equity crowdfunding Archives - Page 3 of 4

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.

Successful Equity Crowdfunding On A Shoestring

Posted on April 2, 2018 by Clive Reffell

When Joel Burgess studied Mechanical Engineering he had little idea he would one day almost single-handedly raise over £190,000 through equity crowdfunding to launch Nutrifix, an app that combines convenience food with nutritional advice and signposts where to find a meal to suit any specific nutritional need. Joel describes his equity crowdfunding as the hardest work he has ever had to do in his life. Thorough preparation was the secret to his success.

Background
Joel’s personal story is that he was a very competitive rugby player, though had to give up the game due to a serious injury. As sports people sometimes do, Joel continued for a while with the same diet but he wasn’t burning off as many calories. He took advice to redesign his diet, though was rather non-plussed as to how to maintain the correct protein, fats and carbohydrate balance when faced with the array of items available in salad and sandwich bars and restaurants. A simple mention of the calorie content of each menu item wasn’t enough.

So to help stay in shape he researched and built himself a spreadsheet based on food and meals from a range of outlets he used. The results were evident, and when Joel found 10 people were prepared to pay him £75 for a copy of the spreadsheet he began to think this level of traction showed him he might have a worthwhile idea for a business startup. He decided to develop it as an app to be more functional and interactive. He started that in September 2016 and it launched in January 2017.

Preparation before crowdfunding
Joel also built up his social media following and engaged with potential users. He discovered he had a very keen audience to test and trial the app before it was released, and in time went on to reach over 1,000 users before spending a penny on marketing.

Further encouragement came when Just Eat contributed £20,000 seed money after Joel pitched to them during London Food Week. They also invited him on their first food tech accelerator: they bought into him (people buy people!) and the problem his app was trying to solve, and the size of the market made it a viable commercial opportunity.

Support from a recognised backer, in this case a high street name, always reassures small retail investors who believe that the company’s legal team will have undertaken a thorough due diligence, and that it’s safe to get behind the startup. Joel really leveraged Just Eat’s support during his crowdfunding that followed.

A friend worked at the equity crowdfunding platform Crowdcube and so that was pretty much the extent of deciding which platform to use. Working with Crowdcube, Joel spent a lot of time on his business model and creating a P&L statement. The platform drilled right down to check any claim he was making as part of their due diligence to safeguard investors’ money.

Another pal offered to make his video for him at a reduced rate, and again Crowdcube were there to help by checking his video script avoided any false or unsupportable claims.

In the pre-crowdfunding period before his campaign went ‘live’ Joel created the majority of the social media and email content he was going to send out, with images filed and ready, and spreadsheets of financial projections and cash flow forecasts if these were asked for. He prepared to use every touchpoint available to him, including Facebook, Twitter and LinkedIn.

His preparation also included creating a list of what he imagined were going to be the most Frequently Asked Questions, and came up with answers. This way, Joel was able to answer most questions quickly with a ‘copy and paste’ technique, and to be on the safe side he added to the list every new question that was put to him, with the answer that he gave.

He was also in no doubt as to how vital it is for a crowdfunding campaign to start with a bang rather than a whimper, and he set about meeting contacts to encourage some early support. Reaching around 30% of target in the first few days, certainly at least 20%, is generally regarded as essential to create momentum and impress other investors who may otherwise be more inclined to stay sitting on the sidelines. Crowdfunding can’t be done totally online, there is still a need for some vital face-to-face personal selling.

Crowdfunding delivers more than just money
Joel’s high level of preparation meant that when the crowdfunding was ‘live’ his diary was free enough to fix meetings with potential investors who wanted to meet him, and to speak at a couple of events Crowdcube organised for him.

This part of his journey was a real emotional roller coaster. Some investors said they really liked his idea and business plan, others tore him apart and made him sometimes wonder if his dream might collapse rather than become a reality. “This is where you discover your inner resilience, you have to rise to the challenge and be ready to impress the next potential backer.”

The crowdfunding target was £150,000. In the end Joel overshot his target by 29% and raised £194,310 from 375 investors (an average investment of £518) in exchange for 24.46% of his equity. This meant he had a business that the public crowdfunding process had given a market value of £485,000. Through his crowdfunding campaign he had also grown his user network to 750 and gathered 3,500 social media followers. Effective crowdfunding is effective marketing.

