Crowdfunding Guide

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Using equity crowdfunding to finance business growth
With over
£9 million raised
for a range of new
businesses
A new way tc raise ñnance fcr ycur business
Crowdcube makes access Io ñhahce easIer Ior ehIrepreheurs oI hewly
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Beyond the banks
FOREWORD
crowdpower
D
arren 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
other 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!
g
LUKE LANG
CO-FOUNDER, CROWDCUBE
Hit the ground
running when your
pitch is published and
instantly attract
attention


03
contents
crowdpower
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14
INTRODUCTION
By Hunter Ruthven, Editor, GrowthBusiness.co.uk
How to put together a pitch
Creating a professional first impression
Investor profile 1
Harald Nieder
Investor profile 2
Georgina-Kate Adams
Business case study 1
Rob Symington, Escape the City
Business case study 2
Andrew Wordsworth, E-Car Club
Business case study 3
Barry Laden, East End Manufacturing
Business case study 4
Alex Kammerling, Kamm & Sons
Handling communication post deal
Balancing the task of handling hundreds of investors
Going up
introduction
crowdpower
T
he $93,000 that was
recently raised by
Turkish political
protesters to run a full-
page 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.
g
HUNTER RUTHVEN
EDITOR, GROWTHBUSINESS.CO.UK
05
There’s no
getting away from
the buzz that is
gathering around
crowdfunding


the pitch
crowdpower
F
or any business going down the crowdfunding route,
the hardest part will be convincing both established and
first-time investors to part with their hard-earned cash.
Statistics from reward-based platform Kickstarter paint a
competitive picture, with only 44 per cent of campaigns reaching
their funding goal.
Getting your pitch right, and right at the first time of asking, is
pivotal to getting a fundraising bid off to the best possible start.
Luke Lang, co-founder of Crowdcube, gives his tips on striking
the right balance.
g
Creating the perfect pitch
logo
The first exposure any investor will have to a possible investment is the logo. Making sure your business has a quality logo
can make a good first impression and set the pitch off on the right footing.
Equity vs. fundraising total
These two figures, when combined, will reflect the valuation you have placed on your venture. It’s important to come up
with a realistic valuation, as investors will often become disenfranchised when they see a valuation of a business is £5
million, despite the fact it is still a fledgling start-up.
EIS/SEIS and share options
Investors in today’s climate are looking for the maximum return possible from their business backing, and the Enterprise
Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) provide important incentives such as individual
income tax relief and exemption from capital gains tax. Companies considering the crowdfunding route should make sure
to have early conversations with HMRC to find out if EIS or SEIS eligibility is available. The vast majority of ventures backed
through crowdfunding platforms meet the required criteria and certification will be an important stamp for an investment
pitch. Choosing between offering perspective investors A or B shares will also affect how much influence and decision-
making power they will have.
Company founders
Part of what investors buy into is the entrepreneurial story – the route they have taken to get their business to the state it is
in today. Getting the personal element of the pitch established provides a human element to relate to – after all many of the
investors putting their capital into crowdfunding platforms are business builders themselves and want to hear about the
entrepreneur.
The video ‘elevator pitch’
Once an investor has been enticed by the company’s branding, equity offering and basic back story, a video provides an
opportunity to partake in a little elevator pitch and sell the business in a more interactive way. This part of the pitch is cru-
cial and allows a business to tease people into finding out more. As with the logo, ensuring that the video is professionally
put together and engaging is pivotal.
Questions and answers
A question and answer section allows for direct communication between interested investors with queries and the
entrepreneur behind the business. It also forms an important part of the ‘crowd’ ethos as investors bounce comments off
each other and discuss the pitch’s merits. It’s important to stay on top of the flow of questions and endeavour to answer
them in a quick, clear and concise fashion. Those posing questions are possible investors in the business, so a prompt
response contributes a great deal towards their feeling of the business.
Rewards
On top of the equity offering available, adding additional rewards provides an attractive crossover with traditional
crowdfunding. It’s a value-add, particularly for the lower-end investors who can get some reward and return on an
investment sooner rather than later.
1
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SEE NEXT
PAGE FOR
DUMMY
PITCH
the pitch
crowdpower
07
HaraldNieder
INVESTOR PROFILE
crowdpower
I
t was through an arty friend that I discovered what
Kickstarter was doing and set out to find if anything
existed for the equity investing space. The alternative
to getting into backing early-stage companies would
have meant putting in a lot of money, and I felt that the
levels in crowdfunding were much more attractive.
