A Snapshot of Small Business Crowdfunding Projects

Posted on by Clive Reffell
Examples of small businesses using crowdfunding

Crowdfunding’s a great way for small business owners to raise alternative funding that’s usually not enough for VCs to be interested. An article published in September 2023 by Small Business Trends gave an overview of five types of crowdfunding, plus five benefits that crowdfunding delivers.

Crowdfunding can certainly do more than just raise money for a business, and here are more than five benefits.

  • Crowdfunding can provide social proof and product validation to show that startup business founders are going in the right direction.
  • It can also be used by existing businesses of any age to develop new products and expand.
  • Early crowdfunding backers can provide valuable feedback as a business tries to fit all the pieces of a jigsaw together to achieve success.
  • Early backers can also become brand advocates in a virtuous circle that allows customers to become investors and investors can become important customers.
  • Pre-orders can de-risk the first production run of a new product, and even multi-national companies including Sony, Coca-Cola and Mattel have used crowdfunding to test consumer demand. 
  • Crowdfunding is very flexible and not only for consumer-facing businesses. Although it’s not exactly small these days, B2B mineral extraction company Cornish Lithium has just closed a crowdfunding round having raised £5.1m.
  • Whatever type of business you have, a well planned and executed crowdfunding campaign also provides great marketing support to build awareness of a business and attract interest. Get in touch if you want to discuss your ideas.
  • Crowdfunding opportunities can also appeal to everyday retail investors who choose to support companies that are active in certain specialist business sectors.

Fashion

Recycled clothing is becoming more and more popular as awareness grows of the amount of waste in the fashion and clothing industry. Immaculate Vegan is an upmarket vegan and sustainable fashion platform. Encouraged by 56% year-on-year sales growth, it launched an equity crowdfunding campaign that closes/closed on September 26. Its target was £200,000 – it reached over £300,000 from more than 300 investors.

Cycling

There have been many successful small business crowdfunding projects in the cycling sector. I guess they appeal to people who want to invest in businesses that may help get people out of cars and tackle air pollution.

Two years ago, the Smart Tyre Company startup in Ohio, USA, developed an airless tyre for road bikes in partnership with NASA. They claim they have both the elasticity of rubber and the strength of titanium, and made them available through crowdfunding on Kickstarter. With 16 days to go at the time of writing, almost 300 backers had pledged just short of £125,000 to order a set of the innovative bike tyres.

Scottish startup Intra Drive is also using equity crowdfunding, through Crowdcube, to help bring its new 8-speed mid-drive for e-bikes to market. The redesigned e-bike motor comes with enhanced efficiency that simplifies manufacturing; a lighter gearbox; integrated electronics; an innovative display interface; and it is easier for manufacturers and consumers alike to fit it.

Healthtech

Healthtech startup AudioTelligence launched a crowdfunding campaign for its hearing enhancement device. Having decided to go-it-alone rather than sell out to an established rival, their small business crowdfunding goal is £400,000 to fund the manufacture of an initial batch of 1,000 units. Feedback from these early backers will be very valuable to aid product development.

Sport

The company that owns both the Cornish Pirates rugby club and Truro City football club in Cornwall, Kernow Sport, has raised over £413,000 from nearly 500 investors by offering equity through crowdfunding. It’s the first stage of raising a £2.5m total as the main benefactor begins to wind down his personal investment in the two clubs, reported the BBC.

Small bsuiness crowdfunding can support sports clubs like the Cornish Pirate rugby team

Community-based projects

The legendary Filmhouse Cinema in Edinburgh is raising the first £250,000 of a total £1.25m needed to re-open with a 21 year lease in its existing building which is being refurbished.

By September 17, a 2021 Masterchef contestant was over 80% of the way to raising £35,000 through reward-based small business crowdfunding to help him open a new restaurant in Bishop Auckland, northeast England.

Proptech

Small buiness crowdfunding helps raise smaller sums than VCs are interested in

HouseStars is an AI-powered app that connects property owners with building trades people. It is 98% of the way to its £125,001 equity crowdfunding target on Seedrs. As at September 25 there were 23 days left to run. SEIS investor benefits are available, which for taxpayers include a rebate through the tax system of 50% of the amount invested.

