Crowdfunding risks and returns follow the same rules as any other investment. Higher returns mean exposing money to more risk.This is certainly true in crowdfunding, whether you want to raise money for your business or on a personal basis. I wrote an article for my client BOLD Awards on this topic, which looks at the risks and returns involved in reward, debt, and equity crowdfunding. I included some examples, plus a little personal experience.
Debt crowdfunding platforms, also known as peer-to-peer lenders, generally experience an average default rate of 1 to 10%. Equity crowdfunding mainly, though not exclusively, involves backing startup businesses. On average, 50% of them fail in their first three years, and only 1 in 10 succeeds beyond ten years. Investors seek higher returns from buying equity than from providing capital for loans.
Reward-based crowdfunding, which does not involve buying equity in or lending to a startup, carries its own risks. It swiftly developed from rewarding backers with a gesture of appreciation for a donation to a project or an appeal. In many instances it has become a quasi-sales channel where the donation is effectively the purchase price of a product, and the product happens to be the reward that is provided. Even though this may sound like a straightforward transactional arrangement, it can carry risks if the product on offer is still in the development stage. It is definitely not the same in timescale or consumer protection as ordering an item from Amazon.
The rest of the article goes through the balance of crowdfunding risk and return for each of reward-based crowdfunding; debt crowdfunding (aka peer-to-peer lending): equity crowdfunding; and crowdfunding to buy fractionalised ownership of tangible assets, such as art, luxury cars and watches, rare whisky, and so on. It is over at the Bold Awards site, please use this link to continue reading: https://bold-awards.com/crowdfunding-risks-and-returns/
It’s said by many people – not just me – that as well as raising money, effective crowdfunding is great marketing. It gets you written about and maybe interviewed. It gets you noticed by would-be suppliers, collaborators, distributors, influencers, affiliates and stockists, as well as backers. I made one of own investments after being impressed when I saw, by total accident, a startup CEO interviewed on television about her crowdfunding project.
Crowdfunding is one of twenty categories in the third annual round of the international BOLD Awards. Their aim is to recognise and shine a spotlight on crowd-related breakthroughs and innovative people, businesses and projects that are leading the way and setting an example in digital industries. Other categories include AI, Robotics, AR/VR, Crypto, Fintech, Cybersecurity, Agritech, Sustainability…….. here’s the full twenty categories.
Here’s how it works. Entries are submitted online, naturally, and can be viewed by potential voters and continually updated by the entrants. There will be a public round of voting early in 2022, which is an opportunity for entrants to mobilize their communities and “get the vote out.” An international panel of judges will then take a look at the entries, and winners in each category will be decided through a blend of public votes and judges’ appraisals.
Winners will be able to collect their awards at a prestigious black-tie gala dinner on March 25th, hosted by Europe’s largest accelerator hub, H-FARM, on their campus just outside Venice. It will be a unique event, with unrepeatable opportunities to network and connect with leading edge innovators and disruptors among the other winners, the judges, and invited VIPs. Given thatcrowdfunding is great marketing, here will be your chance to make an impression in person.
Plenty of candidates would be able to enter under several categories. As an example, the Small Robot Company, with its agritech robots controlled by AI and working to improve sustainability, has recently concluded a round of equity crowdfunding in the UK.
Previous nominees in the Crowdfunding category include Startup Italia and Borrow A Boat from the UK.
Entries are open, with the price held at €77 until September 15. If you have worked hard and enjoyed crowdfunding success, get some recognition at the BOLD Awards gala dinner award ceremony in Venice in March 2022. Register to enter now, and maybe I’ll see you next March in Venice.
I had the privilege of putting questions to a number of international experts in an event organised by Crowdsourcing Week about what goes in to a successful equity crowdfounding round. This article sums up their key insights. If you want to discuss any plans of your own, I’m an independent crowdfunding advisor, which means I have no ties to any particular crowdfunding platform beyond my own personal investments. Send an email to [email protected].
