Crowdfunding Archives - Page 3 of 5

Why Do Many Startups Still Fail After Reaching A Crowdfunding Target?

Posted on May 12, 2020May 12, 2020 by Clive Reffell

I have looked at this topic because I help small businesses and startups raise money through crowdfunding. There are plenty of times when an influx of investment allows them to scale up, which can often mean introducing new procedures and “control levers” to steer colleagues/employees, and maybe suppliers and customers, in new directions. It doesn’t always run smoothly.

Unfortunately for these plans, most people are naturally and inherently change resistant. It’s in our DNA to want to keep things around us they way they are. It’s a fundamental part of our defence mechanism as it helps us to spot anything out of the ordinary or unexpected that could be a threat. “Human beings are programmed to fear the unknown,” says a recruitment tv commercial for the Royal Marines.

Many change initiatives fail because they are decided by a management minority and then foisted on to the majority, employees or other stakeholders, who are suddenly supposed to adopt new ways of working that are unknown to them. Without adequate pre-selling or involvement in a process to bring them on-side from an early stage, a change initiative can be sunk by a majority of people simply sticking to doing what they previously did in the ways they previously did it.

This can even be the cause of friction between business founders if they didn’t all agree on the scaleup measures to begin with. In a business’s early days, it might all be about taking risks. As a business develops and goes through successive funding rounds, whether it’s money from a crowd or institutional investors, or even sales, the emphasis – and perhaps pressure from new shareholders – can change to “let’s not start to muck it up now that we’re nearly there.”

Perhaps high risk-taking mavericks that were the company’s early spearhead are still in the team, but may be less disposed to a more cautious approach – and the new people who will now help implement it. This is one example of how friction can develop, distracting effort away from building the business before it’s even standing on its own two feet.

This is what’s meant by “company culture eats strategy.” Company culture is an emotional element that binds colleagues together with shared expectations of each other, and it has to be tackled alongside procedural ones to initiate change. A startup team will have often developed a strong culture, meddling with it can be tricky.

For more on the topic, take a look at this article (which is nothing to do with me, I just liked the look of it from the ones I found in a Google search): Culture eats strategy for breakfast – The Management Centre. It also has a five point plan to initiate change successfully.

Tips on Making an Effective Crowdfunding Video

Posted on April 9, 2020April 9, 2020 by Clive Reffell

In my role as an independent crowdfunding adviser I’m often involved in matters to do with making videos as part of a pitch to investors, backers or donors. And where a client wants me to work on the basis of payment based on results of a successful project, it would be irresponsible of me not to ask for involvement with such a crucial aspect of a pitch. So I’ve built up a list of some tips that I thought I’d share.

Video production companies don’t have all the answers

The first tip is do not assume that a video production company knows what should be in your crowdfunding video. Some do, though not all of them. Even if they say they do, they might not.

This week the founder of a video production company asked to connect with me via LinkedIn. I confirmed with him he had worked making crowdfunding videos, and he sent me a link to one he had shot for an equity crowdfunding project.

Throughout the five minutes of the video I was waiting for the company founder to tell me why he was raising money, how much was needed, what it would be used for, the current company valuation, what the new value could be when the latest investment had been secured and the developments implemented, what their potential exit strategy might be, and a possible Return On Investment. None of it was ever mentioned. The video might encourage a few new customers to make a purchase, but there was nothing in it to convince anyone to invest in a share of the business.

It turned out that the video team had simply followed the client’s brief, didn’t offer any ideas on the content, and made their usual sort of company video in their usual sort of way.

How to start thinking about your crowdfunding video

Whether your project is to sell equity in your business or generate donations, maybe for rewards, there are common aspects of a good video. These tips from rewards platform Indiegogo are well worth a look, they’ve certainly had enough videos to look at to spot the common ingredients of what works: https://learn.indiegogo.com/making-your-video-great-campaign-video-creation-guide/. This link takes you to some tips gathered from four sources by the equity crowdfunding platform Seedrs: https://www.seedrs.com/academy/how-to-perfect-your-crowdfunding-video-pitch/

Also, spend time watching the videos of successful projects yourself to identify what they have in common, and to spot anything different that makes any of them stand out to you in a positive way.

Spontaneity or a well-rehearsed script?

As much as you should not rely on spontaneous inspiration of what to say, writing a tight script and saying it word-for-word can sometimes lose too much spontaneity and make you sound flat, unengaging and uninspiring. On the other hand, don’t employ a video company and only start thinking about what to say when they turn up, or you arrive at their studio.

I once saw a good video that had been expensive to make because the video team had been with the project leaders all day and they hadn’t been able to shoot the right content to put together an effective three minute film. At the end of the day, almost in exasperation, the three founders sat round a table to talk it through once again, and the camera stayed rolling. This footage is what was finally edited to produce a very naturally flowing video in which they said all the right things to convince enough backers.

So do some concentrated brain storming and throw some ideas around with people who know inside out what you’re doing with your business or new product idea, film yourselves on your smartphones to get comfortable with talking to camera, and reach a point where you pretty much know what’s going to be in your video. Then get a video team with a decent camera and sound equipment to film it and use a good editing suite to pull it together.

Prepare storyboards

Do you know about preparing storyboards? Storyboards will keep you on track while shooting and give the video team a good idea of the intended end result before they start doing anything.

Maybe share the storyboards with them at a pre-production meeting so they can think about how to stage and light some of the shots you want. It gives them an opportunity for technical input (rather than asking them for creative input) and thus plays to their strengths.

Overall, the more you do, the more the video team can just get on with it and it will be more affordable for you. It will make the process less open-ended, and you’ll be more certain they’ve shot the right content.

