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Equity crowdfunding hopefuls and ten tips from successes

Posted on November 23, 2015March 15, 2017 by Clive Reffell

This month I enjoyed a week in which week I met nine entrepreneurs at different ends of the equity crowdfunding spectrum. Six were seeking investors, three were sharing tips on having achieved successful results. The willingness to share experiences and support each other is a very positive characteristic of the crowdfunding sector that helped me decide to specialise as an independent crowdfunding adviser. And those tips apply just as much to donations-for-rewards crowdfunding as equity projects.

Investors and business development advisers critique crowdfunding hopefuls

The six entrepreneurs ready to trade equity for investment presented to a panel of four advisers and an audience of over a hundred people gathered in Whitechapel, London E1. The audience included several potential investors plus other people who were planning how to conduct their own equity crowdfunding to launch or develop their businesses.

The meeting with the successful users of crowdfunding was organised by equity platform Seedrs and held in a function room at Camden Market, London NW1.

The Hopefuls
Here is a brief summary of the six companies and the diverse business sectors they operate in.

In Your Stride, founded by Shaun Lancaster, is a smart adaptive coaching platform. It matches runners’ individual abilities with a database of over 20,000 events to create a custom training plan that adapts with progress. It is compatible with a range of wearable technology for easy use. It is available through a personal subscription, and also supported by charities that stand to receive more sponsorship income if people running in events on their behalf achieve better results. In Your Stride has exceeded its £100,000 target on Crowdcube for a 15.8% stake in the business.

Unis Learning provides HR departments with the means to test the aptitude of potential employees and thus place them in the most productive roles compatible with their inherent talents as well as academic qualifications. They wanted £150,000 for 20% and would seek further investment two years on.

Leeds-based Perks Loyalty, represented by Commercial Director Whaleed Shihadah, enables local traders to co-operate and utilise electronic customer loyalty cards. It empowers the traders with affordable technology to build and maintain business traffic through customer tracking and dynamic and adaptable benefits. Perks Loyalty is currently seeking £130,000 through Crowdcube for 8% of the company. One of the panellists thought they weren’t seeking enough to establish themselves firmly in their competitive marketplace.

Two bespoke high-end men’s tailoring companies, Daniel & Lade and Edit Suits Co., utilise the benefits of electronic 3D imaging and laser cutting to create quality clothing at a fraction of the cost of traditional suppliers. Both want extra money fast to develop ahead of the me-too competition in this obviously highly competitive business sector.

Colony is a new management software tool to manage increasing numbers of staff working remotely. It helps new office-based companies set up without the need for as much office space as traditional businesses, if any at all. They want £450,000 for 20% and in 12 months they will be seeking further investment.

What all six have in common is harnessing the latest IT, developing its use to provide tangible customer benefits, and trying to raise funding to move faster than inherently slower existing competitors tied to older methods and perhaps dated software. If you have a business idea along these lines then perhaps you’d like to get in touch with me and we can explore the opportunities and benefits that equity crowdfunding could deliver for you.

The successes
The three successful equity crowdfunding users had all used the Seedrs platform.

Shaken Cocktails raised £118,690 for 9.43% equity in March 2015
Incubus is a business incubation service for start-ups provided on a converted double-decker bus. They raised £53,770 for a 15.95% stake in July 2014
Brother Cycles make bike frames and builds custom bicycles for their customers. They raised £125,880 for a 16.22% stake in the business in July 2015

Ten tips the three companies offered.

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), and plan when to tell them (don’t overload demands on your own time by telling everyone all at once, stagger it).
Examine projects by other equity crowdfunding users in your business sector. Check for opportunities through your platform provider to identify and contact backers with a relevant investment history.
Build your own networks of relevant people for as long as possible before going live. Every person you have ever met is a potential investor! 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.
Pre-sell to your closest contacts and supporters so that you can count on at least 30% of the funding arriving in the first few days. This gives the project vital momentum and reassures other would-be investors.
Ensure you and your support team have adequate social media skills, or have a budget to access some.
Crowdfunding can be a fulltime role. 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 investors.
Set weekly targets to monitor progress and check that you are doing enough, and establish what’s working well and what isn’t.
Make it easy for investors to tell their own networks about your investment opportunity, provide them with content.
Be flexible to accommodate other opportunities that arise, such as offers of retail distribution.
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’ to engage with potential investors; 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 (Specific, Measurable, Achievable, Realistic, Timetabled); a budget to bring in any of these skills and any other requirements as necessary (such as video production, temporary office support staff); a campaign plan with KPIs; a campaign manager to oversee everything if you don’t have the time. These requirements are just as important for donations-for-rewards projects.