Raising capital through equity crowdfunding
Andrew Zhang of Republic, a U.S. equity crowdfunding platform, ran through the essential structure of a money-for-equity campaign.
They have certainly hosted enough projects to have built up a wealth of insight and experience. Republic has enabled over 150 companies to raise a total of $45 million. Last year the average raise was $500,000. Most of the investors were non-accredited, and the raises were capped at a top limit of $1,070,000 by SEC regulations.
Successful equity crowdfunding can run alongside other funding mechanisms that between them can bring in a maximum of $5m.
There is a strict vetting process to ensure that only the best opportunities are put to Republic’s database of investors: under 1% of all applicants end up launching a campaign.
However, keeping to the theme that equity crowdfunding has democratized the process of funding a startup business, 40% of project leaders have been women, and 20% have been Black or Latinx.
Funding generally comes from four sources: friends and family; people who know the business – customers, suppliers, other stakeholders; Republic’s network of investors; new supporters brought in by marketing activities.
The usual timeline is for a three to four month campaign from going live online to issuing shares to new shareholders. Though prior to this there are issues including arriving at a company valuation, preparing marketing materials, and pre-selling to reach c. 30% of the financial target. Pre-selling ensures the public stage of a successful equity crowdfunding campaign starts with a bang and not a whimper, and gives it dynamic momentum that attracts investors looking for a home for their money.
Key lessons include the realization that at whatever stage of a company’s growth, in addition to raising money, successful crowdfunding involves, builds and strengthens communities. In an increasingly competitive environment this requires expert communication skills.
To be a successful equity crowdfunding project it should be clear what it is asking for; what the organisation raising the money hopes to achieve; and who will benefit. Any funder can go on to become a customer, an advocate, or a supplier. So keep communicating after the crowdfunding closes, share news about your progress through achieving milestones or report on KPIs.
As well as improved professionalisation of all aspects of the process, regulations are adapting to crowdfunding being a global practice. Funds need to flow freely to encourage cross-border financing, though authorities have to be aware of laundering. European harmonisation through the ECN will ease cross-border payments from outside the EU – which of course from 1 January 2021 includes the UK.
Retail investor access to VC deals
Equity crowdfunding is often described as having democratised access to investment funds for startup owners who do not mix in the same circles as high net worth individuals and VC managers. In the same way, equity crowdfunding has opened up opportunities for retail investors to invest in private companies, sometimes alongside institutional backers.
Jonathan Medved is CEO of Israel-based OurCrowd. As the country’s biggest VC investor, he said their links with crowdfunding are becoming more stretched and tenuous than before, though they still allow individuals to piggy-back on their VC investments. For a management fee and a 20% carry-over on profits, retail investors can enjoy the same pre-IPO terms as a VC. Half of OurCrowd’s investment deals are in Israeli businesses.
OurCrowd’s prospects are looking good. Their investor network includes 50,000 U.S. accredited investors. Jonathan is delighted the U.S. SEC (Securities Exchange Commission) is relaxing its stringent rules on who is allowed to invest, and how much they can invest, through crowdfunding projects. Professional qualifications can now replace former demarcations based on income or savings definitions. And smaller businesses will be able to raise more than the previous cap of $1,070,000.
Also, a recent normalisation of political and trade relationships between Israel and the United Arab Emirates has the potential to unleash a torrent of investment capital, perhaps as much as half a billion USD in the first 12 months.
Crowdfunding for Policy Makers
Author and management consultant Tim Wright, of TwinTangibles, closed the event with a session based on insights gained from co-authoring a recently published book “CROWDASSET, Crowdfunding for Policy Makers.” The book looked at crowdfunding from a variety of perspectives, given that policy makers can represent the interests of diverse stakeholders.
His visual device representing the core benefits of a crowdfunding campaign relates to core policy maker interests. In gaining a better understanding of what is of key concern to policy makers, crowdfunding project leaders can better ensure their campaign is fit to succeed.
