alternative finance Archives

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.

10 Tips on Reward Crowdfunding from a Tech Startup

Posted on July 20, 2018July 22, 2018 by Clive Reffell

Hribarcain is a newly founded UK technology company that was launched on the crowdfunding platform Kickstarter in 2016. After starting in a small design studio in Bristol their first product launch was “Magno, The World’s First Magnetically Controlled Pencil.” They then developed a range of titanium pens and expanded internationally to provide products to thousands of customers worldwide, raising over £250,000 in revenue. As an SME marketing and crowdfunding specialist I was keen to meet the company founders at a recent networking event and hear more of their story.

Co-founders Ashley Hribar-Green and Matthew Aston Cain are British entrepreneurs with a wealth of experience in product design engineering. After working for one of the largest technology companies in the world (Dyson), Ashley and Matthew launched Hribarcain to pursue their dream of designing products that challenge convention as a result of ground breaking innovation. In this case it began with a range of magnetically controlled propelling pencils with a subsequent brand extension in to pens.

Rewards crowdfunding allowed Hribarcain to promote their products direct to end-user buyers without first needing retail distribution agreements. They also used Indiegogo in 2018 for a campaign with US dollar pricing, whereas their Kickstarter campaigns have been priced in UK pounds.

Matthew already had previous experience from using reward crowdfunding on Kickstarter to generate orders for his range of Astoncain minimalist watches with top quality components and functions at a reasonable price. At a recent networking event in London organised by Masterclass Crowdfunding, he happily shared 10 top tips based on his seven years’ experience of using reward crowdfunding.

1. Have a clear and concise video that runs under 2 minutes – it’s your business card. This is his advice after sometimes using longer running videos.

2. Advertising – use some! Let people know you’re crowdfunding

3. At the close of the project don’t simply just fulfill the reward item orders, up-sell to the buyers. In Magno’s experience it can add a further 15% sales income

4. Make your pricing attractive, reduce it to create urgency within the limited time period of your crowdfunding project, maybe to 50% of RRP

5. Possess a clearly defined USP (Unique Selling Proposition) to stand out from competitors

6. Use quality photography in your crowdfunding project. It will help to enhance the image of your product or service and reassure people you’re serious about what you’re offering them

7. Only use quality, reliable manufacturers who won’t cut corners and reduce the value of your items

8. Price in a minimum 50% margin to allow for mistakes and to afford some marketing (see Point 2)

9. Consider fulfillment delivery costs right at the start of selecting reward items and maybe opt for smaller, lighter ones, or at least smaller packaging to meet postal rate sizes

10. Find other crowdfunding project owners who have complementary products, such as matching up pen makers and notebook suppliers, or maybe cooler boxes and food and drink providers, and agree to co-promote each other’s products to your respective networks.

All of these are great pieces of advice, though there’s also a lot more to consider. If you are considering using reward crowdfunding yourself then please get in touch via [email protected] for us to meet, either in person in London or maybe on Skype, and discuss your ideas and how to effectively plan for success. You can also follow me on Twitter, @Cliveref.

UK energy newcomer raised £487,000 through reward crowdfunding

Posted on January 4, 2018March 20, 2018 by Clive Reffell

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.

In 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.

Update on 20th March 2018
CrowdFundRES is a European project that contributes to the acceleration of renewable energy growth in Europe by promoting crowdfunding for financing renewable energy projects. It has published a practical guide for crowdfunding platforms, project developers, investors and policy makers on “Crowdfunding Renewable Energy.” You can access it here.

10 Top Tips for Crowdfunding

Posted on October 30, 2017 by Clive Reffell

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.

Examine projects by other crowdfunding users in your business sector.
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.
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.
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.
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.
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.
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.
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.
Be flexible to accommodate other opportunities that may arise, such as offers of retail distribution or interest from an angel investor.
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.

Top 10 US Reward and Equity Crowdfunding Platforms

Posted on May 25, 2017 by Clive Reffell

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

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.

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.

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.

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.

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.

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.

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.
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.
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.
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.
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

Posted on March 20, 2017December 31, 2020 by Clive Reffell

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 gave the company founders a business valued at over £5m. By June 2020 they had grown it to over £50m!

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.

Their 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 they 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 founders invested a total of £5,000 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 expanded with facial tissues, their products were available on Amazon and through a number of ‘health stores’, and by March 2017 they were 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 became a company with a value exceeding £5million. Quite a stunning achievement given the co-founders had a business idea on holiday just two years previously.

2020 update
In 2019 their product range added award-winning babies’ nappies after they had started their own family, and as I add this comment in 2020 I can say I regularly see their products on the shelves at Tesco. After further corporate backing and two more rounds of equity crowdfunding (the last one completed in May 2020) The Cheeky Panda has a company valuation of over £50 million.

