Can you please tell us a bit about Crowdcube and how the idea came about?
Crowdcube is an equity crowdfunding platform. We help startup, early, and growth stage companies looking for growth capital raise equity investment. The idea came about when our founders, Darren Westlake and Luke Lang, were frustrated with the long-winded, difficult and undemocratic process of raising early-stage investment, and they were inspired by the rewards-based crowdfunding model pioneered in the U.S. with platforms like Kickstarter and Indiegogo. Fast forward 8 years and we’ve raised £400m+ for 700+ companies!
What are the benefits of equity crowdfunding platforms like Crowdcube compared to more traditional VC firms?
A huge benefit of equity crowdfunding in my eyes is brand advocacy. Look at Monzo; they recently raised £20m purely from their customers (36,006 of them). This means they’ve got an army of ambassadors who have literally invested in the future success of the company they love. They will inevitably talk about Monzo when people happen to see their investor cards, or at Christmas dinner they will mention their exciting new investment which is on the same terms as early Facebook investors; and no doubt will convert their friends/family into Monzo customers in the process. That’s powerful.
Are certain types of companies particularly successful at crowdfunding? Are there specific traits that a company needs in order to succeed on this type of platform?
Significant successes in the sector are typically, but not exclusively, consumer facing companies. They’re the ones you hear about because they tend to use the campaign to help acquire or retain customers. Typical traits would be a company with a strong and engaged network of users or customers, who are ultimately going to be the first people to see the investment opportunity before Crowdcube’s network of investors. This is important because no-one wants to eat at an empty restaurant; successful companies realise this and by tapping into their network, they prove to investors that people really love their product, and they have established their product-market fit.
What advice or tips can you give to startups hoping to raise capital through equity crowdfunding platforms like Crowdcube?
What’s frustrating to see is companies that would be ‘crowdfundable’ in my eyes, not doing the basic things they should be, like engaging their community. They may have a slick video and good product, but they’re not doing any promotion on social media or reaching out to their network. Crowdcube is an FCA-compliant way to corral investors; to get everybody in on the same terms and valuation, in a fixed time frame. My top tip would be to shout about the opportunity and work to drive people; not taking a back seat when the campaign is live. If you haven’t got capacity and need help, tell us – we have programs and processes that are designed to help companies succeed.
What is one challenge a company may run into while using an equity crowdfunding platform?
I think one challenge, particularly for earlier stage companies, is capacity – to keep driving the business forward whilst simultaneously raising money! This is the same principle for any kind of fundraising but I don’t want to paint the picture that an equity crowdfunding campaign is quick and easy because it isn’t, but it is achievable and will be so rewarding. Founders who get the fact that equity crowdfunding is so much more than just money in the bank will be the ones who succeed at it.