Naturally, the key element of the whole exercise is that businesses want to grow. For that they need Finance, which in equity crowdfunding is achieved by selling part-ownership of the company. This aspect is overseen by financial regulators and authorities that ensure compliance with financial regulations. National tax regimes differ on how they treat the funding received, cross-border investing is scrutinised for possible money laundering, and the U.S. has an added complication of different rules that apply to accredited and non-accredited investors.
Some countries still bar equity crowdfunding in the interests of protecting unsophisticated investors from possible financial harm, including India.
Crowdfunding also provides Insight to company founders through receiving feedback from people on the nature and structure of the business, validation of the value put on the business, and feedback on the proposed products or services to be delivered. Business trading standards authorities, as an example, would be keen to know that any products offered by firms using crowdfunding meet statutory minimum requirements.
Good Communication is vital for successful equity crowdfunding. This covers the marketing activities, raising awareness and stimulating sales. Most countries have extensive regulations on what can and can’t be said about crowdfunding opportunities, which can differ from one to another. So a crowdfunding campaign can’t always be picked up from one country and then run again in another.
Networks relates to a business’s customers, suppliers, supporters (who may not always be customers), and social media followers. Trading and Advertising authorities would once again be involved here.
And finally, there are also the vested interests of the crowdfunding platforms themselves, who are often members of their own professional trade representation and lobbying group. Such groups include the UK Crowdfunding Association, European Crowdfunding Network, National Crowdfunding & Fintech Association (NCFA) in Canada, and Bundesverband Crowdfunding eV in Germany.
The breadth of interests and responsibilities of related policy makers is thus extremely wide.
Don’t forget, if you want to disucss your own thoughts or plans for an equity crowdfunding project feel free to email me in confidence, I’m an independent crowdfunding advisor: [email protected].
Covid-19 vaccinations have started and perhaps provide a route back to some normality within a few months. Though many businesses haven’t had the luxury of being able to simply batten down the hatches and wait that long, and many people who used to work for them face a turbulent 2021 full of change.
The ranks of the self-employed and small businesses are going to grow. Crowdfunding provides solo entrepreneurs and startup businesses with many benefits, including product testing and raising awareness alongside raising finance without melting down credit cards, re-mortgaging the family home or taking on other forms of a loan guaranteed against personal assets.
Business experience is valuable
Those who had reached the autumn of their career may feel particularly uncomfortable about going it alone in a fast changing world where digital natives appear to be increasingly calling the shots. Yet as The Blockheads’ band leader Ian Dury might have said, there are reasons to be cheerful.
A 50-year-old tech startup founder is 2.2 times more likely to be successful than a 30-year-old.
A 50-year-old startup founder is 2.8 times more likely to be successful than a 25-year-old.
A 60-year-old tech startup founder is 3 times more likely to be successful than a 30-year-old.
Not everyone works in tech, though I find it reassuring to know that founding a successful startup isn’t the exclusive preserve of the young, and that the younger business founders aren’t always the best. In my role as an independent crowdfunding adviser I have met many startup founders of all ages. It is always dangerous to make sweeping generalisations, though the high value of transferrable skills and just general understanding of how businesses run is much stronger among older founders. They appreciate far better how solidly things have to done, how robustly claims and plans have to be validated, and that hope isn’t a strategy.
10 top tips for a career change
I’ve been made redundant twice, and worked for a company that folded and left us all high and dry. I know how former salaried employees in their 50s feel, and I offer my ten top tips on setting out in business alone.
Doing new things, outside of a comfort zone previously full of support, is scary. You’ll get through it.
Most of your previous contacts have become useless because they were part of that former comfort zone, your former life.
Reconsider the people who you know, and build connections among a new group of people who are going to be able to help you.
Think equally about how you can help them, relationships will not be built just on how they could help you.
It’s difficult to achieve a target daily pay rate, so do what comes up that looks like it would be good to be involved with.
