We’ve spoken with investors to discover what they are looking for when they engage in crowdfunding investing and to see how a finance-hungry business can stand out from the crowd.
The importance of putting together a professional and engaging pitch is examined, alongside tips on how to communicate with hundreds of investors
once the investment has been closed and money is in the bank.
Luke Lan, Co-founder of Crowdcube
Darren Westlake and I, the co-founders of Crowdcube, are both entrepreneurs who have crucially experienced first-hand how difficult it is to raise finance – and we’re passionate about doing something extraordinary to change the status quo.
That’s Crowdcube’s raison d’etre; to help entrepreneurs, like you, raise finance. While the rest of the world was galloping along embracing the internet, e-commerce and social media, the mechanisms that financed many of these businesses were reluctant to evolve, adapt and change themselves.
It’s curious that it took two people, a techy with a great idea (Darren) and a marketer (me), without any background in financial services to transform an age-old industry.
But that’s what good entrepreneurs do; they see things that others don’t and develop solutions to problems that others merely accept.
Since we launched Crowdcube in 2011 – coining the phrase ‘equity crowdfunding’ – 55 businesses have reached their funding targets raising £9.5 million between them. Growth has accelerated in the first half of 2013 with £4.4 million raised between January and May compared to £2.7 million for the whole of 2012. That’s an increase of over 500 per cent when compared to the same period in 2012.
Harnessing the power of the crowd to raise business finance is now a genuine option for many businesses. This guide will equip budding crowdfunders with essential advice and tips on how to create and execute the perfect equity crowdfunding campaign.
The number one piece of advice that I can offer is that your crowdfunding campaign does not start when your pitch goes live; it started last week, last month, even last year.
If you plan to raise equity finance for your business then you should begin to make friends, family, customers, suppliers and existing investors interested in investing as soon as possible. That way you can hit the ground running when your pitch is finally published and instantly attract the attention of other investors.
Best of luck! Luke Lan.
From the editor
The $93,000 that was recently raised by Turkish political protesters to run a fullpage advertisement in the New York Times demonstrates the power and influence that the crowd can have not just in supporting projects, but also movements and causes.
Crowdfunding as a concept has evolved from the early dawn of the internet when bands used their supporters to fund new records, through the days of web-enabled giving for charity, to the foundation of Kickstarter – whose most notable success came when smart device Pebble Watch raised over $10 million in little over a month.
However, it is the growth in equity crowdfunding which can perhaps have the biggest overall impact on society. Start-up businesses are no longer at the mercy of bank managers – they can now utilise the support of burgeoning customer bases to fuel development.
Figures from NESTA show that £200 million was invested through crowdfunding in 2012, with a significant amount of that coming through the equity route. With as little as £10 required to gain a stake in a business, crowdfunding has opened the door to a huge crowd of people who have had their investment activity limited to stocks and shares because of the barriers to entry associated with being a business angel.
Already a number of businesses have raised over £1 million by putting a pitch online while backers, from seasoned angels to first-time investors, come together to put their hard-earned cash into businesses that are embracing the internet to find capital.
But as with any investment, getting the pitch right remains a fundamental challenge for businesses hoping to raise money through the equity crowdfunding route. Going up against thousands of other opportunistic ventures means that a pitch needs to stand up and demand the attention of the armchair dragons who are looking to back the next big thing.
To find out the best way to pitch a business, we’ve spoken with companies which have successfully raised up to £600,000. They’ve given their tips on the fundamentals of a pitch and what can go wrong during the fundraising process. This guide also looks at the importance of striking a balance between the amount of capital required versus the amount of equity being given away.
It’s a new and evolving process and with each successful fundraising we learn more about what kind of sectors appeal to investors, what they demand in terms of communication and how they expect an exit to be achieved.