Get the most value from the video team

After shooting the main video content, record some other short pieces to use later while the crowdfunding is running, messages like: “Hey, we’ve reached 30% or 40%,” or “we’re half way there” or “we’ve reached the first £50,000 – thank you all so much. But there’s still a way to go. Please let your friends know about us…..”

Have these clips ready to use via your social media before they are actually needed, so anyone can just lift them down from the proverbial shelf.

Consider changing some clothes for these other mesages as they will go out at different times during your crowdfunding project.

Other crowdfunding video tips

There are more crowdsourced tips from various other people here: https://www.quora.com/What-are-the-most-important-points-to-remember-while-making-a-crowdfunding-pitch-video

Like anything else, perfect preparation prevents pathetic performance.

Equity Crowdfunding Works for B2B Businesses

Posted on March 19, 2020March 19, 2020 by Clive Reffell

There is a common misconception that crowdfunding is only applicabe to B2C businesses. On recently seeing a question posed on Quora, asking if anyone had got some examples of B2B startups that had used crowdfunding, there were three that immediately came to mind.

Energytech
A crowdfunded B2B business I have invested in is Pavegen. They generate sustainable electricity from people walking on their floor tiles which are installed in high-traffic places like shopping malls and sports stadia.

Their customers include transport system operators, and owners of shopping centres and sports and entertainment venues: Pavegen – Global leader in harvesting energy and data from footfall.

Transport infrastructure

Another B2B company that has used equity crowdfunding in the UK is MacRebur. They reinforce asphalt with recycled plastic to create a more resilient road surface, and help reduce the amount of plastic waste.

They have also resurfaced some airport runways, and recently announced a pothole repair material that will be available in 20kg bags: macrebur.com. Their customers include airport owners, local councils and highway authorities.

Agritech

To give a third example, I made an equity crowdfunding investment not long ago in an agritech business called Hectare. Traditional farmers’ markets in the UK are closing down at a rapid rate, meaning more and more farmers have to make long and arduous journeys to take livestock to market. And sometimes it means driving their fit and healthy animals through areas where there is a higher risk of disease.

Hectare provides online marketplaces for farmers to check current prices and sell animals at SellMyLivestock and crops at Grainindex. Their B2B customers are farmers and agricultural produce buyers: Hectare Agritech | Reinventing Farm Trading

Despite Extinction Rebellion’s Efforts, Will Weaponized Robots Give Us Enough Time To Tackle Climate Change?

Posted on October 29, 2019October 29, 2019 by Clive Reffell

In October 2019, the activist movement Extinction Rebellion disrupted daily routines in major cities around the world to highlight the dangers from man-made climate change, and that time is running out to do anything meaningful about it. In London, demonstrators glued themselves to office building doors, the pavement, trains and cars – even to the top of an aircraft about to take off!

They also ran a UK crowdfunding project with a target of £1 million to fund their activities, maybe even to pay some of the fines their members picked up – just a guess. As at October 29 the crowdfunding is still running and they’ve reached nearly £965,000, they’re almost there.

Though within the 30-50 year time frame we are usually told is going to be decisive, some people believe there are other threats that ought to be taken just as seriously, if not more, from artificial intelligence and robotics.

Robot threat to jobs

Many of us have become accustomed to doom-mongers’ comments about the threats to livelihoods from robots doing repetitive and menial work. Inevitable consequences usually list mass unemployment, with non-working people subsidized by far higher taxes levied on those still in work. How would norms of social inclusion and the rule of law cope with an ever more divisive and polarized world of haves and have nots? And that includes having a sense of purpose as much as anything else.

Stuart Russell, a professor of computer science at Berkeley, California, and one of the world’s leading experts in AI, has weighed in with his own opinions in a new book published this month titled “Human Compatible: AI and the Problem of Control.”

He asks readers to imagine a scenario in which a comparable risk is external, one in which advanced aliens from another world email the United Nations and say “we’re coming, we’ll be with you in 30 to 50 years.” Would our planet’s best minds be mobilized to prepare for this extra-terrestrial incursion more than we are preparing for the creation of our own super-humanly intelligent machines?

Pace of technology leaves controls behind

Technology continues to develop at a faster and faster pace. Machine learning-powered artificial intelligence is increasingly likely to enable automation to take on more complex tasks thought were once thought to be ‘machine-proof.’

Flying aircraft, as an example, is a highly skilled profession, not one of the highly repetitive jobs that are supposedly under most threat from robots. Airline pilots can earn substantial incomes and generally receive public admiration. How close are we to that changing, with their role totally automated?

The Probability of Job Automation By Occupation

Lockheed Martin, the US global aerospace corporation, is currently sponsoring an open innovation challenge to combine AI, machine learning and fully autonomous flight. The goal is to create an AI framework that could pilot racing drones through high-speed aerial courses without any GPS, data relay or human intervention.

420 teams from 81 countries have been whittled down to nine finalists who will compete in four races in the coming months. The winning team will win $1 million plus an extra $250,000 if their AI drone can beat a human-piloted drone: the challenge-winning drone will race the fastest 2019 DRL Allianz World Champion pilot at the end of the season.

However, there are often unintended consequences. In a less sporting context, weaponization of drone technology has already been achieved. In 2016, the Islamic State of Iraq and the Levant (ISIL) carried out its first successful drone attack, killing two ‘opponents’ in northern Iraq. Terrorist groups are increasingly using drones and elementary artificial intelligence in attacks. Improved AI could prove a formidable threat, allowing non-state actors to automate killing on a massive scale, creating incidents of mass destruction.

