Some 39 businesses have been backed through equity-based crowdfunding service Crowdcube, the majority of which are situated in the South East.
The platform was created by entrepreneurs Luke Lang and Darren Westlake in 2011 and has been used to raise a £1 million allocation for London members’ club business The Rushmore Group.
Speaking to GrowthBusiness, Lang says that it has been an ‘exhilarating’ first two years for the business.
He adds, ‘We’re extremely proud to have helped fund just shy of 40 UK businesses; raising over £5.3 million worth of investment that would otherwise have been very challenging to secure through traditional means.’
Statistics released by Crowdcube shows that 30,239 ‘armchair dragons’ are registered on the platform, with 22 per cent investing more than once. The largest investor portfolio stands at 22 and the single largest commitment to date has been £100,000.
One business to shun the traditional venture capital route for fundraising is Escape the City. The company, which helps people leave’ unfulfilling’ corporate jobs, initially raised £500,000 in nine days and then extended the pitch by £100,000 to £600,000, raising the extra capital in a further four days.
Explaining the decision to GrowthBusiness back in June 2012, co-founder Rob Symington said that when the business embarked on its fundraising efforts it was not aware of the crowdfunding system. But he believed that funding the business with a large pool of micro-investors fits with its brands and the way it wants to develop in the future.
Of the companies to have raised money through Crowdcube, the majority have been in retail (12) – while food and drink (11), professional and business services (10) and internet (9) have also seen strong interest. Crowdcube has itself used the platform to raise capital for its own growth and netted £300,000 in December 2011.
More on developments from Crowdcube:
The funding platform has also been successful in securing Financial Services Authority (FSA) regulation for its service. As part of a process which began in December 2011 and was rubber stamped in January 2012, the FSA approval is designed to give investors direct shares in businesses as part of Crowdcube’s efforts to offer investors more protection.
Speaking then, Lord Young, advisor to prime minister David Cameron, commented, ‘Crowdfunding is a highly innovative and important source of finance for UK businesses.
‘I am delighted to see that the UK financial services industry and its regulators are reacting dynamically to new models of business finance, such as equity crowdfunding, so that the UK can maintain its position as world leaders in this space.’
Lang says, ‘We have a vision to make Crowdcube the number one choice for UK businesses seeking seed investment and authorisation is crucial [to that].
‘Equity crowdfunding has really begun to come of age over the past 12 months with public awareness and understanding of how it works increasing all the time.’
A breakdown of companies using it for early-stage funding finds that start-ups have accounted for 31 per cent, early-stage businesses 40 per cent and growth companies 29 per cent. The average valuation for these three regions is £382,700, £830,000 and £2.52 million respectively.
Lang reveals that Crowdcube has ‘lots of exciting’ developments and partnerships planned for 2013 that will help the platform to ‘dominate’ equity crowdfunding in the UK.