And finally, Nutrifix now has a network of active investors, and many have become brand advocates who are keen to help it grow through positive word of mouth and other more direct assistance when contacted. Joel keeps in regular contact through monthly e-mails, and also reaches out to them when he needs some particular help or wants to make new contacts.

Swedish Crowdfunding

Posted on November 30, 2017November 30, 2017 by Clive Reffell

Alongside my role as an independent crowdfunding adviser I also source and create original content for a global organisation that covers trends and developments in the crowd and sharing economy, Crowdsourcing Week. The various forms of crowdfunding make up some of its 14-part crowd economy landscape. As part of the build-up to a March 2018 conference in Swedish Lapland I took a look at the current state of crowdfunding in Sweden.

Crowdfunding in Sweden

Crowdfunding in Sweden continues to grow and make headlines, from startups using donations-for-rewards crowdfunding as a sales channel for innovative products to quickly achieve high turnover, to the electric vehicle manufacturer Uniti raising €1.2m through its own equity crowdfunding just last month. It also took pre-order sales deposits on 915 units (main image).

The Swedish government wants to generally encourage crowdfunding as a credible way for small and medium size businesses to raise money and conduct business, and is scheduled to publish a report in December 2018 to propose new legislation which will hopefully create a more secure and better defined crowdfunding market. Source: ECN Review of Crowdfunding Regulation 2017.

There is no central professional body for the Swedish crowdfunding platforms and the precise number of them is open to interpretation under the existing vague rules as to what exactly is or is not a crowdfunding platform. There are also international platforms that operate in Sweden, including Kickstarter and Indiegogo in the rewards-for-donations sector and the Finnish platform Invesdor in the debt and equity sectors. General estimates reckon there are 20 to 25 players in the market. Here are the key ones.

Rewards-for-donations

As in many countries, entrepreneurs with an eye on international markets gravitate towards Indiegogo and Kickstarter, with domestic platform providers reaching a primarily internal audience.

A recent Swedish tech success at an international level was the Trippy wireless docking speaker for smartphones that operates through electromagnetic induction. 165 backers supported the project, raising €15,390.
In numerical terms a far more popular product was a range of cutaway, odour-free socks for men that aren’t visible outside shoes. William & Sterling raised over €153,000 from 4,418 backers in August 2017.
CrowdCulture, which launched in 2010, combines crowdfunding with citizen engagement. It has around 5,000 registered supporters who donate to cultural projects around the country and claim their rewards. Each donation is match-funded by regional or local funding sources operating within corresponding parts of the country. “This civic involvement in allocation of public funding has so far seen 152 projects funded, a success rate of 45% with a total allocation of over €800,000 (SEK8m), “ said Gustav Edman.

Equity and debt crowdfunding (p2p lending)

These two categories are combined as there are platforms that provide both services.

The biggest Swedish operator is FundedByMe which launched in 2011. They have a network of over 100,000 registered investors who have so far invested over €46.3m in equity and loans. FundedByMe is considering an IPO in 2018 (Initial Public Offering) to be listed on the Swedish stock exchange, and are running their own equity crowdfunding campaign through to mid-December 2017. If the IPO goes ahead there will be an early exit point for shareholders.
In August FundedByMe joined forces with Finnish investment company Privanet. Their first joint venture raised €1.2m for the Finnish media-platform builder BCaster.
In a reverse situation, the Finnish crowdfunding platform Invesdor, which already operated across other Nordic countries and in the UK, opened its first Swedish office in Stockholm in September.
Toborrow is a p2p lending platform based in Stockholm and since its launch in 2011 it has provided entrepreneurs with over €6m. Borrowers have to be already trading with a turnover of over SEK1m (around €100,000) and secure the loans with personal guarantees. It isn’t an option for anyone who requires seed or early stage funding.
Tessin is a property crowdfunding platform. It gives people opportunities to invest in a number of properties to spread any risks alongside other investors.
In June 2017 Trine, a platform based in Gothenburg, raised €6m to pursue its aim of tackling energy poverty through closing the gap between private capital in developed countries and local solar partners in emerging markets. A subsequent project in Kenya then raised over €145,000 (17 million Kenyan Shillings) to deploy solar energy systems for 6,000 townspeople.