A former Google software engineer and member of the International Committee for Robot Arms Control, Laura Nolan, has warned that autonomous killer robots could accidentally start a war in the future. She has called for automated weaponry to be outlawed by international treaties. Which ones? What treaties do terrorist organizations sign up to?

Terrorist groups aren’t the only parties involved. Stuart Russell’s book points out Israel has developed an autonomous “loitering munition” called Harop, which can hunt and destroy objects it classes as hostile. Anti-personnel microdrones equipped with facial-recognition systems and explosive weaponry might already exist. Slaughterbots, they are called.

At the time when Extinction Rebellion were disrupting major cities around the world, and targeting hubs of finance, media and transport, Russell put forward the notion that the leading tech firms in Silicon Valley and China must learn to accept regulation in the area of weaponry. “Let’s hope it doesn’t require a Chernobyl-sized disaster (or worse),” he warns, “to overcome the industry’s resistance.”

But whilst authors and activists can point and warn of the dangers, I have to ask the question again about “who can introduce enforceable regulation, and act with whose authority?” Any suggestions or comments out there?

Equity Crowdfunding and Venture Capital Working Together

Posted on May 21, 2019June 3, 2019 by Clive Reffell

Not so long ago it was still quite common to come across articles that tried to pitch VC investors and equity crowdfunding supporters and platforms against each other, as if every startup business entrepreneur faced a binary choice of which investment route to pursue. There are growing signs that the complementry rather than competitive nature of these sources of startup and scaleup business funding are beginning to be appreciated.

Many startup founders seek investment budgets that are beyond the resources of friends and family backers, yet are too small for VCs to normally bother getting out of bed for. And if a business is in its earliest days without a trading history or future sales orders, there’s precious little hope of securing a business loan, whether from a traditional source like a bank or from a peer-to-peer lender such as Funding Circle. So there is a true gap in the business investment market that equity crowdfunding occupies, at the same time as providing better returns for small-scale investors than they can get from high street deposit accounts or investment schemes.

It remains fair to say that equity crowdfunding is not yet a fully developed entity due to the small number of exits that have allowed investors to reap their rewards: the UK Crowdfunding Association’s website has just one solitary case study (though there have been more). Other business finance commentators harp on about the startups that still fail, sometimes within months of raising seven-figure sums through crowdfunding, as if crowdfunding ought to provide some mystical defence shield against business failure.

Despite these shortcomings, the rude health of hundreds, even thousands of startups around the world that have traded equity for an investment from a crowd of backers supports enough confidence for the practice to continue to grow and spread.

It has now reached a point where venture capital firms are not only taking notice but some also want to be involved. In the UK, for example, the startup support division – called G – of the global accountancy firm Grant Thornton works with the equity crowdfunding platform Crowdcube.

It is a symbiotic relationship: Crowdcube can offer its clients a longer business development path than just realising their earliest investment rounds, and Grant Thornton gains an entry point to build relationships with promising entrepreneurs before they are big enough to usually be worth their attention. G also offers to make introductions to some of its network of investors who have indicated they are open to the idea of making early seed-stage investments. Here is an example of this co-operation in practice.

Gunna is a range of uniquely-flavoured, craft-made soft drinks which aims to disrupt the established carbonated drinks marketplace in a similar way that craft beer has. It retails at a competitive price for a product made with better quality ingredients, and contains less than 5% sugar to be part of a healthy lifestyle. In 2018 it was available in over 3,500 UK stores, sales were up 300% on the previous year, and their highly experienced founders wanted to raise funds to accelerate the growth rate.

Initial discussions with Grant Thronton indicated that £500,000 would be appropriate to build distribution through recruiting additional sales people and investing in trade marketing. Although this amount is below Grant Thornton’s minimum threshold, their growth finance team remained involved to get Gunna investment-ready to run equity crowdfunding via Crowdcube to raise the money.

Support from some cornerstone investors who wanted to get involved at the ground level, introduced by Grant Thronton, strongly reassured a crowd of smaller retail investors. The equity crowdfunding project generated £819,150 from a total of 245 backers. As Gunna grows it’s likely there will be a need for further, larger rounds of investment which will meet Grant Thornton’s VC-backing criteria. Gunna’s hoped-for exit strategy is acquisition by an international drinks company.

A less formalised example is that of a business founded in 2013 that recycles surplus fruit and vegetables to make traditional recipe relishes and chutneys, Rubies in the Rubble. They were able to gain investment backing from Mustard Seed, a VC fund that takes a principal investor role in world-class early-stage businesses that generate compelling financial and societal returns. However, beyond accepting £160,000 from Mustard Seed, the founder of Rubies in the Rubble, Jenny Costa, used it as cornerstone funding to launch an equity crowdfunding project on the Seedrs platform.

A rule of thumb has evolved based on empirical evidence that successful crowdfunding projects ought to start with very early pledges of at least 30% of their financial target. This is achieved through personal pre-selling by the project leader and their team to guarantee – as far as possible – that their project starts with a bang and not a whimper. This creates momentum as it gives vital confidence to what are usually smaller retail investors who require some reassuring encouragement to take the plunge.

Rubies in the Rubble set a target raise of £300,000, in which Mustard Seed’s investment easily covered the 30% requirement. By 3 June 2019 the project on Seedrs has easily surpassed the initial target and wss overfunding at over £535,000. The funds are to support the launch later in the year of a mainstream ketchup product and a vegan plant-based mayonnaise. The business aim is to capture 3% of the UK ketchup and mayo market by 2023, whilst continuing the fight against food wastage. A trade sale is the most likely exit strategy.

