Crowdfunding has become a popular way of raising funding and has changed the way that we finance services. Crowdfunding has doubled in less than two years, according to NESTA it has risen from from £267m in 2012 to £666m in 2013 – and equity crowdfunding is worth around £84m of this pot. But what exactly is crowdfunding and how can it help your business? These were questions put to our expert panel at Tuesday’s event.
SEUK hosted their first event and teamed up with Crowdcube to put on an educational panel discussion at their office in Soho. This was a great opportunity for individuals to find out more about this new way of raising funds. The audience was given an introduction to crowdfunding and advised as to how to get the most out of these platforms. We were thrilled that Nick Tong from Compare and Share was able to join us and provide invaluable advice drawing on his own experience of raising funds using crowdfunding.
The process of crowdfunding roughly takes three months from start to finish. It’s an intensive and timely process. Nick told of his experience of using his own network and social media, in particular Twitter, as a tool to reach out to investors and drum up interest in Compare and Share. He stressed that, for a company to be successful on these platforms, there needs to be a buzz around the raise in order to encourage potential investors to find out more about the company and therefore want to invest.
Unlike traditional forms of fundraising, It is difficult to meet each and every prospective investor – an average Crowdcube raise involves around 70 investors. This means new ways have to be found to get people’s attention. Crowdcube ensures that companies trying to raise funds on their site create videos. Videos allow you to engage with investors and show your passion for your company. Nick stressed that it doesn’t need to be expensive but it is needs to represent your brand and what your company is all about.
Once all the due diligence is done and everything has been verified by a third party your company is ready to go live! The advantage of raising funds in this way is that you have a finite window to reach your goal. A company will be on the site for a maximum of 45 days. The panel explained how the first half of the raise is the most difficult as its hard to get momentum going – investors want peer validation before they get involved. Crowdcube suggests the best way to great over this hurdle is to have around 30% of the amount you wish to raise lined up before you go live. This will mean that once you are live there is a quick injection of funds and this will help other investors feel confident in your business and hopefully encourage them to invest.
Crowdfunding is a great way for sharing economy businesses to raise money. Crowdcube was involved in the recent ground breaking funding of JustPark and Tom explained how one of the things that attracted JustPark to this way of raising funds was the idea of giving the users of their service the chance to get involved. It became increasingly apparent throughout the event that crowdfunding is not only about an alternative way to raise funds, but also about creating a community.
It is important to note that crowdfunding platforms are not financial advisers, they are not going to offer investment advice but rather provide a platform and marketing tools in order to present your company in the best possible way to potential investors.
Panel –
- Debbie Wosskow, CEO, Love Home Swap and Chair, SEUK
- Nick Tong, Director, Compare and Share
- Tom Leigh, Business Development Manager, Crowdcube