Or contact me, an independent crowdfunding adviser, at [email protected] or on 07788 784373.

Crowdfinders Live, a top all day crowdfunding conference

Posted on October 16, 2015October 18, 2015 by Clive Reffell

Over 400 people booked their place at Crowdfinders Live (#CFLive) held in London on 15 October 2015. A blend of personal and company investors, entrepreneurs seeking funding and crowdfund platform providers spent the day networking and hearing industry updates, panel discussions of topical issues and some live pitches from companies seeking equity funding. This is not a summary of the whole day, it’s selected items that resonated most with me personally.

Will Broome, a respected figure in the events and hospitality industry and creator of londonlaunch.com in 2001, had the role of MC. In his first of several entertaining sessions at the microphone he reckoned that having a good idea made up about 1% of a successful crowdfund project – 99% being hard work! This was a comment I used in one of several tweets during the day (@Cliveref) which were shown on the big screen behind the speakers and panellists.

Nicola Horlick, CEO of Money&Co, a person-to-business lending platform, was the first speaker. Banks are generally still not lending to SMEs, in part due to recent rules on bank capital requirements to support their amounts on loan. So there is a demand for business loans and through its high net worth clients who are looking for good investment returns there is a source of funds available through Money&Co. There is the risk of business failures among start-ups, though the latest average gross annual yield for Money&Co investors is 9.1%. For those of us of more modest means, a new Innovative Finance ISA will allow individuals to invest up to £15,000 a year in loans to small businesses in a tax-free wrapper.

Next speaker was Christian Mouyesset, co-founder of Hummus Bros which raised £500,000 this year (against an initial target of £250,000) through equity platform Seedrs. He stressed the importance of pre-selling to guarantee some early funding to give a project momentum. Whether it’s for equity or donations crowdfunding, empirical evidence shows that successful projects receive 30% of target within the first few days. This gives strong encouragement to others who may be thinking about investing or donating.

Kiki Loizou, Small Business Editor at The Sunday Times, chaired a panel session covering topical issues in equity crowdfunding. Sound-bites included:

A lingering unresolved issue is how new companies go about establishing a credible valuation figure – some are simply outrageous. Julia Groves, Chair of the UK CrowdFunding Association said investors should just reject those projects, so that the marketplace would cultivate responsible behaviour.
Case studies of failed projects as well as success stories should be examined to identify common reasons for failure to reach target. I tweeted whether doing this and making the results easily available should be within the remit of UKCFA?
There are people looking to invest more money than is required by current good opportunities.
To encourage continued growth, perhaps there ought to be case studies from an investor perspective as well from the companies that receive funding. Another UKCFA task?
Equity crowdfunding is maturing fast, though perhaps more should be done to educate potential small-scale investors about possible risks and the length of time they may have to wait to cash out their investments.

In a second panel session, Michael Wilkinson of CrowdCube repeatedly stressed how important it is for crowdfund project owners to understand the need for effective marketing to drive a big enough crowd of the right type of people to their project. This is a very good piece of advice that was also identified by business think tank Nesta as often being a bit of a problem, which I pointed out to conference delegates via Twitter.

The afternoon session showcased 15 minute pitches from seven fund-seekers.

David Brabham, several times winner of the Le Mans 24 Hour Race and son of Formula One champion Sir Jack Brabham is using crowdfunding as part of his plans to revive one of the most famous names in international motor racing.

Kelvin Mackenzie (right), formerly editor of The Sun and owner of talkSPORT radio station, is raising funds for his price comparison site A Spokesman Said. The site also champions the consumer rights of ‘little guys’ who believe they are being bullied or ignored by big companies.

Former TV Apprentice challenger and qualified lawyer Lauren Riley (left) wants £150,000 to develop TheLinkApp, a version of WhatsApp designed for the legal industry to improve both their profitability and their clients’ quality of experience.