Please get in touch for further insights and support on how you could use crowdfunding to raise money to startup or scaleup your business, plus reap the benefit of numerous other advantages. I’m an independent crowdfunding advisor, not tied or affiliated to any particular platforms: [email protected]

Five Nominees Remain in International Crowdfunding Award

Posted on February 28, 2019 by Clive Reffell

The public online vote for entries in the international BOLD Awards, launched by Crowdsourcing Week, has closed leaving five nominees in the Crowdfunding category – as well as in each of the other 11 categories.

The main factor each entry had to satisfy was that they had achieved something significant beyond reaching or exceeding their financial target, whether it was a donations-for-rewards project or equity crowdfunding. Here’s a run through of the final five nominees.

Borrow a Boat

After they launched in 2016, I met up with the startup team at the London Boat Show in January 2017. Almost all privately-owned pleasure/leisure boats remain unused for the majority of their lives, moored up and incurring charges in commercial marinas or yacht clubs, while the cost of boat ownership remains prohibitively expensive for the majority of people.

Borrow a Boat connects people wanting to enjoy boating with boat owners who welcome a contribution to the cost of ownership. Through working with partners they have standardised requirements for qualifications, experience, insurance, boat safety, and charter contracting. This has made the whole process simpler and more accessible for people wishing to enjoy recreational boating.

Borrow a Boat ran an equity crowdfunding campaign on the UK-based Crowdcube platform at the back end of 2017. Against a pre-fundraising company valuation of £1.2m they set a target of £200,000 which was smashed when 688 backers invested £468,880 in exchange for 28.1% equity. This was an average of nearly £682 per investor and valued a 1% share of the company at £16,686.

In January 2019 a second round of equity crowdfunding, again using Crowdcube, raised just £20 short of £1.5m from 564 investors for 30% equity. This was an average of £2,660 per investor and valued a 1% share of the company at £49,999.

Last year 18 million people in the UK wanted to go boating, but only 4 million did (source: British Marine Federation, Futures Project). Borrow a Boat has transformed the boat charter business through creating an affordable entry route to open the pleasures of sailing and motor boating to a much wider audience that seeks life-enriching experiences, while providing an income stream and safeguarding the interests of boat owners. They now have over 16,000 boats available for hire via an app that’s used in 60 countries.

StartupItalia

This is the largest Italian community dedicated to startup founders and investors. A team of 20 talented people in Milan and Florence creates a daily newsletter with crowdsourced content from 600 contributors and it’s sent to 50,000 subscribers.

They also organise the largest Italian event dedicated to the startup ecosystem and have plans to launch the largest digital training academy for the professions and new businesses of the future. Additionally, they want to create a 3,000 square metre space for a newsroom, with 8,000 square metres for events and networking and 1,000 square metres for training, in a former factory building in Milan.

Their current equity crowdfunding project on Mamacrowd.com closes March 31. To date almost 1,700 backers have pledged over €2.25m.

Tam Development llc

There is a growing number of Saudi youths who are facing problems in finding a job or starting a new business as they have grown up in a rather undemanding and cosseted lifestyle to be passive, unconfident, and inflexible.

Tam Development LLC was established in 2012 with the purpose of engaging and activating the public and helping them reach their full potential, and has successfully designed and implemented over 50 local and regional projects in partnership with 20 government and private entities in Saudi Arabia and the wider Arab region.

They provide access to the range of expertise required to execute startup initiatives from start to finish through Jasarah, a crowdsourcing and initiative management platform that enables users to flexibly engage the public at large plus targeted groups of specialists to help create, manage and deploy challenge solutions that meet global standards in fast-paced advanced technology.

Scribit

Scribit is an intelligent writing robot that ushers in a new way of presenting digital content, makes it possible to instantly reconfigure and personalise a wall – whether it’s a storefront, an office lobby or your living room.

Any vertical surface can be transformed into a screen where images, messages or feeds are projected through an ‘always-on’ web connection, allowing you to download, upload or source any content from the Internet, or use your own content. Applications include restaurant daily menus with changing availability, stock market prices, art displays and sports results updates. Checkout here the video from their Kickstarter campaign.

Their Kickstarter project in 2018 generated $1.6m of pre-orders from 4,352 backers.

RAPPLER

Rappler is social news network of stories in the Philippines that inspires community engagement and digitally fuels actions for social change. Rappler comes from the root words “rap” (to discuss) + “ripple” (to make waves). Readers are encouraged to contribute to crowdfunding projects set up to address some of the issues raised in its content, and to also actively contribute to supporting independent journalism and press freedom, through its crowdfunding and e-commerce platform.

The five nominees here and in each of the other BOLD Awards categories will now be studied by an international panel of judges. They will make their decisions on who are the winners in time for an award ceremony at a black-tie gala dinner in Venice, Italy, on 5 April 2019. A few remaining event tickets are available to spend an evening with award winners, category and event sponsors, and the Crowdsourcing Week team and some of its investors.

Crowdsourced Marketing Makes a Big Impact and Saves a Packet

Posted on December 4, 2018December 5, 2018 by Clive Reffell

One of the biggest recent trends in marketing is crowdsourcing. In the last decade, 85% of the top global brands have used it in some form.

In pre-digital days it was pretty much restricted to publicity stunts or involved celebrities, or both, and relied on the media gatekeepers – print and broadcast media owners – to be a vital part of the process. Media owners were the b2b crowd that a brand owner sourced, and the media provided the b2c link. Mass digital connectivity has widened the net, and crowdsourced marketing can skip the media owner involvement and still achieve phenomenal results.

