible for 59% of all the money invested through Crowdcube since it started in 2011.
Other important issues for crowdfunders included protection of Intellectual Property through copyright, registration and use of trade marks. This is all very valid if you’re going to essentially post a business plan online for people to decide whether or not to invest in you and your idea.
There were further lessons for deciding on items to offer as crowdfunding perks from a branded merchandise supplier. Thank about what’s memorable and relevant, allows good quality at an affordable price, is going to be useful to people and will last long enough.
Acquiring contacts and driving enough of the right types of people to an online crowdfund project is the core basis of success or failure, and the most popular seminars were any that offered to explain how to put together an effective social media strategy. Relevant presenters included Kristian Downer of DowSocial.
Finally, it’s well known that anyone trying to put together and run a crowdfunding project on their own has the odds stacked against them. A team of people almost always gets better results. And Alastair Cook, captain of the England cricket team, made an appearance to draw some parallels between leading teams in business and in sport. When things get tough – and inevitably at some stage of crowdfunding they will – believe in yourself as a leader and dig-in rather than pack it in. And when your team is under pressure it’s vital that everyone keeps putting in their fair share of contribution, no ifs, no buts, no excuses or cop-outs.
This collection of issues to consider shows how complex putting together and running a crowdfunding project can be. If you think you could benefit from independent crowdfunding advice, whether for equity or donations-for-rewards crowdfunding, then please get in touch: [email protected].