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Finance

Crowdcube co-founder on why tech companies should use equity crowdfunding

Crowdfunding was once the preserve of the bedroom entrepreneur, a platform where people made things in their garage and could get a bit of cash for their ideas. Not anymore.

Today crowdfunding gathers just as many big companies as it does small. Whether it’s celebrity chef Hugh Fearnley-Whittingstall or big tech companies such as Canonical or Sony, everyone wants a piece of the crowd.

While most of the headlines revolved around rewards-based sites such as Kickstarter or IndieGoGo, there’s a growing number of companies heading down the equity route. For as little as £10 ($15), anyone can become an investor on the likes of Crowdcube or Seedrs, giving them a share in your company, potentially creating a small army of dedicated fans.

We talk to Luke Lang, co-founder & CMO of Crowdcube about why companies should consider equity crowdfunding as an option [and get some tips], along with how the market has changed and life as in the West Country.

How has the perception of Crowdfunding changed since Crowdcube started, and what does this mean for businesses?

Crowdfunding has previously been perceived as a route to finance for start-ups struggling to secure investment but that’s no longer the case. It’s now recognised as a mainstream funding option and as a result, a growing number of established brands, seasoned entrepreneurs and VC backed businesses are choosing to raise finance through Crowdcube. Whilst many of those businesses, such as JustPark which is backed by Index Ventures or Sir Stelios’ easyProperty, have access to traditional routes to finance they’re turning to the crowd, lured by a host of benefits in an era of co-creation.

Why should Tech companies look to equity crowdfund as opposed to rewards-based or more traditional funding models? And why Crowdcube as opposed to Seedrs or other platforms?

Crowdfunding not only gives businesses a platform to raise finance from a wider pool of investors, it also enables them to engage existing customers whilst fostering relationships with new brand advocates. By harnessing the power of the crowd businesses have access to a fruitful source of skills, experience and contacts, there’s also the post funding benefit of being supported by a group of people who have a vested interest in the business’ success.

When it comes to choosing a crowdfunding platform, Crowdcube was the world’s first investment crowdfunding platform, and since launching in 2011, we’ve maintained our market leading position by amassing a crowd of over 180,000 people, who have invested more than £80 million, funding over 250 businesses – making Crowdcube the first and largest investment crowdfunding platform.

What’s Crowdcube’s involvement with the London Co-Investment Fund (LCIF)?

Crowdcube was chosen as one of only six competitively selected partners by the Government-backed London Co-Investment Fund (LCIF). As the only crowdfunding platform on the list of partners, the LCIF have set to invest £5 million through Crowdcube, alongside the crowd, in seed-stage Technology, Digital and Science businesses. The LCIF have already invested in two businesses on Crowdcube; GamesGRABR, a social network for gaming and Powervault, a leading supplier of home energy storage appliances.

What kind of audience does Crowdcube attract and how do they differ from the traditional VC-type?

There isn’t a typical investor on Crowdcube, which is one of the reasons we have attracted over 180,000 to our investor community. We set out to make investing accessible, affordable and rewarding so Crowdcube appeals to every day investors, professionals and VCs who can invest as little or as much as they like.  For example Adzuna, the UK’s fastest growing job search engine is currently seeking investment on Crowdcube, they’ve attracted investment from 390 people ranging from every day investors to professionals and executives for the likes of AOL, LinkedIn, LOVEFiLM and even a board member from the London Stock Exchange.

What are some of Crowdcube’s most successful projects, and likewise, some that have been disappointing after they’ve reached their funding goals?

So far over 250 businesses have raised finance on Crowdcube, several of which have gone on to receive follow-on investment from VCs or others, (such as Righteous, which is now sold in more than 1,000 stores in the UK, stocked in four major supermarkets and exported to Canada, Malaysia and Germany), and have made great steps in expanding and growing their business in the UK and overseas.

Other success stories include the Eden Project, which raised over £1.5 million in less than 24 hours with a Crowdcube Mini-Bond, and JustPark, which is already backed by Index Ventures and recently raised £3.7 million on Crowdcube, tripling its initial investment target.

Around 50% of the businesses to list on Crowdcube go on to successfully raise investment, it’s always disappointing when a business fails to reach its investment target but ultimately it’s the crowd that decide which businesses go on to fund.

Do you think there’ll ever be a unicorn that’s primarily funded by “the crowd”? What do you think Crowdcube’s own chances of becoming one are?

Whilst I wish I could, I can’t predict the future but there have been some fantastic businesses to fund on Crowdcube, many of which have gone on to secure follow-on investment or expand across the globe. When it comes to Crowdcube, who knows – we’ve grown massively in the last 12 months, with nearly £50 million having been invested through the site so far this year. We’re continuing to grow at a rapid pace, it’s an exciting time for Crowdcube - so watch this space!

Crowdcube was founded in Exeter; do you ever feel isolated since most UK tech generally comes out of London?

No, we love it here. Exeter is a fantastic place to live and work; it’s well connected to London, where we also have an office, and it’s a thriving hub for businesses. Our location has been a real draw for people looking to escape the city and have the best of both worlds; a better work-life balance and a challenging and rewarding career in an innovative and rapidly growing business. We’ve attracted top talent from the likes of Google, eBay, KPMG, Goldman Sachs and Market Invoice, just to name a few. We have competitors that are based in the heart of Silicon Roundabout but we’re still the runaway leader in the sector and being located in Exeter is just another factor that makes us stand out from the crowd.

What advice would you give to companies looking to list on Crowdcube? Any insider tips?

My top tips for businesses looking to raise on Crowdcube would be:

  • Make sure you get the basics right by ensuring you have a clear and concise proposition supported by a well thought-out business plan and sound financial forecasts
  • Create a killer pitch which covers the idea, market opportunity and how and when investors may see a return, but don’t forget to show your passion and enthusiasm for the business

Don’t underestimate the power of your own crowd - reaching the first 10% of the investment target is the hardest part, so businesses that are proactive in promoting among their existing network to gain early momentum are at an advantage  

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Dan Swinhoe

Dan is a journalist at CSO Online. Previously he was Senior Staff Writer at IDG Connect.

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