Today’s digital connectivity enables all of us to publish online material, if we want to, and social media spreads the word to encourage direct access to content created personally or in-house by brands. It also means people can respond to brand owner call-outs with an array of written content, photos and videos. This means crowdsourced marketing can involve consumers voting on or even submitting ideas for marketing campaigns and advertisements. A well-known example is the Doritos “Crash the Super Bowl” contest in which consumers submitted homemade Doritos commercials for the chance of their work being shown during the American Football end-of-season Super Bowl. It ran for 10 years.

Sticking for the moment with crowdsourced marketing meaning generating editorial media coverage through newsworthy publicity stunts and appearances by celebrities, Richard Branson is very good at it. He continually makes himself a news item to promote one Virgin brand or another. The example below is a press conference for the launch of Virgin Voyages, cruise ship holidays. The media pick up on a lot of what he does, and he also uses his own social media to communicate directly with audiences.

Examples that relied on traditional media to leverage the message include the now defunct UK holiday company Club 18-30 (which catered to that age group) that used to get high levels of press media coverage by putting up risqué posters near to newspaper offices where they were bound to be seen by journalists: “Wake up at the crack of Dawn… or Lisa, or Julie” was one example. I created a case study about this back in the Noughties for the out-of-home contractor Clear Channel.

This and other similar poster executions won advertising industry awards for the creative ad agency, Saatchi & Saatchi, even if public outcry against indecency – ironically fuelled by the newspaper coverage they were designed to achieve – resulted in them having to be taken down early. But they had done their job.

Founder of the Ultimo lingerie brand Michelle Mone is another business person/celebrity who created her own media moments in the spotlight.

One incident, when she was still a cash-strapped startup just beginning to get the first shops to stock her products, involved hiring a dozen actors. They pretended to be plastic surgeons and demonstrated outside the Selfridge’s department store to try and prevent them stocking her cleavage-enhancing underwear.

They claimed they would be out of work if too many women decided to wear an Ultimo bra rather than have surgical implants, and blocked the road, the world famous Oxford Street. Their morning picketing was shown on lunchtime television news and Selfridge’s sold what was meant to be six months’ of stock in five hours. It’s all in her book, My Fight To The Top.

Up-to-date, and on a far more serious theme is an example from South Africa. Francois Du Preez, Digital Creative Director of Grey Advertising in South Africa presented a case study at the Crowdsourcing Week 2016 Global Conference. Dog fighting is an unsavoury and illegal activity in South Africa that causes many animals to suffer, not just the ones that do the fighting, and it’s a multi-million Rand industry when related gambling is taken in to account.

Criminals steal domestic small dogs to feed to pitbulls being trained to fight, to give them the taste. But over time a majority of the public had tired with and disengaged from the regular media coverage of tattered, battered and mutilated dogs. The ad agency created a mobile billboard that appeared to publicise a dog fight, Nitro vs Thor, with a website URL and a phone number. Social media exploded within one hour of it driving around affluent suburbs of Johannesburg. It was reported on radio news and in the next editions of newspapers. Angry people found out the website had been registered by Du Preez and some came looking for him.

The website was taken down after just three hours in which time it had received more attention than they had ever anticipated. Against this background of anger they ‘came clean’ that the advertised dog fight was a stunt and then got even more media exposure for supposedly trivialising the distasteful and illegal activity. The issue was suddenly important once again to many people.

The amount of media space and broadcast airtime costed as media advertising exposure was valued at Rand 1.7 million. The mobile ad had cost Rand 7,000, allowing a claimed ROI factor of 240 times the initial outlay. But not only had massive media coverage been achieved for such a tiny sum, the mobilisation of the crowd had made it so much more effective than if a real budget had been used with a regular “this is bad, let’s all help put a stop to it” style of message.

In the digital-era of personal connectivity, newcomer craft beer brewer Brewdog claimed to be worth £1.8bn in January this year (based on some corporate investment deals), and has vowed to never spend a penny on paid-for advertising. Though they happily hired and branded a helicopter to make a video of parachuting “fat cats” (stuffed toys, I hasten to add) in to the City of London to generate news coverage of the fact that they were crowdfunding. They went on to raise their first £5m through equity crowdfunding without the services of any expensive “fat cat” investment advisers.

A current example is the Royal Mail which has installed four musical post boxes in the run-up to Christmas. When cards and letters are posted they trigger a sensor that plays a loop of snippets from Christmas tunes and reindeer sleigh bells.

There is just one in each of Scotland, Wales, Northern Ireland and England. The one in England is in Greenwich, the historic area on the south side of London’s River Thames and a UNESCO World Heritage Site, very popular with tourists.

It has been mentioned in social media by many people and organsations including numerous bloggers and local businesses in the area, reported in local and national newspapers, on BBC tv news and by the advertising industry platform Campaign.

The Royal Mail are using the added media coverage to raise awareness of this year’s last posting dates. There, I’ve written about it and you’ve read about it, it works.

Crowdsourced marketing offers huge benefits for businesses. Crowdsourcing saves on marketing costs because either consumers are happy to submit their ideas for free in exchange for seeing them used in the marketplace, or because bloggers, journalists and editors fall over themselves to create engaging content featuring stunts and/or celebrities to entertain their audiences. Plus these days there is direct consumer-2-consumer connectivity. It’s a great way to get affordable coverage of a crowdfunding project.

If you’d like to discuss you own ideas for a crowdfundng project and to see how I can maybe help you please email me at [email protected]. Don’t forget, a dream isn’t a plan and hope isn’t a strategy.

