independent crowdfunding adviser

Crowdfunding is firmly established as a means for individuals and privately owned businesses to generate funds, and in some case it can literally make dreams come true. Crowdfunding is a very flexible and adaptable method of fundraising which this selection of activity I spotted in July 2021 demonstrates.

I have looked at how some of the GB competitors at the Olympic Games used crowdfunding to help them get to Tokyo; how it has been used by two startup brands in the plant-based food sector; and by a trio of gin makers.

Sports funding through donations crowdfunding

Many of us are enthralled by top level sporting contests, and certainly the pinnacle in many sports is to take part in the Olympic Games. However, while commentators encourage feelings of national pride at GB success, funding varies hugely across sports; while some receive millions of pounds, others only receive thousands to get them through the Olympic cycle.  Also, several sports had their level of funding cut in the run up to the games in Tokyo, and many members of the GB team turned to crowdfunding to try and fill some of the gap and let them keep training as much as possible to compete at the highest level.

One such competitor was BMX rider Beth Shriever. Supposedly based on the likelihood of winning medals, funding for male riders stayed in place but female riders were left to their own devices. This meant Beth Shriever relied on crowdfunding donations made through the GoFundMe platform and a part time teaching assistant job to maintain her place in the team. Simply being in Tokyo was a major achievement, which the former junior world champion from Leytonstone topped by winning a gold medal.

Members of the GB Rugby Sevens squad found themselves in a similar position. After the home nation rugby football unions of England, Wales and Scotland cut their funding, a combined crowdfunding project was launched for both the men’s and women’s squad members on the Pledge Sports platform. Both the men’s and women’s teams reached semi-finals, and lost a playoff match to miss out on a bronze medal. Who knows how much their on-pitch performance might have been improved without money worries in the build-up not just to the Olympics but also other competitions they played in to keep fit and sharp?

Their reward-based crowdfunding remains open for a few days for anyone to still show some appreciation of their efforts. Rewards are still available and include coaching sessions, signed playing shirts and joining players for a day’s golf. Crowdfunding is flexible and adaptable, though in this case could probabaly have been helped by more support on social media by the players.

Equity crowdfunding to help us eat less meat

There is a growing trend to eat meat less often. Cattle farming is increasingly regarded as an inefficient use of resources, forests are cut down to create grazing land, and cows give off high levels of methane that contribute to the climate crisis.

Meatless Farm creates vegan, plant-based meat alternatives in a product range of mince, burgers and sausages. It was founded in 2016 by Danish entrepreneur Morten Toft Bech. As of October 2020, Meatless Farm employs 100 people in Leeds, Amsterdam, New York, and Singapore. Their products have a much lower environmental impact and are stocked in many branches of the leading UK supermarkets, and are available in 20 overseas markets. They can also be ordered frozen for direct delivery to consumers, and consumed in Leon Restaurants, Pret a Manger and Itsu outlets.

Meatless Farm’s current round of crowdfunding on Crowdcube closes on August 19. Against an initial target of £2 million they have raised over £3.4m from over 4,200 backers. The money is being raised as Convertible Loans. This means a share price has not yet been established. It will be set as part of the next corporate funding round, anticipated later this year, and will be based on the company valuation at that time. When it is set, the value of each backer’s loan will be converted to equity at a discounted rate of 15%, plus 5% per annum interest. This round is not eligible for investor benefits under EIS (Enterprise Investment Scheme), though does demonstrate how flexible and adaptable crowdfunding can be if you haven’t even got a company valuation.

Institutional backers dating back from before the crowdfunding include Bridford Investment Group, Channel 4 Ventures, Stray Dog Capital, and Beyond Impact. Having worked in Media Advertising and Corporate Barter Trading, the Channel 4 backing is of particular interest to me. The tv station effectively traded over £1m of advertising airtime for equity in the business. Advertising will initially run regionally across Channel 4’s main channel and on its streaming service All 4, targeting a core 16-34 year old audience. Channel 4 is in the process of moving its head office to Leeds, where Meatless Farm is based.