I’m always interested in how start-ups present themselves
on crowdfunding platforms – how they are perceived by peo-
ple. As an investor, I look at the business model on show
and the entrepreneur behind the venture.
I like looking at the different blogs that are linked to,
what kind of questions are being asked of entrepreneurs
on the forums and then analysing how they react to
that.
My interaction with the business owners happens
on a more personal one-to-one basis. I find it is a
more efficient way of doing things as a lot of
people are just putting up questions to im-
press others.
My rule of thumb is: how much do you
get for £5,000? If someone only gives you
0.1 per cent of the company for £5,000,
it’s not immediately interesting. You get
the feeling it could be expensive for a rea-
son.
I definitely see this as a much riskier
form of investing, but I’d only put in an
amount of money which I could afford to lose.
In some cases I am looking for voting rights, but
that isn’t much use if you’re only putting £50 in.
GOOD VS. BAD
Branding of a business is a really important element. As more
and more pitches come online across different platforms, a
good logo can help an entrepreneur and their business stand
out. On a couple of occasions it has put me off from delving
any deeper, as I need to be impressed at the start to dive in
and have more of a comprehensive look.
This was particularly true for one of my investments [salad
dressing company Righteous], which I felt had really solid
branding. It is in a bit of a niche market, but digging a little bit
deeper I found the entrepreneur had a lot of experience and
was well on her way to building a business in a gap that had-
n’t been filled.
I like the fact that with these kind of companies I am get-
ting in early and have the opportunity to get a good price
and have an influence over how the business grows.
Exit strategy is an issue which has been often dis-
cussed with crowdfunding pitches, but for me, pretty
much all of the ones I have seen are too optimistic.
A few early-stage companies I have looked at
are talking about a three-year exit, which is a
bit unrealistic. Whatever strategy is put in
place is just random numbers. But I don’t
think that’s too much of a problem as a
bit of confidence doesn’t harm.
Lots of them have exit potential,
through a sale or even IPO, but I know I
am going to be invested in them for a
long time.
Once I’ve made a commitment to a
business regular updates are necessary to
keep me abreast of what is going on. Despite
the fact that they are all busy making a success of
the venture, all of my investments do this regularly
through media like newsletters.
The facet of crowdfunding that makes it more fun and in-
teresting than conventional stock and shares investing is that
you’re able to follow your companies through Twitter and
Facebook to find out how they are doing.
g
my interac-
tion with the
business owners
happens on a more
personal one-to-
one basis
Age: 37
Profession: Physics background, now in financial services
Investments through crowdfunding: Crowdcube, E-Car
Club, Righteous, Brupond, ineed.co.uk
Other investments: Personal stocks and shares portfolio


08
Georgina-KateAdams
INVESTOR PROFILE
crowdpower
M
y first exposure to crowdfunding was writing about
it as a financial journalist, and I became interested
in the funding mechanism. I constantly had busi-
nesses asking me, 'How on earth do I get funding', and to
me crowdfunding seemed like a really exciting solution.
The craze that Dragons' Den was creating around start-up
businesses and funding fitted in well with this and created a
great opportunity, for those that wouldn't have previously been
able to get involved, to dip their toes in.
For me, like most people, I'd seen a lot of businesses come
and go on the show and thought: I'd like to invest in some-
thing.
Incidentally, my first crowdfunding investment was actu-
ally in Crowdcube when the business closed its first
round worth £300,000 in late 2011. I’ve also subse-
quently taken part in the platform’s second round
when it raised £1.5 million earlier this year.
The attraction, and reason for investing as
much as I did, was that I wanted to feel a
sense of ownership. You can put in as little as
£10 but how much of a role will you have? I
thought it was really important to have a
tangible amount so made sure, through my
first investment, that I had a 0.1 per cent
stake.
WISH LIST
When I'm looking at a possible business in which
to invest, I want to see some integrity in it. The com-
munications need to be quite professional and transparent
without too much spin.
I look for a company which has found a gap – not just another
restaurant! Personally, I also like to see an element of social pur-
pose. Start-ups raising money through equity crowdfunding have
an opportunity to sustain themselves by turning to customers
and not ending up in a headlock with the banks.