But don’t forget that time is your most precious asset, particularly when starting a new enterprise later in life.
What you knew before is not going to be enough. You should remain curious and love learning. This is now easier than it ever was with the range of material available online.
Add practice to your knowledge, by simply getting out there to start providing others with the benefits of your knowledge and skills. Even work free for a local charity or community group rather than keep them to yourself. This will help teach you how to best present that knowledge in a way that builds confidence.
Confidence is what your new customers, and maybe later on partners or investors, will recognise and buy in to.
Work with people you like, who respect you, and pay you on time. Life’s too short to do otherwise.
If you want to know more about crowdfunding, either as a means to check consumer demand for a new product, or to raise finance for a business to grow, you could start by following me on Twitter. I also regularly write articles about crowdfunding for Crowdsourcing Week. When you’re ready for a conversation, please first email me at [email protected]. I am an independent crowdfunding adviser, providing objective and impartial advice with no ties to any particular crowdfunding platforms.
Governments the world over are encouraging more people to use bicycles, and various forms of crowdsourcing are used to support their efforts. This article looks at co-creation to map popular cycle routes in a city; automated sensors and data collection to monitor traffic levels in smart cities and control the flow; and the use of civic crowdfunding to steer local authority decision-making and influence local residents and other stakeholders.
At a macro level the benefits appear to be evident. Reduced traffic levels reduce congestion and air pollution. The built environment needs less space used for parking. A fitter and healthier population puts less pressure on the health services.
At a personal level, cyclists feel empowered by measures they are taking to protect the environment and improve their physical fitness. And right now, cycling is being promoted to reduce the number of people using public transport to help maintain social distancing.
The GB Bicycle Association reported that in the first full month of lockdown, April 2020, sales of bikes priced at between £400 and £1000 more than doubled compared to April 2019 (rising by 112% in number, 99% in value). A UK Government scheme offering online vouchers for use as payment towards repairing old bicycles to a state of roadworthiness crashed under the weight of overwhelming demand.
Co-creating route maps
Road safety remains the paramount issue, more so among female cyclists. A crowdsourcing project in the Indian city of Bengaluru, run by the Directorate of Urban Land Transport (DULT), has asked the city’s cyclists for details of their favoured routes through the city, and where they would like dedicated cycle lanes installed. DULT’s aim is to team up with the city civic body and create an initial 34 km network of routes in the outer parts of the city before working into the centre, eventually making the whole city more cycling friendly.
It follows a similar exercise carried out in Kuala Lumpur, Malaysia. Car ownership stands at 93% of households, the third highest level of any city in the world, and much of the city centre is a cycle no-go zone. The bold efforts of Jeffrey Lim, a keen cyclist and vintage cycle restorer, saw city authorities earmark a $765,000 budget to create the city’s first cycle lanes.
Smart city traffic management
Many major cities have bike-sharing schemes. In 2015, Barcelona launched its “Bicycle Strategy for Barcelona” government measure, which encouraged increased bicycle use as a habitual mode of urban transport. Its ‘Bicing’ bike share scheme was suspended when emergency measures were first introduced to tackle Covid-19 in April 2020, though from the start of June the network was re-opened with 97 new hire stations planned, and more than 1,000 additional new cycles available.
Beyond bike-sharing, Copenhagen has installed intelligent traffic signals that prioritise bikes and buses over cars. This system can potentially reduce bus travel time by 5–20% and cycle travel time by 10%. Copenhagen has also built a citywide network of protected bike lanes, as laid out in its strategic plans published in 2011. Local authorities across the country collect as much data as possible, both quantitative and qualitative, to inform their decisions on anything related to cycling.
Transport for London similarly uses video sensors with artificial intelligence capability at 20 locations across London to detect the volume of different modes of transport, especially cyclists and pedestrians. This data will be used to assess demand for new cycling routes in the city.