Food and beverages

World Tea News reported that New York-based Leaves of Leisure, a luxury herbal tea brand with a focus on zero and low caffeine teas, has launched a crowdfunding campaign aimed at growing the brand and expanding into new markets. CEO and Founder Allison Ullo hopes to raise $50,000.

Crowdfunding, through offering equity or bringing new products to market, is definitely a strong option for many small businesses with big ambitions. I am an independent crowdfunding adviser, with no ties to any particular platforms. Whatever sector you work in, crowdfunding is very flexible and could play a role to help turn your innovation and dreams in to life-changing reality. If you’d like an objective assessment of how crowdfunding could provide a solution for you, and how close you are to being ready to use it, then please get in touch. Send a message to [email protected].

Building Sound Foundations for a Startup Through Crowdfunding

Posted on by Clive Reffell
Louis Timpany, founder and CEO of Fix Radio

I was fortunate to meet recently the founder and CEO of the startup Fix Radio station. Louis Timpany did some building site work as a student and experienced the building trade’s love affair with the radio. He listened to their gripes and grumbles about what was on offer, and then set about creating a different type of startup commercial radio station that better suited their listening habits – sometimes all day, most days – and also championed their causes. He then had to set about monetising it to build a secure future for his niche radio station which is outside the established pattern of how a commercial radio station operates these days. Louis turned to equity crowdfunding.

After starting with a regional presence based around London and Manchester, in 2022 the station was granted a national digital licence. Since then its listening audience size has grown by nearly 250%, and national advertisers including B&Q have recognised the Fix Radio station’s ability to deliver a key advertising audience with low wasteage.

The station also gets behind what matters to the building trade. Such as the grim statistic that men who work in construction have the highest suicide rate of any industry sector in the UK. The seemingly never-ending introduction of one-way roads and width restrictions make life more difficult for builders – and their clients. Post-Brexit immigration rules are exacerbating the construction sector’s skills shortages, and escalating fuel and building material prices mean it’s harder to manage costs and make adequate profit.

For those of you that know me, I spent a couple of summers as a student preparing for each September’s new rugby season by working for a local builder, and later I spent six very rewarding years working at the generic marketing body for the UK commercial radio industry. There was a certain inevitability that I would sign up to Fix Radio when I came across their crowdfunding campaign in 2022, and I was one of nearly 350 investors who backed the station with over £950,000.

The funds allowed Louis Timpany to scaleup his startup radio station by expanding his team; run promotional events across the country to build awareness among potential listeners and commercial supporters; and sign up to industry acceptable audience measurement research. Naturally I wish Louis and his team great success!

If you have a startup business and are thinking about how to raise a budget to accelerate growth, please get in touch to discuss whether crowdfunding is going to be appropriate for you. I will provide you with independent crowdfunding advice and set out a seven-stage appraisal to get you ready.

New UK Crowdfunding Platform CrowdInvest Will Offer Equity in Indian Startups

Posted on by Clive Reffell
Clive Reffell's interview of Nakul Garg, co-founder of crowdfunding platform CrowdInvest

Since January 2022 I have written numerous articles for what is going to be a new equity crowdfunding platform in the UK, called CrowdInvest. Its unique market position is that it will offer UK investors opportunities to buy shares in tech startups that operate primarily in India, which is the world’s third largest startup ecosystem. With a population approaching 1.4 billion, startups in India can seriously scaleup without the added complexities of developing or servicing a market in other countries.

CrowdInvest is a group entity of Red Ribbon Asset Management Plc, an Indo-British investment company established in the UK in 2007. Crowd Investments Limited is an Appointed Representative of Prospect Capital Ltd, authorised by the Financial Conduct Authority in the UK, and investor benefits will be available under the HMRC’s EIS and SEIS schemes.

I recently interviewed CrowdInvest’s co-founder Nakul Garg, an alumni of the London School of Economics. With his permission, here is that interview that was originally published at his LinkedIn account.