What does the future look like? In addition to a likely new regulatory framework for crowdfunding in Sweden, right now everyone’s talking about ICOs being “the new crowdfunding.” Funds raised through ICOs now exceed early stage venture capital (VC) investments.

In Sweden, Uniti CEO Lewis Horne has set out plans to launch the first green ICO, Uniti Green Tokens (UGTs). The company will use the upfront income to accelerate its work with the open source community. Early investors will gain access to data generated by the first vehicles on the road in 2019. Further options on how to redeem UGTs could potentially include access to mobility services and car charging options – watch this space!

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].

Networking with crowdfunders in London (Part 2)

Posted on January 30, 2017February 21, 2017 by Clive Reffell

This is the second part of a two-piece blog on attending five crowdfunding-related events in eight busy days in London. As an independent crowdfunding adviser such events give me great insight in to crowdfunding motivations from the perspective of the crowdfunders, the crowdfunding platforms, and investors whether they are high net worth individuals, angel investors or venture capitalists. Here is a link to Part 1.

Networking with crowdfunders in London (Part 2) The fourth event in my sequence of five was a visit to The London Business Show 2016 at Olympia. Among hundreds of exhibitors and scores of seminar presenters I heard Henrik Ottosson of equity crowdfunding platform Invesdor and Bill Morrow, CEO of angel investment platform Angels Den.

Angels Den also ran two live crowdfunding sessions during the day and at one of them I saw pitches from three businesses that were seeking investment. The levels of investment being sought ranged from £60,000 to £250,00 (which had £175,000 already pledged).

TrooGranola, a family business making fresh granola and offering 12% equity for £60,000 investment. Already on Tesco’s radar.
Flexiapp, a free app for people to find and book a wide range of yoga, dance and fitness classes with a variety of smaller, specialist instructors as well as mainstream providers. Offering 15% for £150,000. Free for users, 30% commission payable from class instructors.
Eat Grub, what it “says on the tin” – highly nutritious energy bars made from insects and kinder to the environment than cereal bars. They were chasing the final £75,000 of a £250,000 investment target for 20% equity.

The final event was a combination of entrepreneur and investor perspectives. Equity crowdfunding platform VentureFounders staged an event hosted by Pennington Manches LLP, a leading UK law firm.

Keynote speaker was Justin Urquhart Stewart, co-founder and Head of Corporate Development at Seven Investment Management LLP. SIM “helps individuals and their families manage capital to meet their financial needs and aspirations,” and now looks after over £7 billion of their own and their clients’ money. He gave an entertaining quickfire summary of his take on topical political and economic global developments. Some of his comments included:

The Euro is ultimately bound to fail, he said, though not quite yet while Angela Merkel is on the scene. What happens if she isn’t re-elected in 2017?
The growth rate of manufacturing in China is slowing down, but not dropping as some media have mistakenly reported. And their services economy is growing too.
The emerging economies not doing so well are the ones whose economies rely on exporting natural resources – such as Russia and Brazil. The nations doing better are the ones that import resources and make things, particularly China and India.
Trump wants an annual growth rate in the US economy of 5% – but it’s impossible to grow an economy that big that fast.
The world’s overall business growth rate is about 3%, which is also the average of the last 50 years or so. To have reached 3% so soon after the 2008 financial crisis shows the world’s major economies are in relatively good shape.

VentureFounders specialise in equity crowdfunding for companies already in business, so their platform is for scaleups and not startups. There were pitches from four companies whose crowdfunding was at the time hosted on the VentureFounders platform, and between them they were seeking from £500,000 to £1.1m

Samba Networks, a mobile software company that addresses advertising avoidance for advertisers and app developers, aiming for £500,000 for 10% equity
Fatsoma, an ‘influencer marketing network’, on the day of this pitch they had received pledges of £650,000 out of a target of £1.1m
freemarketFX, a peer-to-peer currency exchange for companies with better rates and lower fess than banks
Lightpoint Medical make imaging equipment enabling cancer surgeons to remove all affected material in the first operation, reducing the need for repeat operations which is good for both the patients, the hospitals, and other cancer victims who won’t have to wait so long for a hospital bed. Without it, 1 in 4 prostate and breast cancer patients still have cancer left behind after their first surgery. CEO Dr David Tuch received the 2016 Start-up Entrepreneur of the Year Award.