Civic crowdfunding for cycle routes
Crowdfunding has been a successful way for several cycling related startups to sell products and launch a business through selling equity. I’ve seen projects for cycle wear that lights up at night time, bicycles made of bamboo, even a cycle repair business based on a barge travelling up and down English canals. Though there does remain an element of hostility from a minority of motorists – and pedestrians, understandably, when confronted by a cyclist using the pavement.
Hostility, or at least deserved wariness, runs both ways. I‘m a regular cyclist, and I’ve had two shoulder operations due to accidents caused by a car drivers and a passenger. I also know what it’s like to be abused by drivers for things like not being able to go as fast as they’d like me to, or for being annoyed when they turn across me without indicating. So I do have a personal interest in dedicated cycle routes.
Critics of such routes complain they restrict road widths for vehicles, actually increasing congestion and journey times, and pushing higher traffic levels on to roads that were previously less busy.
Civic crowdfunding can not only raise some of the cost of cycle routes to influence local authority decision-makers (more usually design and feasibility studies than actual construction costs), but can also operate as a marketing initiative to influence residents and other stakeholders in a community.
This strategy worked well in Denver (fantastic place, 360 days a year with sunshine!), when Colorado’s biggest city built its Arapahoe Street protected bike lane. Community organisations engaged residents and business owners early in the design process, and this made a huge difference. The Downtown Denver Partnership, a local business group, initiated the project based on what it had heard from business leaders. To build on this public support, it launched a crowdfunding campaign to cover $35,000 of the design costs.
“Letting communities vote with their dollars isn’t just about budgets. It is much more about letting local residents and businesses know early on about the project and allowing them to participate in a meaningful way,” said Kate Gasparro, Graduate Research Fellow of Sustainable Design and Construction, Stanford University.
Three ways crowdsourcing is boosting cycling
Whether it’s research among cyclists drawing their favoured routes on paper maps, sophisticated traffic management technology in smart cities, or civic crowdfunding to let all elements of a community input ideas as well as raise money, the effects are boosting the takeup of cycling the world over.
I originally wrote this article for Crowdsourcing Week. Please contact me if there’s anything you’d like to ask or discuss about running a crowdfunding project. Email me at [email protected]
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.
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.
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.
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 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.
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.
As an independent crowdfunding adviser I had my eyes open among the hundreds of exhibitors at the 2017 London Boat Show (January 6-15) to find ones operating on a crowd economy/sharing economy business model. This article features three of them, the oldest being twelve years old and the youngest is a brand new company that launched at the show.
Beds on Board is a simple concept to grasp. It’s like Airbnb except all the accommodation is on boats that don’t leave their mooring. Since 2015 it has operated as an online as a peer to peer platform connecting boat owners and accommodation seekers. The average amount of time an owner uses their boat is the equivalent of just six weeks a year, so they are very often vacant though still with on-going costs of a mooring place (usually in a marina) and maintenance. Yachts and motor cruisers not only depreciate, but also cost approximately 10% of their capital value per year to keep and maintain. Beds on Board enables owners to have an income from renting their boats at minimal risk to overnight guests who aren’t going to do any sailing or cruising.
Boat owners with safe, comfortable boats with shore-side access that comply with all local laws and regulations can list their boats for accommodation-only rentals by guests. Guests looking for alternative accommodation and who respect boats and marinas can search for boats to stay aboard and enjoy a novel way to relax at their chosen destination in over 40 countries. Once accommodation seekers sign up on the website, they are able to make bookings after identifying their required date, number of people and a verified payment option. The owner then has 48 hours in which they can veto a booking if they have any reason to.
There are some ground rules to follow (e.g. no parties and anyone not on the booking form not allowed on board), and all guests have to be able to swim. At the end of the booking the owner and guests rate each other to encourage mutual best behaviour.
A company that does rent out privately owned boats for sailing is the brand new Borrow a Boat. At the same time as most boats remain unused for the majority of time, 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.