Crowdfunding does more than raise money

Posted on November 22, 2018November 23, 2018 by Clive Reffell

I was recently asked about crowdfunding by the founder of a startup business that makes a range of non-alcoholic wine. There was nothing confidential in my reply, so I thought I’d share it with you.

You’re absolutely right that crowdfunding can be a more time consuming way to raise money compared to perhaps a VC investment or an angel investor. Yet there are other benefits that go way beyond the money it raises.

For example, VCs were queueing up to invest in Chapel Down (the celebrated English sparkling wine maker) when in 2014 they launched their equity crowdfunding campaign. Beyond raising £3.9m in three weeks, their CEO Frazer Thompson told me that crowdfunding had generated 1,500 brand advocates who would spread positive word-of-mouth, buy Chapel Down products at every gift-giving opportunity, and create sampling opportunities by stocking their wines (now beers as well since they built a brewery with some of the money they raised, and gin too) both at home and in their company drinks cabinets. Priceless!

Crowdfunding creates a virtuous circle whereby customers can become shareholders and shareholders become customers. I’m caught up in it myself as an investor in a craft brewery and a gin maker. If “my brands” are available, why drink others? Shareholders catapult themselves right up the brand loyalty ladder.

Hop Stuff Brewery started five years ago when it raised £58,000 through offering 34% of equity. It’s now valued at over £25m, with products stocked in Wetherspoons (which encourages lower than regular cost product trial), Tesco and Majestic Wine; it has a growing chain of beer and pizza outlets; and international sales and franchise brewing agreements. Hundreds of their 1,000+ investors from three rounds of crowdfunding on Crowdcube attended an “Investor Fiesta” event at their new brewery back in August.

A network of investors can be used for research purposes and to ask for ad hoc assistance such as help recruit staff, recommend suppliers, volunteer their own services, and so on. At the Hop Stuff event I heard a fellow investor volunteer to use his contacts to help sort out supplies of CO2, which if you remember was in short supply in the summer.

Even if it’s not a main aim of the crowdfunding, it could find you an angel investor. This happened to some people I know who started a business making tissues from bamboo. To begin with, all they wanted was an initial £10,000 of orders through rewards crowdfunding to provide validation they weren’t wasting their time. A backer was impressed with what he saw and stepped forward to invest, which allowed the founders to greatly speed up product development and company growth. So do eveything as professionally as possible.

They were a top-seller on Amazon very quickly. Within three years the company founders raised £500,000 in October 2018 for 10% equity on the Seedrs crowdfunding platform – they had a business valued at £5m!

Their latest news is The Cheeky Panda tissues are now stocked in Tesco and Morrisons; in the summer they signed a £1m corporate investment deal that valued them at £20m; and right now they are running a second round of equity crowdfunding for existing investors in which they are offering 5% for £1m.

Good crowdfunding is also good marketing. I call it an ultimate direct marketing campaign. There’s a start date, an end date, lots to do, and if you fail to hit target you don’t raise any money. Naturally there are risks, though by breaking a crowdfunding campaign down in to component parts each potential risk can be addressed and minimised. I’ve created a Seven Stage Assessment to check if a business is ready to start crowdfunding, and identify areas that need to be addressed before going public.

My approach is more from a marketing angle, since that’s what I’ve always done. I am not a finance expert and not qualified to give financial advice. Though I can provide an experienced layman’s assessment on how appealing any offer may be to the public. I do have a post-grad diploma from the Institute of Direct and Digital Marketing and a Professional Diploma in Management from the Open University Business School.

One vital tip is that crowdfunding should not begin until you have done enough personal pre-selling for 30% of the financial target to fly in to your crowdfunding campaign within the very first few days. This applies whether you’re trying to generate product orders or offering equity. This gives immense confidence to other backers who don’t know and haven’t met you, and creates valuable momentum. So if you have a target of £200,000 your pre-selling should reach a guaranteed support level of £60,000 in the bag before you start crowdfunding in the public eye (ideally more to allow for dropouts).

Early success is newsworthy and hard-working PR will generate media coverage to add to your early momentum. On the other hand, crowdfunding without pre-selling is like shovelling quicksand – hard work and you get nowhere.

How much it costs and how long it will take depend on:

how well your business rates against my Seven Stage Assessment
how much work has to be done to become investment-ready
of that, what can be done internally and how much has to be outsourced
including how enthusiastic and good you are at using social media – and “it’s ok, my kids use Facebook, they can help” isn’t good enough
success rate of using PR to secure media coverage
how long it takes to drum up support to reach the first 30% of your target.

If you have no social media networks to drive people to your crowdfunding project it may first require months of work to build some. Or months to accumulate impressive media coverage you’ll be able to refer to, or both, ideally.

Outsourcing support and input can even begin with the pitch document. A 30-chart deck may be very thorough but it’s too much for a potential equity investor to wade through with enthusiasm. Most look for the first reason they can give themselves as to why not to invest so they can move on to the next opportunity. Simply having to spend too long to get a feel of an opportunity is a good enough reason to discard it right away.

Don’t forget the taxman. Many retail investors prefer businesses to be registered with HMRC under EIS and SEIS agreements. These Enterprise Investment Schemes allow tax-paying investors to claim valuable rebates of up to 50% of the cost of their investment, and shelter capital gains from CGT. Under SEIS a company founder can invest up to £100,000 in their own business and claim a refund. Make sure you understand and take advantage of these benefits for yourself and your backers.