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 UK (Part 1)

Posted on December 31, 2016April 12, 2017 by Clive Reffell

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!

The 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.

Close encounters with the crowd economy at Southampton Boat Show

Posted on September 29, 2016March 15, 2017 by Clive Reffell

Southampton Marina hosts the largest outdoor annual boat show held in Europe, so perhaps it should have come as no surprise for me as an independent crowdfunding adviser to have encountered aspects of the crowd economy there among the hundreds of exhibitors and the opening day celebrity guests.

The event was officially opened by actress Michelle Keegan, formerly of Coronation Street and currently on our tv screens in the BBC drama Our Girl. On stage with her was the GB Sailing Team from the Rio Olympics boasting four gold medal winners.

Olympic success in a wide range of sports has been achieved with financial state support for our top athletes through National Lottery Funding for UK Sport. Every purchase of a lottery ticket contributes a small amount towards crowdfunding national sporting achievement at the highest level. The benefits to the nation are wide ranging:

with more role models to aspire to more people take up or maintain a sporting pastime – which the government encourages as part of the health battle against increasing obesity;
association with success puts a spring in the step, encouraging greater productivity and optimism;
it inspires more people in all walks of life to achieve excellence in whatever it is they do.

In a similar ‘organisational crowdfunding’ vein, an event on Day One of the show was the official handover of a new yacht to the Ellen MacArthur Cancer Trust. The carefully adapted yacht will be used to take children recovering from cancer treatment on confidence-building sailing adventures and has been funded by the People’s Postcode Lottery. Every ticket buyer has made a contribution.

Sailing has a reputation as something of a rich person’s hobby, sometimes described as similar to standing under a shower and tearing up money. FlexiSail has utilised the crowd sharing model to make boat ownership less onerous for owners and to provide access to a “pride of ownership” to a far wider audience. Boats are expensive to buy in the first place and then expensive to maintain and moor somewhere. Yet most of the time they are unused and simply take up space in a marina.

FlexiSail offers a choice of membership options for people to choose from a range of 30 to 40 foot yachts, catamarans and motorboats and use them for a fixed number of days or weeks throughout the year, explained Business Development Manager Suze Hart. Reassuringly for the boat owners FlexiSail also arranges training to ensure everyone has appropriate skills and qualifications, and provides a full two day induction on board any chosen boat. They maintain an online calendar for members to book their time aboard, online logbooks for all the users of each boat to keep a record of problems and any work that needs to be carried out – and FlexiSail carries out the work. And the boat owners have turned their depreciating assets in to an income stream with safeguards in place.

Finally, a vital and integral part of sailing for many boat lovers is a gin and tonic on deck or in the cockpit at the end of a day on the water. In a corner of the Ribeye stand at the boat show Howard Davies, Co-founder and Director of his own brand new gin brand was providing very welcome samples. puedes comprar viagra en la farmacia

The Salcombe Distilling Company, based in Salcombe in Devon, batch produces hand-crafted gin made with obligatory juniper and a secret blend of other botanicals. Premium products like this don’t come cheap and Salcombe Gin retails at £35 a bottle. Howard, who spent part of his previous career path as a sailing instructor, only gave up other employment this summer to concentrate on his new venture, in much the same way that many hand crafted spirits brands have come on the market in recent years.

A search using industry data provider Crowdsurfer showed 15 new distilleries/spirits brands used crowdfunding in the last 12 months in the UK. Crowdfunding is extremely flexible and can be used in a variety of ways to match very different requirements. Some used it on a rewards-for-donations basis, others traded equity to gain long-term investors.

At the lower end of financial targets, one person wanted £3,000 in donations to convert a unit in a suburban London market in to a tasting room and install a micro-distillery to make gin, and a couple of guys raised £30,000 through donations for rewards of branded merchandise to establish a malt whisky distillery in Devon.

Meanwhile, at the top end, the Cotswolds Distillery raised just over £1m from 124 investors at the end of January 2016 in exchange for equity – double its target of £500,000 – and GlenWyvis Distillery in Scotland had raised over £2.5m by July 2016 (against a target of £1.5m) using “community shares” through the crowdfunding platform Crowdfunder.

I hope that Howard’s gin proves to be popular and when he is ready to expand his Salcombe Distillery Company he’ll get in touch with me to explore the benefits and opportunities that crowdfunding could deliver for him.

Maybe you have a business you want to launch or expand? I am an independent crowdfunding adviser, please feel free to contact me for an initial conversation about what crowdfunding could do for you and how I can guide and help you through the process. Send an email to [email protected]. I have gained a wealth of experience in a 30+ year career in Marketing, and it is increasingly evident that implementing a good marketing plan helps attract investment.