It's a humanising process, and gives people another option –
considering the banks are so restrictive these days. This struck a
strong ethical chord with me and is part of the reason I like the
process.
When I'm scanning through businesses looking for crowd-
funding capital I like to see an open-door policy being embraced.
I wouldn't invest in a company that you send an email to and
never hear back from. My investment, Crowdcube itself, I com-
municate with in person, on the phone, by email and on Face-
book and Twitter – so on all levels.
ENGAGING INVESTMENT
I'm 26, so am a young investor. Back when I invested
in Crowdcube I was 24 and in my first graduate job. I
didn't really have any disposable income and was-
n't necessarily looking for investment opportuni-
ties. I haven't felt sufficiently compelled to
invest in anyone else but I do look at pitches
and some of them are definitely very tempt-
ing.
Crowdcube was an example of a busi-
ness which I could tell was going to ex-
plode and everyone was going to want a
piece of it. If I saw another fantastic idea, a
really big growth opportunity, I would defi-
nitely invest again.
The rest of my money is in savings accounts,
stocks and shares and bonds. It's my childhood sav-
ings that has always been organised by my parents. It feels a
lot less tangible than my crowdfunding activity, as I have less
ownership of that money.
I like the personal involvement you get with investing in start-ups.
You can drop the founder a line and feel proud if they get a great
press article.
g
The
communications
need to be quite
professional and
tranparent, without
too much spin
Age: 26
Profession: Marketing manager for handcraft business in
Swaziland
Investments through crowdfunding: Crowdcube (twice)
Other investments: Personal stocks and shares portfolio


09
ROB SYMINGTON, ESCAPE THE CITY
case study
crowdpower
O
ur first £10,000 investment in the business came from
our savings, and was spent on the first website.
Further funding came from another £10,000 of
savings and a £20,000 bank loan, and that got us all the
way to two and a half years in, at which point we raised the
Crowdcube investment.
Prior to discovering crowdfunding, we had hit the angel and
VC circuit in London in our attempt to raise £600,000. There
were about eight VCs in the capital who were worth speaking
to at that level of investment. We had many meetings with VCs
but nothing conclusive came of it; we weren't getting any
no's, but certainly not getting any firm yeses.
During that process, we read about Crowdcube, and
decided to meet with the founder. After learning more
about the concept we realised we liked what they were
doing and saw a fit with our brand.
In May last year, we got an offer from a VC just at
the time we decided to go for Crowdcube. Initially,
we had sent an email to our membership asking if
they would be interested in investing in the company.
We got a huge response, with 2,000 people
expressing interest. We only needed about 10 per cent
conversion of that to raise the money, so we decided to go
with Crowdcube.
We gave away 20 per cent for the £500,000 which was the
same as the VC offer. Overall, going with the crowdfunding
option felt more risky but also more exciting and attractive.
THE PITCH
We had spent the previous four months polishing the decks for
VCs, with endlessly revised PowerPoint presentations on why
we were a good investment opportunity. It's a never-ending
refinement process.
When we got to
crowdfunding however, the
pitch was now for our
members. The crowd angle is
more of a hearts and minds piece
as well as a pure investment
proposition, so we told a story rather than
just presenting the financial nuts and bolts. As well as a video
we presented a single page financial model. We also made an
FAQ, since a lot of the crowd investors were first-timers and it
was easier than answering all their emails individually.
We got to £500,000 in ten days or so and, because we
were oversubscribed, we put it up to £600,000. The
money was to be spent almost entirely on salaries,
mostly developers. Advisers in accounts and law,
online subscriptions, hosting and offices also
needed paying for.
We were slightly different from
most companies raising money
through crowdfunding in that we
had our crowd coming with us.
Crowdcube gave us a private URL
and the opportunity wasn't available
to the rest of the investment
community. From that
perspective we were
effectively using the funding
option as a legal vehicle to
raise the funds and less as
an actual source of the
funds.
g
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TIP 2
Appear
trustworthy
Amount raised: £600,000
When raised: May 2012
Investors: 395
Equity: 20%
Sector: Online recruitment
T
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10
ANDREW WORDSWORTH, E-CAR CLUB
case study
crowdpower
O
nce our Crowdcube pitch was live it gathered interest
quite quickly; on the first day we got a £15,000 investor
straightaway. By the end of the first week we were at
60 per cent funded, but then it slowed down a bit, with
funds dribbling in gradually. We picked up a few £1,000-
level investors and the occasional £5,000. That went on
for six weeks and we finally got another £15,000
investor which meant that it closed a week later.