The Crowdcube round forms part of a total of £18,000,000 of convertible loan notes. The company raised £5,870,000 from existing investors in May 2021 and allowed for up to £5,000,000 from Crowdcube investors. Discussions are underway with addititonal institutional investors for a further investment of £7,130,000 through the convertible loan notes, though to date no agreements have been signed and no funds have been committed. Meatless Farm has the discretion to increase the total amount of convertible loan notes from £18,000,000 to £24,000,000.

Another business in the meat-free food sector that recently used crowdfunding was Ready Burger. They are a fast food restaurant chain serving vegan, plant-based, non-meat products. To date they have a solitary branch in London’s Crouch End, and yet by June 23 raised almost £2 million from over 800 investors for 22.47% equity. A second site on Finchley Road will open in September 2021, and more locations are in the pipeline.

Max Miller, co-founder and CEO, was well aware of the valuable benefits of crowdfunding beyond simply raising money. “It was important to us as we wanted to create a community of people who would support the brand and hopefully become loyal customers, eat at Ready Burger restaurants and recommend us and our mission to their friends,” he said in an interview with Catering Today.

Investors had been lined up through effective pre-selling and the first £1.5m came flying in within hours of the crowdfunding starting.

When crowdfunding is just the tonic that gin needs

I was contacted recently by the founders of a premium gin brand who wanted to explore opportunities and benefits that crowdfunding provides. I was able to find several examples of other gin makers using either reward-based or equity crowdfunding. Though one that particularly stood out is a reminder that one of the earliest forms of crowdfunding is the simple raffle.

I am a shareholder myself in a gin maker through equity crowdfunding: the East London Liquor Company has a distillery and its head office in London’s Mile End. They have just completed a second round of fundraising through Crowdcube, raising over £900,000 for 3.35% of equity from 757 backers. They already had a company valuation of £26 million.

Looking at the other end of the scale for gin startups, I found that in May 2020 five women raised £22,000 through reward-based donations crowdfunding to start the Isle of Cumbrae Distillers in Scotland. Being of a self-described “mature age,” and with no commercial spirits industry experience, it’s highly unlikely they would have met the terms required for a business loan or startup grant. Their crowdfunding project not only raised the seed cash they needed but also helped them form a group of loyal supporters who have become regular customers. One backer even offered to buy them the distilling equipment they needed to get started! They hope they will be an inspiration to other women to go in to business.

However, one fundraising effort that particularly stood out is a reminder that one of the earliest forms of crowdfunding is the humble raffle.

Bronagh Conlon became the launch director of Listoke Distillery in Ireland in 2016. She bought out the original business founders late in 2020, a process that involved valuing the company at €1.7 million. There has been considerable interest in her gin, and other spiritis, from China and Russia and Bronagh decided it was time to upscale the business. To raise an investment budget she decided to sell raffle tickets through the UK-based online service Raffall. com, for £20 (€23.30) each. The draw was made on July 9, and the first prize was a 5% shareholding in the business, potentially worth €85,000. Second and third prizes were €10,000 and €5,000, plus cases of gin.

The potential gross income from selling all 50,000 tickets was €1,165,000. At the time I bought my raffle ticket they had sold almost two-thirds of them. Even if there had been no further ticket sales, that level of sales would have generated around €777,000, of which €15,000 went in prize money and there was a 10% commission fee to Raffall.com. Allowing for other costs to promote the raffle, plus legal and other professional fees, they would have been left with at least €600,000 to invest in the business – and all for just 5% equity! This really does show how crowdfunding is flexible and adaptable.

Are you considering your own crowdfunding project, whether on an equity basis or using a reward-based model to lauch a new product? I am an independent crowdfunding advisor with no allegiances to any particular platforms. I can provide you with an object view of your plan, help improve it, and perhaps operate as a Campaign Manager to co-ordinate its execution. Crowdfunding is flexible and adaptable. Are your plans maximising its opportunities and benefits? Email me at [email protected].