The three founding partners all share a passion for boating and have spent much of their lives on the water. They definitely know their bowsprit from a bow thruster and can talk with comforting authority to owners and renters alike.
I’ll talk in greater length about the third exhibitor using a crowd economy business model. Twelve years ago, before any of us had heard of or even imagined going online to share car rides, parking spaces or spare bedrooms with people we don’t know, FlexiSail launched itself as a closed-user group boat sharing business based on the English south coast. I caught up with their Business Development Manager, Susannah Hart, to hear more.
As with all boat charter companies, FlexiSail’s aim is to make recreational boating more affordable and is designed to give a greater number of people an opportunity to get out on the water regularly without actually buying a yacht or motor cruiser. Their key difference is achieved through a boat share membership scheme. As opposed to a traditional boat charter business that offers access to an interchangeable pool of vessels, each boat user commits themselves to just one particular boat from FlexiSail’s fleet. They pay a fixed monthly membership fee determined by the size and how often they wish to use the boat of their choice, and when they have that boat booked out it is exclusively theirs.
Through this method of exclusive access the boat users share some of the ‘pride of ownership’, though without the long-term costs, commitment or worry as FlexiSail completely look after, maintain and manage every boat in the scheme. It is this sense of ‘ownership’ which really sets the FlexiSail model apart from other boat charter initiatives as it helps boat owners trust the boat users to keep them in immaculate condition. What also reassures the boat owners is that FlexiSail ensures all members have appropriate sailing experience and qualifications for the boat they wish to use. On signing up, members gain access to an exclusive RYA (Royal Yachting Association) Training Centre – FlexiSail Training.
It is also possible to join FlexiSail as a crew member and be available to help on the boats under the command of fully qualified sailing members, the temporary boat ‘skippers’. This is not only for less experienced sailors but for anyone who is unable to make the full commitment of a FlexiSail boat share – even some sailing instructors are signed up to FlexiCrew.
their boat will be professionally managed and maintained
the hassle, worry and costs of ownership are offset
there are adequate safeguards and controls in place to protect their asset
In keeping with the growth of the rest of the global crowd economy, the key to the development and success of FlexiSail’s membership sailing model is the advancement of technology. Their online systems are designed for members to autonomously manage their own bookings, further engendering that sense of ownership.
FlexiSail’s iCalendar booking system gives people the greatest amount of flexibility. Bookings can be made up to 12 months in advance and amended or cancelled at the touch of a button. All members are entitled to a certain amount of time throughout the year, dependent on the level of membership they buy into, and this time is guaranteed, the system knows this and over-booking cannot occur.
Standard charter companies rely on labour intensive check on and check off procedures. This increases costs and also means a third party has to be present. This not only restricts flexibility of embarking and disembarking times, but also takes away the feeling that it is ‘your’ yacht. FlexiSail has a comprehensive online system called the iBosun, which allows each member to take care of all of this without any restrictions. A simple form, the iBosun is completed on arrival and departure, and any issues reported are emailed directly to the FlexiSail management and maintenance teams to be dealt with in a timely and competent fashion.
FlexiSail currently provides access to 18 boats for 175 boat ‘skipper’ members plus 25 crew members. Their annual turnover is in the region of £700,000 and they are considering crowdfunding as a means to purchase their own boats.
From one perspective these three examples are about people being able to create an income from an under-used asset within an online framework that vets the users of that asset to protect the owner. Crowdfunding is similar: people with under-used wealth are able to potentially gain a higher income from it through investing in companies pre-vetted by the equity crowdfunding and peer-to-peer lending platforms. However, equity investments cannot be guaranteed to provide a return, or even to hand back the original investment, so do so with due diligence and the standard advice is always to invest in a range of companies to offset risk.
From another perspective it’s about people having access to something that was previously our of their reach, whether it’s the use of a fantastic yacht or motor cruiser, or access to funds to launch a startup company or expand an existing business. If that’s what you want to do then as an independent crowdfunding adviser I can help you with your first steps of understanding how crowdfunding can work best for you, and work with you to create an effective pitch to investors. Contact me at [email protected].