We finished with 62 investors, with four of them
being ‘A’ shareholders. Anyone who invested over
£15,000 became an ‘A’ shareholder, and the
remaining 58 are ‘B’ shareholders, but we wanted
all shareholders to have voting rights. Some
businesses have ‘B’ shareholders who don't have
voting rights, but we thought we would be more
marketable if they did.
Crowdcube doesn’t tell you if you have a good or a
bad business, its job is to make sure you, as an
entrepreneur presenting your business to them,
are disclosing everything they require. I’m
supportive of that; they're not VCs. The
whole point of crowdfunding is you're
getting away from people who have
never run a business but who seem to
think they can judge where a company
is going or not. I feel the crowd is
better equipped to do that.
Some people say ‘armchair investors’
on crowdfunding platforms are largely
mugs who don’t know what they’re doing, but I
think that's highly insulting. There are some very sophisticated
people who have put money into our company and have
adopted a portfolio strategy. Effectively they have enjoyed the
benefits of disintermediating, of not paying fees to anyone.
Until you have dealt with these people I don't think you can
have an opinion on their level of sophistication.
We raised £100,000 on the site, which was part of a
bigger seed round. Overall we raised £400,000 or so,
to take us to 20 cars on the road. Now, we're getting
a lot of enquiries from angels, and people who
wouldn't touch us beforehand are now [naturally]
interested.
EIS AND REGULATION
We are one of the 2 per cent or so of
businesses on Crowdcube that doesn’t
qualify for the Enterprise Investment Scheme
(EIS).
If you don't qualify for EIS, think again
about crowdfunding, because investors
can’t qualify for the tax breaks. If we
knew what we know now we would
probably have picked a different
business to start with.
Also, FSA regulation has been a big
talking point for Crowdcube. The
company wasn’t FSA-regulated when
we first registered interest in the
platform. We held off closing the deal for a
month or so until regulation happened and now enjoy the
bragging rights associated with being the first regulated
equity-based crowdfunding investment in the world. The
degree of protection both we and investors get has taken
some of the burden off the companies on the platform.
g
TIP 2
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product
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Amount raised: £100,000
When raised: March 2013
Investors: 63
Equity: 20%
Sector: Car rental
11
BARRY LADEN, EAST END MANUFACTURING
case study
crowdpower
I
started my company from a cautious perspective with
a modest factory in the East End, but after a few
months of supplying various small clients I noticed
that larger customers were put off by the small size of
our operation. I realised I needed to raise £150,000 to
expand our factory and buy more machinery to scale up.
I had read about crowdfunding in the financial pages of a
trade magazine. What's interesting about the process is it's
not some sort of easy alternative to banks or other funding,
you still have to have an excellent pitch, robust financials
and a super business plan for it to be attractive to investors.
In our video pitch, it was key for me to tell the story of
what I was planning to do but also what I had already done.
I included a small clip of Boris Johnson launching the factory
and also a film of Prince Charles giving me my MBE which I
received for services to the fashion industry. These types of
things help to validate the pitch and appeal to
investors. Also, investors recognise my desire to
bring manufacturing back to London from the Far
East, which is a powerful hook.
Valuing a relatively early-stage business is
never an exact science. The overall
valuation of around £750,000 I felt was
analogous to where we would be in
the first year of trading in the new
premises, and a smallish multiple of
that in terms of profits.
Some say that if a pitch gets
funded reasonably quickly you
know the valuation is about right,
and we were funded within eight days.
The money really piled in, with 95 per cent coming in
three days or so. Some entrepreneurs trying to raise
money via crowdfunding are valuing businesses at £1
million plus and struggle to garner interest. Many of
them need to think about what they’re doing.
I do not believe shareholders should just pay
money in and feel they won't be
contributing; an ongoing relationship is
important. On that point, right from the
start, I was adamant that all shares
would be ‘A’ shares, with full voting
rights. Many of the pitches divide their
shares up but I don't agree with that. I
think all shareholders are important and
have the ability to contribute, even if it's just
once a year at an AGM.