To close, what you see online when people and organisations run crowfdfunding campaigns is like the tip of an iceberg visible above the waterline. Invisible under the water is a vast amount of planning and preparation, and a fair amount of stress. It’s not impossible to run a crowdfunding campaign alone if you’re tough and resiliant enough, though most people need some help and support, be it technical or emotional or anything else. This comes either from a team of willing supporters who between them provide all the necessary skills required to achieve your success, or you need a budget. Most times it’s a bit of both. If you want to talk about your ideas that could transform your life please get in touch, [email protected].

How Crowdfunding is Changing Business

Posted on August 26, 2018August 28, 2018 by Clive Reffell

For many startup entrepreneurs (and d-i-y investors who back them) the most significant form of modern day crowdsourcing is crowdfunding. Rather than trying to impress a single backer to support a business idea, perhaps through chasing a grant or bank loan, or by catching the attention of an elusive angel investor, crowdfunding has decentralized the process and enables business startups to ask crowds of people directly – some of whom they know and many they don’t – to each provide a relatively small level of support. It also builds communities of followers and supporters, where customers become investors and investors become customers in a virtuous circle.

Favourable “light touch” treatment of equity crowdfunding (where investors pay for a slice of ownership of a business, and accept the risk that it may fail) by the financial regulators allowed the UK to emerge as the world’s market leader. Crowdcube was one of the first equity platforms to appear, in 2011, and it recently announced a total figure of more than £500 million invested so far in 700 funding rounds. The banking app Revolut and the Scottish brewery Brewdog, both currently worth over £1 billion, launched through Crowdcube.

Although some of the startups supported by crowds of sometimes relatively unsophisticated backers might be mocked by professional investors for some fanciful financial forecasts, many disruptive and challenger brands have emerged whose impact on established business sectors often far outweighs their market share or company valuations. Being new can mean a fresh approach unbound by a legacy of the past, even though a lack of a track record makes it hard to interest traditional investors at the beginning.

Here are examples in three business sectors where challenger brands used the power of crowds and are disrupting the status quo.

Banking
London-based Revolut, the UK’s fastest growing fintech company, ran a crowdfunding campaign as recently as 2016 to raise £1m and get started. Crowdfunding was also good marketing for them as it generated a core crowd of hundreds of investors who would become keen customers and brand ambassadors.

Revolut’s CEO and co-founder Nikolay Storonsky

The co-founders’ business idea came from their personal frustration with exchange rate markups, inexplicable foreign transaction fees and the overall hassle of managing a bank account abroad.

Today, Revolut provides over two million customers (two million customers acquired in two years!) with a debit card allowing the holders to spend money in 150 currencies with no fees. They estimate they have saved their customers over £560m in traditional banking fees, and in 2018 raised $250m through corporate investment which valued the business at $1.7bn (£1.2bn).

Brands like Revolut and fellow banking newcomer Monzo are definitely shaking up the traditional banks and changing customer expectations. The technology was there, but the existing high street banks still provided us all with slower, less sophisticated and more expensive services. With us all the way, are they?

Brewing
Behind Brewdog which is now a unicorn startup valued at over £1bn, there are many smaller craft brewers that continue to launch with modest funding and provide UK drinkers with a vast choice of beers and ales made with hands-on quality control and finer ingredients than high volume mass-market brands can access in sufficient volume.

An example is the fast growing Hop Stuff Brewery in south east London. City finance professional James Yeomans found he enjoyed home-brewing more than his time spent in the office and became determined to take it further. In 2013, without any commercial brewing experience – but he could talk “money” – he used equity crowdfunding through Crowdcube to raise £58,000 in exchange for 34% ownership of his startup craft beer brewery.

The business grew, and alongside attracting corporate investments it ran a second round of equity crowdfunding that closed in January 2017, and then a third smaller one in early 2018. Although corporate investors were by now queuing up for a slice of the business and crowdfunding was unnecessary for purely financial reasons, crowdfunding has provided Hop Stuff with a dedicated following of over a thousand supporters happy to perform unofficial Brand Ambassador roles. They influence people to sample the brewery’s products through positive word-of-mouth, and ask pubs and bars where they drink to stock them.

Hop Stuff is currently opening a number of its own “beer and pizza” bars under the Taproom brand, filling a global order book and signing overseas franchise brewing agreements. Compare this to the rest of the UK beer trade: the British Beer and Pub Association (BBPA) recently reported annual sales were 1.7% down, and in August 2018 the BBC reported UK pubs are closing at a rate of 18 a week. Hop Stuff Brewery is certainly bucking the trend, has just moved to larger brewing premises, and five years after launching with £58,000 raised through equity crowdfunding it is valued at over £25 million.

At an invite-only event for his crowdfunding investors in August 2018, founder James Yeomans announced that packaged Hop Stuff Brewery products will soon be on the shelves in London branches of Tesco, Oddbins and Majestic Wine.

Grocery items
Bamboo is a fast-growing sustainable product with four growth cycles a year. Tissues made from bamboo rather than paper are naturally stronger, softer and more hygienic. They can be made with a 65% smaller carbon footprint.

Who created and introduced this breakthrough eco-friendly product to the UK? Was it corporate giants Kimberly-Clark or Procter & Gamble that own market-leading worldwide tissue brands? No, it was a pair of UK holidaymakers who returned home from China, researched possibilities and wrote a business plan to utilise abundant supplies of unwanted surplus bamboo they had seen being left to rot.

A modest reward crowdfunding project on the Crowdfunder UK platform with a target to generate £10,000 of orders gained the attention of a crowd of early adopters and, by chance, an angel investor. Within three years the founders of The Cheeky Panda tissue company ran an equity crowdfunding campaign with Seedrs that raised £500,000 and valued their business at £5m. The brand is a top seller on Amazon.