I’m often asked how much equity a client should make available. Or how much money to ask for. Of course the answer is “it depends”, and it depends on a variety of factors, including the company valuation, target market share of the specific business sector any company operates in, and an investor assessment of the likelihood of achieving it. This was adequately brought home by seeing 19 sophisticated equity crowdfunding pitches in 8 days.

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.

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.

Crowdfunding sessions at a major European crowdsourcing conference

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

Spread throughout the four full days of speaker sessions and panel discussions at the Crowdsourcing Week Europe 2016 conference in Brussels November 21-25 there were a number of sessions dedicated to crowdfunding. As an independent crowdfunding adviser they were naturally of great interest to me, and here is a summary of them I’d like to share.

Fredrik Barkenhammar of House of One told us on the first day of conference about his crowdfunding project to raise money for something truly unique – building a mosque, a church and a synagogue under one roof in central Berlin. This will be a multi-denominational house of prayer and interdisciplinary learning, bringing together people of different faiths to share experiences and get to know each other through dialogue. Even people with no religious focus are welcome.

He is running open-ended crowdfunding asking for a €10 contribution for each brick – and the project will cost €43.5m. That’s a lot of bricks! His project is a stand alone, it isn’t hosted on a crowdfunding platform, there is no cut-off date, and the project keeps all donations. In these respects I guess it’s more like JustGiving than what we usually categorise as crowdfunding, though in simple terms he is asking the crowd to fund the project.

Sebastian Morvan and Olivier de Brauwere started the Brussels Beer Project (a brewery) in 2012 to shake-up Belgium’s conservative brewing sector. Through a number of rounds of donations-for-rewards crowdfunding via the Beer For Life platform they have received support from almost 2,000 crowdfunders. The formula is simple: each crowdfunder receives 12 beers, every year for the rest of their life, in exchange for €160. Watch the video here. Thanks to that support, they were able to start their venture in 2013, fund their brewery in 2015, and after the last round ended on 31 January 2016 they were able to recruit more talent and invest in more equipment.

Their website says: “Not only the financial support but also the positive energy we received from this beautiful community has been overwhelming and will bring us even further. We don’t have the means of Big Industrials – so the enthusiasm and word of mouth permitted us to take on this adventure and look into the future.”

They continue to involve their crowdfunders with pop-up beers, one every two weeks, at their open evenings (Thursday to Saturday) at the brewery. Based on this crowdsourced feedback they decide which ones to go ahead with on a commercial basis. One that got the thumbs up from the crowd was a beer made with soda bread. This had the added benefit of recirculating 10 tonnes of unsold soda bread that would have otherwise been thrown away. They are also asking their crowd to propose beers for them to brew. They have so far received 150 suggestions and the winner will be able to go to the brewery and be involved in making it.

The first day also included a panel discussion titled “Are VCs Getting Disrupted by Crowdfunding?” It wasn’t much of a contentious debate, as Bill Morrow, CEO of angel-led investment platform Angels Den made the points that there is no reason to compare venture capitalists and crowdfunding since they operate within distinctly different funding levels. Most businesses using crowdfunding are looking for far less than VCs would consider as a minimum investment.

On the second day of the conference the economist and entrepreneur Walter Vassallo, co-founder of internet company MC Shareable in Monaco, gave a talk under the heading Crowdfunding for Sustainable Entrepreneurship and Innovation. One of his key points was that crowdfunding is so much more than simply getting funded. An effective crowdfunding project also increases awareness among wider stakeholders: project proponents; project investors; policymakers, regulators and the related research community.

A new book he has edited pulls together contributions from different authors to try and identify key factors that influence crowdfunding success, and create a validation tool that can assess the viability of crowdfunding projects before they run. The average success rate on Kickstarter is 37%, he said, so there is clearly room for improvement. Copies can be ordered here. A full copy will set you back $205, though individual chapters are available at $37.50.

The third day of the conference focussed on energy and sustainability issues. The energy market shift to decentralisation and renewable sources dramatically lowers the industry entry cost for new producers. However, investment to fund new energy initiatives and bring them to fruition can often be an issue, and Dr Chiara Candelise of Ecomill – an equity crowdfunding platform in Italy – told us about Smart Financing and Empowerment: Crowdfunding in Energy. Her global study of energy crowdfunding shows that 80% of the money raised has come from loans and equity. For homeowners unable to switch to a renewable or a more sustainable energy supply, crowdfunding renewable energy projects is a further way the crowd can stimulate this market and show their support for alternatives to the established major energy producers.

