Crowdfunding has become the major unbanking way to fund small businesses and startups in recent years. It began through fans funding bands they liked for tickets and merch in return and has now grown into all kinds of weird and wonderful services, matchmaking adventurous investors with fledgling entrepreneurs. It is a match made in heaven. The entrepreneurs get a source of revenue without the strangulating influence of the banks and punters get a low risk (assuming they spend responsibly) thrill ride through a startup. And did I mention freebies?
Crowdcube, since being established in 2011, has become the leading crowdfunder for investment in the UK with a 48% share of the market. Some more stats: £300M invested in pitches, 400,000 registered members, 525 successful raises, average number of investors is 238, over £4M invested from nearly 3,000 people per month and 82% of those that join invest within a month of doing so. Their focus is business with 30% startup, 45% early stage and 25% growth. Doing awfully well, in short.
It is a pleasure to browse the investment opportunities page which is clearly set out with a brief but understandable digest of the offer. The “How it Works” page gives the essentials and the explore page is a very welcome articles page all about Crowdcube and it’s industry. There is a members area with the portfolio dashboard, settings and the option to begin setting up a pitch yourself. Clicking on the offer will give you a whole lot more detail with stats, details, usually a video and, most important of all access to the people making the offer. The most useful avenue to the offer makers is the Investor Discussions page which, forum like, will have questions posed to the offer makers, almost always the top dogs around, and often with greatly detailed answers. It definitely sorts out the men from the boys.
It should be said that the crowdcube team does due diligence and vets the offers before they meet the gaze of potential investors, ensuring that the claims made by companies are not misleading. That is a reassuring fact because some of the offers are kind of whacky. In fact, that is what makes it fun just to browse through the site, ebay-like. And if you’ve signed up it probably means you have enough money to risk (hopefully not lose) on a punt: after enough browsing you are sure to find something that tickles your fancy.
There are enough success stories to be enthusiastic and involvement starts at £10, low enough for the vast majority of the country. Brewdog, recently valued at £1bn, began in 2007 with a fresh approach to brewing lager. This year it raised £13.3M on Crowdcube with equity and bonds in four rounds, with the earliest round netting investors 2,765% return on investment. Sugru moldable glue, invention of Jane ni Dhulchaointigh, sought to raise £1.5M capital for her invention and got overfunded by 300% and (through Amazon) celebrated her 10 millionth sale. In April this year, Bluebird Tea Co. hit their target in 24 hours, securing £365,000 in 48 hours. And on and on.
It is well worth browsing the site even if you have no intention of spending money. It’s fun to browse this site. The low starting involvement means that you can dip your toes in the water without risking too much and on the way you can pick up valuable cues on the way investors and those seeking investment relate to each other, especially which questions get asked over and over and how the business owners respond is a real education. With interest rate so low and inflation edging up again, many see no disadvantage to taking on risk for higher returns. Merely left in the bank, money will, over time, simply erode to nothing