Husband and wife team Rufus and Charlotte Pearl already have a thriving business selling their Pink Lining brand products to the Mother and Baby market. In the UK they are stocked in 300 stores including Harrods. They are also stocked in Paris, New York and Tokyo, and are big in South Korea. They want to expand further. Strong social media networks are vital for crowdfunding success , and they have a customer database of over 100,000 people and 55,000 Facebook fans.

The other pitches include a dog-sharing website called Borrow My Doggy, a UK based asset management company called Alquity which invests in sustainable ethical projects in Africa, and Mayfair Brands. Mayfair Brands has achieved national USA distribution for their high quality gin, vodka and rum produced in Clapham, London. Now they need investment to create the stock levels needed to soon meet the American orders.

And Mayfair Brands products were available in the post-event party where I got together with several other delegates, some of the speakers and panellists, and Luke Davis (pictured on the left), CEO of Crowdfinders who organised the event.

If you want to discuss your own thoughts or plans for crowdfunding with a specialist independent adviser then please send me an e-mail to [email protected] or call me on 07788 784373.

Crowdfunding’s role for worthy causes

Posted on August 4, 2015March 15, 2017 by Clive Reffell

Crowdfunding goes from strength to strength. And for social community projects and worthy causes, crowdfunding provides new and exciting opportunities for fundraisers to exceed previous levels of expectations, perhaps by up to three-fold.

Here’s how it works. Like most other disruptive changes to established ways of doing things, it is based on the internet. Crowdfunding delivers an innovative way to generate an investment budget to finance a business start-up, expand an existing organisation, or achieve a worthy aim in the community. The crowdfunding process makes your funding requirement public on a dedicated website platform, and you need to drive a big enough crowd of people to it and convince a high enough proportion of them to give just a little bit each towards what you need.

There are four broad types of crowdfunding. For businesses it includes money on loan with pre-set repayment terms, or in exchange for some company equity. For social community projects or worthy causes there are direct appeals for donations (with or without reward incentives) that do not incur any responsibility of repayment.

Donations campaigns are often built around a donations-for-rewards model. Donors not only feel a rosy glow from supporting a cause they empathise with, they are also encouraged to give by the range of perks and incentives offered in recognition of their support. This reduces the net income a crowdfunding project generates by the amount it costs to source and distribute the perks. Though if the perks include merchandise material that promotes the cause or the project then they can deliver valuable longer-term visibility. Perks may also include reduced rates to buy products or use a facility or venue, encouraging a level of habit-forming patronage.

Here is what makes crowdfunding particularly effective for worthy causes. The money raised through donations campaigns tends to come in three roughly equal parts. The first third is donations from your closest contacts and you need to personally secure their support. In the past this may often have been the extent of the fundraising for a particular cause or project. However, crowdfunding now provides effective leverage to use this income as a base upon which to achieve even more, perhaps double the initial amount again. Do the personal selling in time to refine an effective pitch for your important crowdfunding video.

The donations from the key personal contacts should appear quickly in your online crowdfunding project, certainly in the first few days because they will inspire and encourage other donors to follow them. The next third of donations are likely to come from other contacts in your e-mail database and various social media networks who are not close enough for you to have reasonably approached on a personal basis. It is thus vital to have an organised e-mail database and sufficiently sized social media networks for this to be viable, and some prepared content to quickly distribute. You may want to consider an e-mail automation programme. Independent crowdfunding advice on several of these issues could be very worthwhile.

The average UK crowdfunding donation is around £35, and – again on average – one in twenty people who visit an online crowdfunding project will make a donation. Depending on your target amount you can start doing the sums to estimate the size of crowd you need to drive to your crowdfunding project.

And finally, there are many, many people out there who are open to contributing to good causes. Up to a final third of your income can come from people outside of your networks, people you have never been in touch with before, but who are encouraged by the quality of your project and reassured by the fact that so many people who do know you are prepared to contribute. It gives them confidence they are making the right decision. Traditional media coverage generated through PR and Twitter hashtagging can usefully extend awareness of your crowdfunding project beyond your known contacts. This needs to be put in hand perhaps months before your crowdfunding goes live. You can of course then add these new people to your database to maintain regular contact and develop a deeper relationship with them.