Let’s begin with something that many people ask. The Financial Conduct Authority approves CrowdInvest. Particularly for anyone new to equity crowdfunding, does this mean their money is safe?

Money is safe, and we will comply with all FCA requirements and vet the startups we will host to ensure they offer viable investment opportunities. We also ensure that lead investors back the deals and that the risks borne by retail investors are shared with them. However, the failure rate of startups anywhere is notoriously high, and the success of any individual startup cannot be guaranteed. Capital invested in private companies will always incur a level of risk.

UK investors who buy shares through equity crowdfunding enjoy valuable tax advantages when they invest in privately-owned UK companies registered under the HMRC’s EIS and SEIS requirements. Why will they choose to invest in Indian startups?

This is something we seriously thought about. Our solution is that we will require Indian startups to open a branch office to scale their operations in the UK. Doing so will make them eligible for the HMRC’s EIS and SEIS tax benefits. Also, we will onboard UK startups who are already eligible for EIS and SEIS tax benefits and wish to scale up operations in the Indian market.

So the CrowdInvest platform will also host non-Indian startups?

In the first phase, we will focus on startups located anywhere in the world who operate in or want to scale up in the Indian market. They will principally, though not exclusively, be Indian startups. In a second phase, we will onboard investment opportunities from African and south east Asian markets and open up opportunities for investors from other parts of the world. We will truly be a cross-border platform.

Does CrowdInvest have to be approved and regulated by any Indian authorities as well?

No, when we start trading, we won’t cater to Indian investors, so we are not required to be regulated by the Indian regulatory bodies. All our financial promotions will focus on UK investors, so we need to comply with only UK laws and regulations.

What investment options will CrowdInvest provide?

In the first phase, our focus will be on equity crowdfunding and convertible loans. We will start offering other alternative financial instruments as we grow our market penetration.

How will CrowdInvest win the trust of investors? 

We will make sure only vetted startups are onboarded on the platform. The vetting process will include rounds of preliminary checks and due diligence to ensure they have the required certificates, licences, intellectual property, and everything else in place per UK standards.

Other crowdfunding platforms have webinars for startup founders to pitch to potential investors and for investors to ask questions. Will you be doing the same?

Yes, we will, through panel talks, speed date sessions, virtual round tables and YouTube. CrowdInvest will also provide newsletter inclusions and social media promotions. 

With the market value corrections that have taken place this year in the startup space, it has been reported that Indian startups have shed over 11,000 employees, and several are now operating at valuations lower than their IPO. Is there any feeling you may have maybe missed the peak market?

In India,Inc42collects data and reports on the startup scene. They said a little while ago that 57 VC funds launched in 2022, 37 focus on early-stage funding. Seed stage funding in India in the first half of 2022 has been four times higher than in 2021. So whilst a market value reset has certainly taken place, many investors had already turned their attention to the higher ROI generally available from backing startups earlier in their lifecycle. This is where CrowdInvest will operate. So No, we haven’t missed out on anything.

That’s very positive to hear. We’re nearing the end of the interview. Can I ask you what is your own background in crowdfunding and what drew you to it?

I started in the crowdfunding industry three years ago and have since carved out a niche for myself in cross-border investments and fundraising in the Indian startup ecosystem.

I graduated with a Masters from the London School of Economics and gained more than eight years of experience in entrepreneurship and risk consulting, with an extensive background in business development and crowdfunding. My expertise lies in developing and maintaining strong client relationships.

I am also a recognised early-stage entrepreneur, endorsed by the LSE Entrepreneurship arm (LSE Generate) and incubated at IIM (Indian Institute of Management) Udaipur Incubation Centre. Additionally, I have worked with PricewaterhouseCoopers in Consulting and served US-based startups with their financials while working at a PCAOB registered firm (the Public Company Accounting Oversight Board).

That’s very impressive and well-rounded. A final question, if I may. Do you already have some longer-term aims for CrowdInvest?

We will certainly democratise platform ownership by running our own equity crowdfunding. Our vision is to become a crowd-owned alternative investment platform operating across international borders.

Thank you, Nakul. I wish you success. Thank you, Clive.