Crowdfunding Anne Strachan

@crowdfunduk

CrowdfundUK.org

anne@crowdfunduk.org

What I will cover

Introduction to crowdfunding

• the three models

• the process

• risks and safeguards

The crowd

What investors, lenders or donors are

looking for

Case studies

Come to the workshop to find out more!

Why crowdfunding

What is crowdfunding?

Statistics

Globally

2012 £1.8 billion

2013 Set for £3.5 billion

Kickstarter

£22 million pledged for UK projects in one year

£17.1m for successful projects

Crowdcube

Over £13 million for 71 businesses since February 2011.

Over 43,000 members

Raised £1.5 million for its own growth 2013

Crowdfunding models

Equity = crowd-investing Works best for larger investment in the whole business model. Must be able to offer share capital (NB Community Shares)

Loans/debt = crowd-lending Works best for business or enterprise that does not wish to give away equity – but can repay a loan, with interest. Social lending possible.

Donations or rewards = crowd-funding Works best for a well connected enterprise/entrepreneur with a clearly defined product and deadline. All-or-nothing or all you raise you can keep

Planning

Choose Platform

The Pitch

video

Written pitch

Campaign time

Campaign

time!

Social networks

Target reached

(or not)

How crowdfunding works

What links …

Why crowdfunding

It gives access to capital

But - its not just about the money

loyal customers (evangelists)

pre-sales

marketing and PR

different inputs and ideas

Incubation - proof of concept

can be easier than obtaining grants or loans

free – if it fails

What Crowd-funding is not

• It’s not a funding stream

• “If you build it they will come …”

• It’s not easy – 40-50% success rate

• If you don’t ask, you don’t get

• Only those projects which actively fundraise succeed.

The Pebble

$10.26 million

£40,000

Is Daddy Coming Back in a Minute

£11,270

Ouya games console

$8.9 million

Draw Like a Boss

£51,833

40-50% succeed

Risks

• due diligence

• legal structure of organisation

• reputation, social capital and the crowd

• no money changes hands – until success

• 50-60% don’t reach their

target (£19% equity)

• fraud

• those that fail honestly

… and safeguards

Questions so far?

Why would you donate/invest your money?

You meet someone, or receive and

email, asking you to invest

(donations) in a new business

• What would inspire you?

• What will encourage you to donate?

• What concerns would you have?

Why do people donate?

• Personal contact - family and friends, wider

personal/organisational networks (they like you or

believe in what you are doing)

• Closeness values, professional or geographical

(what’s in it for them)

• Support creators or causes (community of interest)

• Seek rewards (they want the product)

Loans and equity – they want a return on investment

Crowdfunding – equity

Strength of the business case

Tax relief

Quality of the pitch

Experience of the team

CEO personal investment in the business

Crowdfunding – loans

Ability to repay debt in medium term

• Strength of the business

• Director’s track record

Crowdfunding – donations/rewards

Strength of the idea

Quality of the pitch

Value of the rewards

AND MOST IMPORTANT

Wide engaged social networks

Near Desk The oyster card for desks: rent office space by the

Hour at various locations around the UK

£134,500 for 7.71% equity

139 investors – investments from £10-£51,000

25% of investors had invested in crowdfunding

campaigns before

EIS eligible

Business - equity

Business - loans

Pants to Poverty - Bonk of Pants

Campaign on Buzzbnk

£58,365 raised of £30k target

Growing an ethical supply chain for fair traded

underwear

104 backers

Ethical market – crowd of existing customers

10.2% interest – 3% cash 7.2% in pants!

Business - donations

Bonnie Bling

Campaign on Bloom VC

£8,130 raised of £7,500 target

Laser cutting machinery to keep production in

Scotland

136 backers

Niche market – crowd of existing customers

Rewards were appealing

Backing Scottish business

Community Enterprise

Home Baked

Campaign on Kickstarter

£18,725 raised of £13,000 target

An oven for a cooperative bakery in Anfield

494 backers from all over the world

Community support

Effective social media campaign

So what’s your business idea?

What does a crowdfunding campaign need?

A strong “crowdfundable”

proposition that fits the model

An engaging pitch

Creative rewards

The personal touch

What does a crowdfunding campaigner need?

• a team

• a creative and innovative approach

• meticulous planning

• marketing and social media skills

• time and energy

AND AGAIN - MOST IMPORTANT

• wide engaged social networks

Final thoughts or questions?