Clive Reffell established Comanche Communications & Marketing in 2014 to provide independent crowdfunding advice to SMEs. He brings a wide range of problem-solving experience from a 30-plus year career in results-focused marketing. His formal qualifications include post-graduate diplomas in direct and digital marketing from the IDM and business management from the Open University Business School.

W: www.comcomms.com. E: [email protected]. M: 07788 784373. T: @Cliveref

Crowdfunding and its use by the English wine industry

Posted on May 14, 2015May 10, 2017 by Clive Reffell

English Wine Producers Trade Tasting, 11 May 2015

The English wine industry is facing several positive challenges, and some major players are turning to crowdfunding as a means to best take advantage of opportunities in a fast growing market.

The English Wine Producers annual tasting for the drinks trade and media took place on May 11 just off Parliament Square, Westminster. It is a major event for EWP directed at the wine trade prior to the English Wine Week consumer event, running this year May 23-31. I spoke with several industry leaders.

Some notable wine writers and reviewers were also present, including Oz Clarke and Jane MacQuitty, wine writer for The Times.

Some quick background. 2014 was a bumper year for the English grape harvest, and production rose by over 40% to 6.3m bottles. Of which an estimated two-thirds are sparkling wines. Part of this growth is also because the amount of land under vines has doubled in the last seven years to around 2,000 hectares.

The largest English wine producer is Chapel Down in Kent. They reported record sales of £6.1m in 2014, and have recently secured a further 326 acres on long leases to plant more vineyards.

_DSC5918_Frazer_Corp

Future plans are being financed with £3.95m raised against 14.1% equity through the Seedrs crowdfunding platform in three weeks last September. This made Chapel Down the first publicly listed company to use crowdfunding. They are also building a brewery, and preparing for a period of consolidation within the industry.

Frazer Thompson, CEO, told me one of the greatest benefits of crowdfunding was that he had acquired not only the money but nearly 1,500 brand advocates who will continually support Chapel Down, not only through future personal purchases but also gift purchases and relentless word-of-mouth support.

If you’d like further information and advice about using crowdfunding to generate an investment budget please contact me, [email protected]. Your plans don’t have to be as big as Chapel Down’s. For example, in the brewing business the Camden Town Brewery recently raised £2.7m. Yet the Hop Stuff Brewery in south east London launched after raising £58,000 through crowdfunding.

Favourable comparisons to Champagne helped English sparkling wine establish an early market position and a price point far removed from Prosecco and Cava. These days, some English producers are more keen for their products to stand on their own two feet. Simon Bladon, proprietor of Jenkyn Place in Hampshire, didn’t mince his words: “Why should I want my English sparkling wines compared to an inferior product?”

Brad Greatrix, winemaker at Nyetimber, at the top quality end of the English sparkling wine market, told me wine makers from Champagne are being brought in by several wineries to contribute and share their skills. “Chalky soil in southern England is very similar to the Champagne region, though they marvel at the better quality of the English grapes they are given to work with.”

He believes English sparkling wine producers also benefit from greater freedom to use grape varieties of their choice than their counterparts in Champagne.

Another producer using crowdfunding right now is Hambledon Vineyard, England’s oldest commercial vineyard (est 1952), in Hampshire. MD Ian Kellet worked in finance and the corporate food and drink industry before buying Hambledon. He has brought these skills to bear with a crowdfund through CrowdBnk to raise a target of £2.75m through loans, rather than equity. Ian told me he saw no reason to part with any share of his company.

The minimum investment is £10,000 for a five year term. For a £10,000 investment after 5 years an investor will get their £10,000 principal back, plus a £4,000 lump sum, which is 8% interest per annum. They also receive 1/2 a case of Hambledon Classic cuvée every year and at the end of the term have the option to convert their principal into Hambledon shares at £2.20 per share and/or Hambledon wine.

At May 14, with 18 days to go, 20 investors have so far pledged £2,329,400, almost 85% of target.

A testament to the growing quality of English wines was the presentation of Sommelier Wine Awards 2015 to Gold Medal winners Wiston Wine Estate on the South Downs, and Sharpham Vineyard in Devon. These awards are internationally contested, and as well as being Gold Medal winners they received the added Critics Choice accolade as being particularly suitable for sale by the glass.

Dermot Sugrue, left, and Harry Goring, right, winemaker and co-founder respectively of Wiston Wine Estate, receive the Critics Choice award for their Blanc de Blancs 2010.