Day One of a global crowdsourcing conference in London focussed on crowdfunding

Posted on April 19, 2016July 7, 2017 by Clive Reffell

On April 12 the historic Regent Street Cinema in London witnessed the first full day of the 2016 Crowdsourcing Week Global Conference which focussed on crowdfunding. Here is a recap of the day, writes independent crowdfunding adviser Clive Reffell.

Crowdfunding within crowdsourcing
Conference organiser Epi Ludvik Nekaj of Crowdsourcing Week and the first speakers of the day set the scene. Affordable, mass communication technology enables high levels of personal connection and interactivity. This has caused a clear disruption to previously accepted ways of appreciating what’s around us and how we access what we want or need. Through C2C networking we can increasingly find what we want without having to go to an established B2C provider – whether it’s goods, services, entertainment or information. And not only are we beginning to increasingly appreciate that the planet’s resources are finite and at risk, but also change our behaviour to reflect this.

A modern Old World generation is happy to have access to what it wants or needs without the proviso of personal ownership. Hence the ‘sharing economy’. Accommodation and travel are the largest sectors of the sharing economy. We share spare bedrooms on Airbnb – an organisation that after just four years has access to more rooms than Hilton Hotels – and empty seats in our cars through Zipcar, LiftShare and BlaBlaCar. And through equity and loan crowdfunding people with adequate disposable incomes are willing to invest in or lend it directly to others who want a chance to create their own business and realise their personal potential.

Panel session: "Can banks afford to ignore crowdfunding?" — Panel session: “Can banks afford to ignore crowdfunding?”

Crowdfunding and banking
In the meantime, traditional sources of business funding from banks that are no longer perceived as trustworthy are increasingly restricted by regulation and compliance. Tech entrepreneurs in their 20s are developing financial tools that banking C-Suite bosses don’t even understand, let alone have the vision to steer their organisations to a future where they may embrace some of them.

So the supply of funding for startups and SMEs continues to shift. Crowdfunding supported the launch of over 4,000 UK businesses in 2015, said Emily Mackay, CEO of Crowdsurfer.

Crowdfunding data
The demand from entrepreneurs for better crowdfunding information to increase their chances of success has led to a raft of companies collecting, analysing and providing data on the crowdfunding industry. As well as Emily Mackay of Crowdsurfer, Barry James of The Crowdfunding Centre and Modwenna Rees-Mogg of Crowdrating were also on stage during the day.

Crowdfunding platforms
Crowdsurfer estimates there are almost 1,800 crowdfunding platforms around the world. Between them they offer opportunities for backers to support businesses in a wide range of industry sectors, and for platforms such as Ethex to specifically provide investors with ethically sound opportunities. The site allows people to “invest in businesses that are changing the world for the better,” said Sarah Flood, and it is the top social investment platform in Europe with over £30m invested so far.

Equity crowdfunding platforms were represented by CEO Goncalo de Vasconcelos of SyndicateRoom. To him, the most important aspect is not the money that crowdfunding pulls in but how much is going to be paid out to investors. If the source of the money dries up because investors get disappointed or short-changed then it’s all over for everyone. His own platform reassures investors with a stringent selection of projects they host so that only two out of 77 projects funded on SyndicateRoom have so far ceased trading. The average failure rate among all new businesses is more like 90%.

With a twist on donations crowdfunding for money, Fanuel Dewever’s Belgian platform Crowd Angels enables projects to directly ask for the goods, services and human resources they require. He identified the biggest reason for projects failing is the lack of a clear demonstrable need for what’s being asked for that will allow backers to feel they have made a contribution to something significant. Issues such as easing a short-term cash flow problem are certainly important to small business owners but it does not get backers queuing up to part with their money.

Who uses crowdfunding?
The companies that use crowdfunding are also increasingly diverse. Through the launch of their app Patrum even the Vatican uses crowdfunding to raise money to restore its historic architecture and many of its art treasures, and we heard from Father Mark Haydu (above left) on how this 2,000 year old business approached and handles it.

Christian Johan Smith of the California-based TrackR raised over $2m on Indiegogo in exchange for their tracking devices for people to trace and retrieve lost, stolen or simply misplaced items.

Eric Partaker of Mexican food restaurant chain Chilango has raised a total of £5.5m, first through a mini-bond that offered interest repayments of 8% p.a. and raised £2.1m and then through an equity round that raised £3.4m. But it wasn’t plain sailing. After the success of their first two outlets the third and fourth ones bombed – at one stage the company was seriously close to going under.

It isn’t easy
Crowdfunding may sound easy when large figures like these are bandied around, though everyone involved with the conference agreed that successful crowdfunding requires thorough preparation and extremely hard work. It isn’t charity, it certainly isn’t easy money, and about 3 in 4 projects fail to reach their target funding level.

If you want to improve your chances of success with the benefit of some professional marketing input, I am an independent crowdfunding adviser. Click here to e-mail me or here to see my website for Comanche Communications & Marketing.