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.
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.
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.
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.
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.
This event in east London’s Mile End Road explored a comprehensive range of funding options available to SMEs, including equity and debt crowdfunding. I attended in my capacity as an independent crowdfunding adviser. Here is my summary of key points from the day in four sections:
A) An approximate, overall market background of funds secured by UK SMEs in 2015
B) The range of funding opportunities available to SMEs
C) Concerns for SMEs to be aware of when raising funds to grow
D) Insights on successful equity crowdfunding
A) Overall market background
Matt Adey of the British Business Bank presented an overview of the funding landscape, the trends and latest figures available on financing SMEs in the UK.
Many small and medium size business owners, particularly in early days, prefer to bootstrap their way through rather than commit themselves to any obligations to third party finance providers. The extent of using someone else’s money may be restricted to existing bank account overdraft facilities or credit cards – which are already in place and immediately usable click resources.
61% of SME owners that do go further use just one source of external finance and in most cases that is their bank. Bank lending to SMEs is recovering, said Matt Adey, despite the continuing groundswell of media comment to the contrary. What clouds the picture is that high street banks are cutting overdraft facilities, according to Bank of England figures, whilst at the same time making more funding available through loans.
Awareness of other sources of finance is growing, as shown by research conducted for British Business Bank. Almost half of UK SME owners were aware of crowdfunding as a source of finance when the research was carried out in October 2015.
B) The range of funding opportunities available
This is effectively peer-to-peer pawnbroking, securing short-term loans against assets provided as security, as explained by Richard Luxmore of Funding Secure. No business plan or cashflow projections required, just an asset the lender will keep if you don’t make the repayments.
Stock market flotation Companies in the EU can be as large as up to 250 employees and a turnover of €50m and still be an SME. Nick Parker, FD of newly floated Yu Energy took delegates through his recent personal experience. Yu Energy floated on AIM in March 2016 based on a turnover of £3.9m the previous year.
The biggest source of SME funding and on the rise, explained by Ian Warren, Senior Lending Manager at NatWest Bank. Total bank lending is increasing, though to some people it doesn’t seem so because overdrafts for SMEs are being cut.
Equity crowdfunding This sector was represented by two platforms: Frank Webster, Campaigns Director at Seedrs and James Sore (pictured), Chief Investment Office at SyndicateRoom. They both stressed that crowdfunding is no easier way of raising money than any other method. The sector has brought opportunities back to the general public to make direct investments in businesses. It is highly regulated, though investors still have to take responsibility for their decisions and conduct due diligence.
European Union Chris Farmakis, EC Funding Manager at GLE Group, explained that through the Enterprise Europe Network they can provide EU funding for “highly innovative SMEs with a clear commercial ambition and a potential for high growth and internationalisation.
Pension-led funding Anthony Carty of Clifton Asset Management pointed out that corporate pension funds are mainly invested in equities, in companies. So why not invest your own pension in your own company? They verify that it makes sense, to the extent that just 1-in-5 applications are authorised. This process can take three months. If you make it, you can get the government benefits from putting money in your pension, and then put it to work for your business. “It’s like having your cake and eating it,” said Anthony.
Invoice discounting Explained by Helen Mackenzie of Platform Black. You can get a high proportion of an invoice’s value very quickly rather than wait for however long it’s going to take to get paid the normal way. Obviously a business has to be trading to have some invoices, so it doesn’t help startups. Platform Black particularly want to work with businesses over two years old with a minimum £500,000 turnover.
C) Concerns to be aware of when seeking funds to grow
Your personal and business credit rating.
Martin Mitchell and Jamie Allan of Experian highlighted the importance of making your credit score attractive to investors. This included checking for unknown County Court Judgements against an individual or their business. Simple things like paying bills on time improves a credit score. Click here for further information on access to monthly or annual reports.