It was certainly a very pleasant day for me to sample many of the splendid wines available at the tasting. My thanks to the EWP Marketing Team for allowing me to attend.

Please contact me for further information and advice about using crowdfunding to generate an investment budget, [email protected].

Crowdfunding London 2015 – brilliant one day conference

Posted on April 24, 2015March 15, 2017 by Clive Reffell

The Crowdfunding London (#CFLondon) conference on 23 April 2015 served up a feast of information and inspiration for over four hundred people in The Crystal building at Royal Victoria Dock, East London.

The diverse nature of attendees spanned the full range from significant investors and business leaders running some of the biggest crowdfunding websites to individuals with a somewhat vague idea of a start-up business they want to launch.

First speaker was Luke Lang, CMO and Co-Founder of Crowdcube. Crowdcube is the largest of the UK crowdfund companies that enables funds to be raised in exchange for company equity. Their growth is representative of the whole industry. In total, 230 organisations have used them to raise £80m since 2011, and the industry is growing so fast that projects hosted by Crowdcube have already raised £20m in 2015.

Whilst crowdfunding may have started largely with attempts to raise relatively small budgets to launch start-ups that banks or other traditional lenders would not go near, the biggest individual amount raised on Crowdcube is £3.7m. The average investment made is £2,500, and the largest individual investments have been £0.5m on two occasions.

Luke’s two key pieces of advice to anyone who wants to raise an investment budget through crowdfunding are:

Work extensively on your own network of personal and business contacts. If you can’t convince them you won’t convince anyone else. And get them to make their investment as soon as possible because early support and momentum attracts other investors who don’t already know you.
Don’t forget that it’s all about delivering returns to investors and treat them with respect.

Next up, an expert panel chaired by the Sunday Times Business Editor Kiki Loizou discussed factors that have contributed to crowdfunding’s spectacular rise in the UK.

Banks are reluctant to lend to small businesses, particularly start-ups with no assets
The growth of a stronger UK ‘entrepreneur culture’, and thus a demand for business investment
Low returns for investors from traditional opportunities
A ‘light touch’ by the financial regulators
Ease of use and trust in e-commerce
The democratisation of two-way communications with big companies through social media
The rise of popular online ‘sharing’ businesses such as Airbnb and Uber

People want to use the internet to do more than post personal content and maintain contact with friends and family, make purchases and let companies know what they think of their products and service levels. They are now ready to be part of something more solid. And it’s easy to build an investment portfolio. After a few clicks anyone can say they are a shareholder in a brewery, an ecological project or whatever else they choose. Crowdfunding has democratised being an entrepreneur or an investor.

Nicola Horlick, the international investment adviser once described as “Superwoman” for her skills balancing global business responsibilities and family life, brought heavyweight gravitas to the afternoon sessions. Her own crowdfunding company is Money & Co though she pointed out her ‘crowd’ was not a large number of people. They are a select group of seriously high net worth individuals looking to make equally serious business investments (known as peer-to-peer lending).

To the previous reasons for the popularity and success of crowdfunding she added:

Fees to meet with financial advisers have created a new type of independent investor
Medium size businesses are vital to the recovery of the national economy because they employ 50% of the UK workforce, and maybe this has influenced the ‘light touch’ of the financial regulators

Business celebrity Michelle Mone, founder of the Ultimo lingerie brand, gave a very personal account of her life from a 15-year-old unqualified school leaver to founding a global brand and receiving her OBE.

It was all here. The battles won by her personal drive to overcome doubters and break through the constraints of other peoples’ limited expectations of her. Creating stunts to achieve £multi-million media coverage. Breaking in to the American market through sending samples to Hollywood film set wardrobes. Then being swindled by her American distributors who robbed her of 10 months’ stock and £1.4m. Yet never giving in, never accepting “No”.

It was inspiring and punctuated with spontaneous applause. Thank you, Michelle.

The final session of the day was a guest panel of speakers being honest enough to admit some mistakes they had made in a quick-fire round of How NOT To Do Crowdfunding. I have been helping a project I found already being run by the Steam Tug Brent Trust. Their aim is to raise funds to restore the last steam powered tug, called the Brent, which had worked in London’s Docks. My sincere thanks to them for allowing me to go on stage and share some points with the audience about what could have been done better.