SME spoke to Luke Lang, CMO and co-founder of Crowdcube to find out just how the platform works
How does Crowdcube work?
Crowdcube is an investment platform where people who are backing or supporting a business invest money and, either through equity or getting a stake in the company, get to own a part of the business.
As a platform, we’re quite distinct from other sites such as Kickstarter, which is a reward-based platform that is very common place and well-known. Crowdcube is often used by larger companies or businesses looking to develop and launch new products.
What sort of business looks for crowdfunding?
It is really difficult to define the sort of business looking to crowdfund as these types of businesses can be quite polarised. We can fund anything from £50,000 upwards, whether a business is looking to raise £50,000, £100,000 or £150,000. The Seed Enterprise Investment Scheme (SEIS), a Government tax incentive scheme, looks to help start-ups in the early days of their growth plan, right up to the much more established businesses.
We are also starting to see a really strong trend, not just of really great entrepreneurs, but also executive and entrepreneurial teams that have run businesses in the past and have got a strong track record and therefore a proven capability of building businesses.
And there has been a trend for more established businesses to raise money. The Camden Town Brewery raised finance on the side; we also had a fashion company called The Idle Man which had a former executive of ASOS behind the business. There are companies there that you wouldn’t necessarily expect to find on a traditional crowdfunding site – River Cottage by Hugh Fearnley-Whittingstall has been trading as a business for ten years or so – which gives you a perception on how attitudes towards these methods have changed.
Why do you think businesses look for alternative finance?
From the equity side of things, a lot of the businesses are in the early stages of growth so bank funding might not be the appropriate way of raising finance, as they don’t necessarily have that traction and the option to service that debt.
We’re certainly seeing that companies like Camden Town Brewery are turning to crowdfunding, either using it as an alternative or alongside traditional forms of investment. There’s also the appeal of getting the money a lot quicker when going down this route.
And don’t forget there is an awful lot of publicity involved in the implementation of a successful crowdfunding campaign – lots of journalists get involved, meaning that there is plenty of coverage.