There’s never been a better time to start a new business. With low costs in marketing and online technology allowing us to connect with customers around the world, the only major issue that many entrepreneurs face is raising investment funds to get started in the first place.
The good news is that a variety of crowdfunding and investment sites have grown online, including Crowdcube which gets budding entrepreneurs right in front of the people with the money.
What is it?
Crowdcube is an equity funding site where entrepreneurs can raise money for their next project, with access to over 300,000 investors. Investors can put in as little or as much as they like and the site attracts private and corporate investors as well venture capital speculators. Crowdcube market themselves as the first site of its kind and started operating in 2011. Since then its popularity has grown and the company has more investment in going into its projects than any other UK venture capital platform.
Investors can handpick which companies they want to put their money into and get a share of them while entrepreneurs can set up on the site and attract valuable funds that help them get their idea off the ground.
Investing in Crowdcube
There are two ways to invest in Crowdcube:
As a joint venture: You put in money and then own a share of the business. Much depends on how the business performs but if it takes off you can earn a good return from the profits.
As fixed income: Similar to a bank loan, as an investor you receive a fixed amount each year depending on how much you have put in. This is a safer option than buying equity in a company that is just starting up.
How to set up on Crowdcube
For startup businesses, setting up on Crowdcube is easy. All you need to do is register, create your pitch and then advertise it. Once you put in a pitch, you have a month to reach your target. The only criteria you have to meet are that you are over 18 and your business is registered as a UK company. You’ll also need a clear business and financial plan that can be uploaded to the site.
The Pros and Cons of Crowdcube
The main benefit of any crowdfunding operation for startups is that you can obtain venture capital and make sure your project gets off the ground. If you need money for infrastructure or to develop an invention it can often be the only way to find the capital required. Banks are less willing to lend than in the past and are often too restrictive in their practices. Because sites like Crowdcube spread the burden across thousands of investors, if you have the right pitch, it can be a lot easier and quicker to raise the capital you need.
Having said that, you are also potentially opening up your company to a large number of investors and you need to be able to keep track of who owns how much of your business. In recent years, crowdfunding sites such as this have come under attack for attracting amateur investors who aren’t quite sure of what they are doing.
The Crowdcube site is easy to use and the customer service has generally good reviews concerning its availability and the responsiveness of its staff. The site gets around 90,000 visitors a month which is more than enough for most investment needs.
Charges for Crowdcube
When you successfully complete your campaign, there is a 5% charge that goes to Crowdcube, so you need to factor this in when you are putting together your pitch. There are also £1,750 in legal fees once you have reached your target.
Over the last 5 years, Crowdcube has raised over £200 million for UK startups with a 60% success rate for campaigns in 2015.
Tips for Using Crowdcube
- Do your research: Any crowdfunding project needs to be carefully researched. If you want to make a good first impression, then make sure you look at the successful and not so successful participants on Crowdcube and learn all you can.
- Set a realistic target: There’s no point asking for millions. Make sure that what you are asking for is going to be achievable in the 30-day window of opportunity that you have.
- Work on your pitch: The pitch is everything as is your business and finance plan. Serious investors are not going to put money into a project that has not been clearly thought through.
Compared to other crowdfunding sites, Crowdcube attracts more high net worth individual investors who will be looking closely at your pitch and what they can make out of your company. To succeed you need to have a very good idea of what you are offering and have all the bases covered concerning your business plan and financial status. That means a lot of hard work which needs to be done before you get to the final pitching stage. Get it right and you can expect serious investors to support your project.