AN EXIT STRATEGY
In life, there is always going to be an exit,
whether that is in business, or relationships,
or whatever. In my case I have considered
a future flotation on one of the smaller
markets. I’ve had some investors
saying if it's as successful as they
hope it will be, they’ll be looking to
come back in and benefit from
shares if the company floats.
We have 71 investors who
potentially could be our early
investors into an IPO, which is
exciting.
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TIP 1
Have a
killer video
TIP 3
No chinks
in business
plan
Amount raised: £150,000
When raised: April 2013
Investors: 72
Equity: 20%
Sector: Manufacturing
12
Alex Kammerling, Kamm & Sons
case study
crowdpower
W
e had been looking for finance for about
ten months before we secured it. We
started with people we knew and
friends of friends, and also presented at the
London Business School to a room full of
angel investors which brought us more
interest – although no deals. We must have
had around ten to 15 serious meetings,
but no one offered anything decent
enough.
Before we raised the first round, we had
never heard of equity-based
crowdfunding – although we knew and liked
the Kickstarter [reward-based] model. When
someone mentioned Crowdcube we thought it
would be an ideal platform to place the brand
while we were searching elsewhere, and we didn't have
anything to lose by trying.
We didn't realise quite how good a 'shop window'
crowdfunding was and it has brought us a lot of
press and external investor interest. For the first
round, people started investing immediately,
although we had to push pretty hard to break
the 60 per cent (of funds achieved) barrier. It
took about eight weeks to be fully funded.
One of the good things about
Crowdcube is that because of the
site's forums, questions were coming
in about certain aspects of my
business. People would give their input
and we would have ready-made ideas
to change things as we went along. Their
feedback contributed to making the business plan watertight.
For the second round, we had to film another video. It was
slightly more generic about the brand and more focused on
getting investment, with me effectively pitching to the camera
and discussing financials. However, I did feel it was a good
way of bringing the brand to life.
For me, the video is the pitch. If an investor likes what
they see there they will then look into the business a bit
more on the financial side and do their own due
diligence.
The second round of funding was a great
deal easier than the first. We had almost
18 months of sales behind us plus a stack
of great press cuttings, endorsements and
bar listings so it wasn't nearly as painful.
We initially contacted our original investors
of which 23 per cent re-invested in the
second round, the rest were new.
Whereas the original round took two
months to fully fund, this round took
approximately five weeks.
The big difference between the
two fundraising rounds was the
amount of red tape we encountered
the first time round. It was a learning
curve for everyone involved, but I get the feeling all of the
creases have been ironed out.
We are an example of a company that has raised more than
one round of funding through the process and I believe
crowdfunding can work for a whole company’s lifespan. If we
needed to go back to it to raise more money, we definitely
would.
g
TIP 2
Answ
er any
and every
question
T
IP
1
h
a
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a
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TIP 3
Use social
media to
generate
buzz
Amount raised: £530,000 – £180,000 for first round, £350,000 for second
When raised: Jan 2012, Jan 2013
Investors: 135 total (85 after first round)
Equity: 23%
Sector: Food and beverage
13
Comms post deal
crowdpower
Handling communications once the deal closes
W
ith investors already enthused enough to put their
money in, businesses then have the opportunity to
use them as brand advocates as well as potentially lining
them up as return backers.
While having hundreds of enthusiastic shareholders can be
great for a business, communicating with them and
maintaining the excitement they first demonstrated when
backing a business can be a difficult task.
Escape the City’s Rob Symington enjoys the process and
always makes sure to email his backers when the company
has something interesting to say.
‘We send out one big annual report which covers the
performance during the previous year and the plan for the
next 12 months,’ he explains.
‘One of the things people have invested in is the story and
journey, so it doesn’t cost much for me to sit down on a
Friday and say we’ve got a new release going live.’
Despite keeping his investors updated frequently, and
offering the same ‘B’ shares as he possesses through the
£600,000 fundraising, Symington and Escape the City did
not provide voting rights when they raised money via
crowdfunding.
‘Having 395 yes or no answers on individual decisions
would be quite a hindrance on running a business,’ he says.
E-Car Club’s Andrew Wordsworth believes in the value of
his shareholders. ‘If someone has taken money out of their
own pocket and is putting it into a business, to say they are
slightly stupid and don’t know what they are doing is
insulting.