So even in the high-volume fmcg sector (fast moving consumer goods) dominated by massive brands that are supported with multi-million £ advertising budgets, crowdfunding – the crowdsourcing of both money and a community of supporters – enables entrepreneurs to introduce innovative products and disrupt existing markets.

If you are considering crowdfunding as a means to launch a startup, or maybe to grow an existing business, I can provide you with independent crowdfunding advice and hands-on support. I have no ties to any particular crowdfunding platforms. Please email me, [email protected]. Let’s discuss your ideas and set about building them in to a plan of action.

Mayor of London has £1m for Community Projects Using Crowdfunding: Sep 3 Deadline

Posted on July 22, 2018July 22, 2018 by Clive Reffell

The Mayor of London recently announced an allocation of £1 million available to a range of grassroots community projects. Operating in conjunction with UK crowdfunding platform Spacehive and the Greater London Authority, community project leaders can apply for a maximum contribution of up to £50,000 for new not-for-profit projects that serve the wider community. It’s a competitive process, and I can help applicants to succeed. The deadline for applications is September 3.

The Mayor and GLA’s main purposes of the initiative appear to be to:

Crowdsource ideas at a grassroots community level that add to or improve local facilities, maybe through new uses of disused buildings and locations, to inspire City Hall regeneration policy-making.
Show Londoners that their City Hall and elected representatives are listening and responsive in a demonstration of growing transparency and accountability.

The re-purposing of abandoned locations and unused buildings, particularly high street retail units, is a matter of growing national concern. Online shopping, road congestion, scarcity or cost of parking spaces and a recent hike in business rates have all reduced footfall and raised costs at traditional retail outlets.

The #CrowdfundLDN project will crowdsource many ideas that could influence local authority policies on how to respond to the hollowing out of previously vibrant areas within communities, and also empower groups of volunteer citizens to work together to deliver their solutions at a lower project cost than full funding from any local authority’s budget.

In 2017 the initiative also attracted a number of corporate donors who wanted association with the initiative. Backers included renewal energy company Bulb, creative co-working space Second Home, Ladbrokes and B&Q alongside Esmee Fairbairn Foundation, Growing a Greener Britain and Veolia.

Here’s the 2018 timeline.

Workshops are currently taking place throughout London to raise awareness and participation levels, and to brief interested parties on the scheme details.
During July and August project leaders will start to build their crowdfunding pitch on the Spacehive platform, identifying necessary skill sets and assembling their team(s) to finalise the pitch, raise the money and then deliver the end project. Completed crowdfunding pitches, including plans on how the project will be delivered and then maintained as a going concern, must be submitted to Spacehive by September 3.
Later in September the projects that meet a required standard of community benefit, validation of local community support, short-term achievability and longer-term viability will go live on Spacehive and start to generate funding.
30 to 40-or-so projects selected to receive a contribution from the Mayor of London’s £1m budget will be announced in October at an event staged in London’s County Hall, headquarters of the GLA and Mayor of London (as in main image in 2017).
Each project will then continue its crowdfunding efforts during November and December to reach their target. The crowdfunding will be on an “All or Nothing basis,” meaning if a project fails to reach the outstanding balance of its overall target the Mayor will keep his money and the project will not go ahead.

Being selected is naturally very positive news to tell potential backers through PR and social media. Projects that fail to receive a Mayor’s contribution can still choose to continue their efforts to raise funds, though of course they will have a tougher job to reach their target.

Benefits for the funding applicants are numerous, and include:

At a community level, participation in the scheme draws together people with a shared focus on involvement in a project for ulterior motives. Firm friendships and alliances between local businesses have been forged in the previous two years of the scheme.
At a personal level, a number of individuals may develop new skills through the experience and interaction of being part of a team, and gain personal confidence through empowerment. All and any of these factors could boost their employment prospects and future personal earning potential.
All successful projects will improve the number and range of London’s community facilities available to the city’s population.

Previous successful projects include building a sustainable food yard, kitchen and event space at Bankside near the Tate Modern to act as a hub for the promotion of sustainable food activity. The project provides education, outreach and advocacy for innovation in sustainable food practices, and incubator space for startups. Affordable access to a professional kitchen as a community resource enables hopeful commercial food and drink suppliers and would-be chefs and restaurant owners to experiment, gain experience and refine skills.

One project completed the external refurbishment of an iconic and much loved local art deco cinema in Hackney. The project also created a second screen allowing for more local events and the sustainable operation of the enterprise as a non-profit community facility.

A south London disused railway space will enjoy a new lease of life as a 900m pedestrian walkway and natural garden area in what was previously a rail yard used for coal wagons. It is a facility comparable to the inspiring and better known elevated walkway examples in New York and Paris. An initial crowdfunding project in 2015 on Spacehive raised money for a feasibility study, now published as a 180-page document. In addition to a contribution from the Mayor of London, Southwark Council also donated £10,000.

Previously abandoned garden allotments in Tolworth, Kingston Upon Thames, were re-purposed as a suburban farming project to teach food-growing skills and create a productive, sustainable source of locally produced food. The designers of the growing space went on to win an award at the prestigious Royal Horticultural Show at Hampton Court with an edible garden.

Details of all 25 projects backed in this initiative by the Mayor of London in 2017, which between them received a total contribution of £400,000, are here.

Spacehive has made a lot of useful information and planning guides available, and also gives details on additional sources of funding in some boroughs. Though if you’d like extra support and insight about using crowdfunding to make your idea for a local community project become a reality then please contact me via [email protected]. There’s no charge for the first meeting or conversation on Skype or the phone, and let’s take it from there. You can also follow me on Twitter, @Cliveref.