Intellectual property protection and ownership. Seeking investment involves telling your secrets, advised Clive Halperin of GSC Solicitors. Make sure what you tell people can’t be copied or stolen. There are trademarks, copyrights, patents and design rights. Make sure you understand the differences and use the most relevant one(s). Also, investors will not be keen if the business does not own its own IP. So don’t try to be clever and own it separately somewhere else.
This was also covered by Clive Halperin of GSC Solicitors. Shareholder agreements have to look to the future, not just reflect the present. Give yourself room to manoeuvre if a business partner stops pulling their weight. Allow for death, incapacity and for simply wanting to do something else instead. Consider all circumstances of share transfers, issuing new shares, restrictive covenants, deadlock resolution procedures, and more. And as Bill Morrow, CEO of Angels Den later added: “If you sign anything [i.e. a shareholders’ agreement] and you don’t know what the likes of ‘tag and drag clauses’ are then you will not survive.” Don’t totally rely on advisers, make sure you actually understand it all.
Secure EIS and SEIS tax advantages for investors.
Founder and CEO of P2P lender Startup Funding Club, Stephen Page, explained the value of these tax break schemes for investors. Business seeking investment should be ready in advance, particularly if the end of the tax year is looming.
D) Insights on successful equity crowdfunding
It requires and dedication time to identify, locate and get in front of enough potential investors to find the one(s) who will back your business. Frank Webster, Campaigns Director at Seedrs (pictured) said: “To raise money, get out there and talk about it [your business]. To potential investors there is nothing special about your business. They’ve heard it all before. So share it.” Or as Paul Grant of The Funding Game put it: “You’ve got to kiss a lot of frogs to find a prince.” He reckoned that on average it takes 50 approaches to find an investor.
Share your idea, don’t hold back, and don’t expect people to sign an NDA before you tell them about your business idea. To reinforce what Frank Webster of Seedrs said, Stephen Page, founder and CEO of Startup Funding Club said: “I’m not going to sign over a thousand NDAs a year. I know what we talk about is confidential. Investors aren’t going to steal ideas, it’s not what they do.”
When you do find a potential investor who shows interest, don’t rush things. Don’t immediately give a potential backer too much information. No one is going to stop what he or she is doing to read your 25-page business plan e-mail attachment on the strength of a brief conversation you had the previous day. “Investors have to be wooed,” claimed Roderick Beer of the UK Business Angels Association. “Don’t ask to marry them on the first date,” advised Paul Grant (in picture). Personally, I’d say don’t make yourself sound desperate as it can put people off.
You need a team Investors will be wary of a one-man band, no matter how much of a genius you think you are. All the people from Seedrs, SyndicateRoom, Angels Den, Funding Knight, Invesdor and Startup Funding Club supported this point.
Don’t rely on your Business Plan Investors will want to know you have prepared one, but as to how accurate a plan for a startup can ever be is acknowledged as a mystery. What’s more important, said Stephen Page of Startup Funding Club (pictured), is knowing what your cash flow is going to be like, and how long it will be before you need to raise more funds. And as the person who has had the great idea for your business, if you can’t write your own business plan you will be dead in the water, said Bill Morrow of Angels Den.
A mentor can be more important than money. Money can be raised later, because maybe what’s needed first is a mentor with experience and contacts in the business sector you want to operate in. Jonathan Pfahl, Founder of Rockstar Hub International said they can effect introductions, and Bill Morrow of Angels Den said they even train their investors on to how to be better mentors. That’s why, he claimed, 94% of the companies that have raised funds through Angels Den remain trading.
If you are considering a crowdfunding project, whether equity or donations-for-rewards, I am an independent crowdfunding adviser with a marketing rather than a financial background. Please contact me about anything to do with identifying and building your own crowd of backers, and underpinning your crowdfunding project with an effective marketing campaign to get noticed and deliver results.