Entrepreneurs always face funding issues. Cedrick Donck, business angel and co-founder of the Virtuology Academy told the conference on the final day that angel investment and crowdsourcing are increasingly popular routes. Bringing an angel investor onboard has benefits of access to their experience and contacts as well as their money. Crowdfunding could be used to raise further money on top of an angel investment, or maybe use crowdfunding on its own if for some reason you don’t require an experienced mentor.

He echoed previous speaker comments when he said positive by-products of crowdfunding include: increased visibility as effective crowdfunding is also very good marketing; you gain access to the personal networks of all the investors; and it raises your credibility to be able to say you raised money from the crowd. Downsides are that you may have been able to raise more money than the business is really worth as early investors may lack experience. This could present problems if further fundraising is needed later and the value is scaled down. And finally, you may lose some competitive advantage because you will have had to put your business strategy in to the public domain.

If you are considering crowdfunding, whether on an equity or a donations basis, please get in touch for an objective conversation with me, an independent crowdfunding adviser. My background is marketing rather than financial, and I can help with essentials such as building a big enough crowd of the right sort of people to drive to your crowdfunding project. Or maybe you know someone I could assist who is considering raising money to launch a startup, expand their business, or support a favourite worthy cause. I’m at [email protected] and my tweets are at @Cliveref. Thank you.

Crowdcube raises over £5m for itself

Posted on July 19, 2016February 13, 2017 by Clive Reffell

Before yesterday, UK equity crowdfunding platform Crowdcube had raised more than £173m from over 295,000 investors to complete 426 successful raises, and described itself as the world’s leading investment crowdfunding platform.

Yesterday afternoon that status was confirmed as Crowdcube exceeded its £5m target when they raised £5,003,024 for themselves from 1,627 pre-registered early investors useful source. This was their largest ever raise, and in the early hours of 19 July the total stands at just over £5.8m from 2,243 investors and they are still open for further business.

This initial target of £5m was set against 7.14% equity, valuing Crowdcube at just over £70m. Very handy for the co-founders Darren Westlake and Luke Lang – well done guys. A stretch target for over-funding could see up to a total of £12m raised.

Fundraising moves to Stage 2 today (July 19) when Crowdcube will open their doors to investments from the general public who will no doubt be suitably buoyed by yesterday’s strong performance.

In total, would-be investors apparently indicated an early interest in buying £50m of shares in the company. Crowdcube is believed to be setting up a secondary market where successful purchasers will be able to trade their newly acquired shares. If they do, then given that demand appears to exceed supply by a factor of over four there could be some early ‘stag market’ sales to deliver quick returns. So much for Brexit reducing enthusiasm for equity crowdfunding.

“Best Funding Solutions For SMEs” – a conference in London in May 2016

Posted on June 13, 2016February 13, 2017 by Clive Reffell

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

Asset-based lending
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.
Bank loan
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.
Peer-to-peer lending
This sector was represented by Jasper Ehrhardt, MD of Funding Knight, and Maria Samayoa, Production Manager at rebuildingsociety.com. SMEs generally have to show a minimum two year trading history.
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.
Shareholders agreements.
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.

Clive Reffell, Comanche Communications and Marketing

Four live crowdfunding pitches received a guarded response

Posted on February 29, 2016May 11, 2017 by Clive Reffell

By independent crowdfunding adviser Clive Reffell.

Live crowdfunding events give entrepreneurs valuable opportunities to deliver their pitches and receive insightful feedback from an interested audience.

An enterprising accountant, Irfan Khalil, has formed a ‘Finance for Startups’ group of over 4,000 people who are interested in equity crowdfunding. Most fall in to one of these four categories:

they want to trade some equity for a cash investment in their business,
they are looking for investment opportunities,
they are at an early stage of considering using equity crowdfunding,
or like me they provide professional services that are useful to equity crowdfunders.

Irfan organises monthly meetings at a variety of London venues. There are slots for four or five entrepreneurs to pitch their business investment opportunity in just five minutes to four or five panellists. The panellists have five minutes to ask questions, and then a final five minutes to provide feedback on what they like, what they consider ought to be better thought through, and so on.