‘From our communications we have with investors, there
are some very sophisticated people who have put money into
our company and have adopted a portfolio strategy.’
Voting rights is something that Wordsworth and E-Car Club
wanted all shareholders to have. With that in mind, the pitch
offered those acquiring ‘B’ shares a say in how the business
would be run in the future.
‘The key difference between those shareholders [‘A’ and
‘B’ shares] is around pre-emption rights. For new shares, ‘A’
stakeholders can continue to invest to maintain their equity
percentage, but there are certain restrictions on them in
terms of selling them.
‘‘A’ stakeholders have to sell shares to other ‘A’ holders
first, while those with ‘B’ versions can sell to whoever they
want,’ he says.
ENGAGEMENT FACTOR
While many shareholders are investing in companies for the
first time, statistics from Crowdcube show that those
supporting start-ups through its platform are committing an
average of £2,427. Crowdcube also finds that some 69 per
cent of backers are self-certified as high net worth or
14
EXISTING FAN BASE - ROB SYMINGTON'S BACKERS WERE AL-
READY MEMBERS OF THE ONLINE RECRUITMENT SITE
FILLING UP - SHAREHOLDERS AT ECO VEHICLE BUSINESS E-CAR
CLUB ARE TREATED WITH RESPECT IN THE HOPE THEY'LL TOP
UP THEIR INVESTMENT SOME DAY
CONT ON
NEXT PAGE
Comms post deal
crowdpower
Handling communications once the deal closes cont.
sophisticated investors, while the percentage that have
invested multiple times stands at 19 per cent.
With such a high number of high net worth and
sophisticated investors getting involved and making multiple
plays, businesses choosing the crowdfunding model will be
gaining backers who will know what to expect from their
shareholding.
Alex Kammerling, of Kamm & Sons, has raised two
batches of capital and now has 135 stakeholders.
The ginseng alcohol business likes to remain proactive,
Kammerling says, engaging its investors on multiple levels.
‘We had an event recently where we invited everyone to
come along to a London bar where we made some cocktails
and told them about the plans we had,’ Kammerling adds.
‘We introduced them to the new team, offered them
discounted stock and got them enthused really.’
While Kammerling is keen to harness the power of his
shareholders, he says that the business has kept its board
down to five people. ‘We don’t want to be revealing
everything,’ he admits.
HANDS ON
Further research conducted by Crowdcube has revealed that
its members want to be direct shareholders.
Luke Lang says, ‘This is as much an emotional play as
return on investment and people like the idea of owning
shares in a company and getting a shares certificate.’
Crowdcube has made sure that companies raising money
through its platform are not completely left to their own
devices once the pitch has been closed. With the money in
the bank, successful businesses are then introduced to a
legal firm, which can represent them. The crowdfunding
platform also provides an investor relations portal, which
allows companies to keep investors up to date through a
locked-down Q&A forum.
Lang adds, ‘This is really important for the company that
has done the fundraising as investors are assets. They can
be brand advocates and also might be return investors
further down the line.
Barry Laden and his business, East End Manufacturing, are
also pioneering the brand engagement that Kammerling has
attempted to instil at his business.
‘I do not believe shareholders should just pay money in
and feel they won’t be contributing – an ongoing relationship
is important,’ says Laden.
‘I’ve personally emailed all
of our shareholders to say
thank you for investing and
to let them know that we
are bringing forward a
planned opening of a new
factory due to the speed of
the fundraising.’
A factory visit has also
been pencilled for before
christmas so that
shareholders can see in
person what they’ve
invested in.
‘I think all shareholders
are important and have the
ability to contribute, even if
it’s just once a year at an
AGM,’ Laden explains.
Through East End Manufacturing’s £150,000 fundraising, it
secured £50,000 from one backer. That investor is now
sitting on the board and will, Laden says, bring ‘valuable
support and advice’.
15
ONE DRINK OR TWO? - KAMM & SONS HAS HOSTED EVENTS
WITH INVESTORS TO KEEP THEM INTERESTED IN THE PRODUCT
EAST END MANUFACTURING
WILL BE SHOWING
SHAREHOLDERS AROUND ITS
NEW FACTORY, WHICH WAS
OPENED BY BORIS JOHNSON
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