At the end of these ‘formal’ proceedings there is then about 45 minutes of networking for everyone there to exchange ideas, experiences and contacts. Each event has a very collaborative feel to it.

February’s event was in Camden. Four entrepreneurs pitched their opportunity to five panellists in front of over a hundred people.

The panel consisted of (r to l):

Peter Richards, a partner in Venture Pilot, which provides technology organisations with a scalable structure for growth;
Amarjeet Hans, Director of Crystal Clear Business Consultants Ltd;
Raimonda Junkanaite, an entrepreneur and early-stage business adviser who is setting up CrowdVelocity, a crowdfunding-for-donations platform;
John Elsdon, Chairman of the management consultancy Allied Powers;
Akeem Famuyiwa, an intellectual property specialist and an entrepreneur with a background in pharmaceutical science.

The four entrepreneurs and the opportunities they pitched to the panel and the audience were as follows.

.James Grant, founder of Weavee.co.uk. James is creating an app that connects job vacancies, recruiters and candidates seeking work. This is a competitive area, I have seen several crowdfunding pitches in the last few months based on apps for the job placement market. James was seeking £150,000 and believed this would be the only round of investment required before he started making a profit in the back half of Year One – subject to reaching a minimal critical mass of 10,000 registered job seekers and 100 recruitment consultants. Five job agencies are currently trialling the technology. .James had pitched three months before and the panellists agreed his pitch was getting tighter and he was coming across as more confident.

Next up was Julian Tremaud, founder and CEO of Fanteamz.co. “86% of viewers skip TV ads” he declared, as a way to start explaining that he will provide organisations with an opportunity to hire teams of brand ambassadors to deliver positive word-of-mouth campaigns. He has Spanish partners and they already have successful case histories from South America, particularly in the music concert and festival sector. Julian is seeking £250,000 for 20% equity, and forecasts £21m profit by the end of Year Three.

The panel advised Julian to be better able to explain how the company valuation figure was reached. Another suggestion was try a round of donations crowdfunding before an equity deal.

Third pitch was from James Parker from Instaload. One third of all US truck mileage is with empty vehicles. Freight bookings go through expensive brokers, often at short notice that leaves the drivers stuck with no loads to pick up at their destination to then take on to somewhere else. The growers and manufacturers with goods to shift sometimes never meet or speak to the truckers who deliver their products. To address these factors, Instaload are developing an app that will provide a direct interface between the people with products that need transporting with the smaller truck companies that carry about 20% of the USA’s road freight. This 20% market share was valued at an estimated $114bn in 2014. James was seeking £50,000 to complete the app development in exchange for 10% equity.

The panel suggested it might be too difficult to raise the finance in the UK if it was going to be invested in the US. Investors would not have market knowledge to make a confident decision and generous UK tax breaks would not be available to them. There might also be heavy industry regulation that protected the brokers’ position. Later in the informal discussion it was suggested that potential investors might not believe it credible that they could get a 10% stake in a company targeting a $114bn market for just £50,000.

The final pitch of the evening was given by Borja Goyarrola, director of Gobe! Borja hopes Gobe! will become a travel/lifestyle app populated with content provided by users about their own personal favourite locations and places to go. The sharing of such local knowledge and tips would allow travellers and visitors to experience more of the living contemporary culture of a city rather than look at iconic monuments and exhibits that celebrate past achievements. Borja was a last minute addition to the roster and it was understandable he did not have a presentation available alongside his demo video.

Borja wanted £100,000 to finish developing the app and to pay for some digital and social media marketing. The panel suggested he should target some low-scale income from advertising before he pins his hopes too much on a big spending global advertiser such as Unilever stepping in to support the fledgling Gobe! I know from experience that fmcg giants and their advertising advisers can be rather conservative when faced with new marketing channels and opportunities.

Whilst equity crowdfunding is clearly about raising finance, research shows that more crowdfunding project creators have difficulties with marketing issues than anything else.

I have over 30 years’ experience in various results-focussed marketing roles and have concentrated on crowdfunding since 2014. I’m happy to meet for initial consultations free of charge. How things develop after that depends on the scale and scope of your aims and the extent of your marketing activity so far.

Clive Reffell, founder of Comanche Communications & Marketing and an independent crowdfunding adviser: E [email protected] and Mob 07788 784373.