Crowdcube

Crowdcube
Web address www.crowdcube.com
Commercial Yes
Type of site
 Crowd funding Corporate finance Equity (finance)
Launched February 2011

Crowdcube was established by Darren Westlake and Luke Lang and is based at the Innovation Centre at Exeter University. Westlake stated in an article that he was inspired by "seeing great ideas fall by the way side"[1] on Dragons’ Den. As an equity crowdfunding platform it allows people the opportunity to purchase equity in unlisted, UK registered, businesses. As of June 2014 [2] Crowdcube offers investors two types of investment opportunities, equity (a stake in a company) and mini-bonds (lending money).

Developed as an alternative to banks, business angel, or venture capital funding, start-ups can use the Crowdcube platform to obtain financing from the public.[3] Andy Haldane, a policy maker at the Bank of England, has said that web-based lenders could be a contributing factor in making banks obsolete in future. "The impact of these firms could be revolutionary. At present, these companies are tiny. But so, a decade and a half ago, was Google."[4]

In February 2013, Crowdcube became authorised by the Financial Conduct Authority (FCA).

Model

Equity based crowd funding is a new fundraising model for entrepreneurs. Individuals' investments are pooled allowing entrepreneurs to secure funding directly from the general public, bypassing business angels and banks.[5]

The key principles of this model are that anyone can invest money in return for equity in a business. Entrepreneurs, with a UK registered company, can showcase their business, and its investment potential, to thousands of potential micro-investors by uploading a Dragons' Den style video pitch, images, and supporting documents. The minimum investment can be as little as £10.

Crowdcube operates on the "all or nothing" model. When a pitch reaches its investment target, the business receives the funding raised; if it does not, no funds are taken from investors. A commission is charged on successful funding campaigns.

The platform utilises social media to a large extent to alert potential investors about an offering. In March 2015, the Financial Conduct Authority released new guidance on the use of social media to promote financial products to ensure that all communications are clear, fair and not misleading.[6]

Crowdfunding as a model for fundraising has become more popular over the past few years with the rise of the US-based Kickstarter and Indiegogo. These platforms differ from Crowdcube as they work on a donation and reward-based model where the donor receives a tangible object such as a DVD or piece of artwork in return for their donation.[7]

Regulation

In February 2013, Crowdcube received authorisation from the Financial Services Authority (FSA) to offer investors the opportunity to become direct legal shareholders in UK businesses.[8] Crowdcube is the second regulated equity crowdfunding platform in the UK after Seedrs.[9]

Successful exits

In July 2015, E-Car Club, an electric vehicle rental business championing the future of the green sharing economy, produced a world first exit from the CrowdCube 'Funded Club'.[10] E-Car received a significant investment from Europcar, Europe's largest vehicle rental business.[11] E-Car club has joined the newly formed Europcar Labs project, which has been set up by CEO Philippe Germond to focus on 'mobility solutions'.[12] This is Europcar's first acquisition since its IPO on the Euronext in early June 2015.[13] 63 original investors in E-Car Club via Crowdcube benefited from a multiple return on their investment.

In December 2015, it was announced that Camden Town Brewery was being bought by the world's largest brewer, Anheuser-Busch InBev. In a letter to CrowdCube shareholders, AB InBev were offering a payout of between £1.0861 and £1.2526 per share,[14] depending on whether they accept an option with a variable element based on sales growth to be paid at a later date. Reports said this was a nominal return on investment of just under 70%, implying that AB InBev paid around £85 million.[15]

Funded campaigns

Equity

Some examples of companies that have acquired funding using this method are as follows:

Business Amount Raised No. of Investors Equity Released Date
Sugru £3,547,410 2,997 4.02% July 2015 [16]
Chilango £3,433,010 1,300 8.72% December 2015 [17]
Pavegen £2,051,720 1798 4.48% July 2015 [18]
Adzuna £2,149,355 552 5.89% June 2015 [19]
JustPark £3,700,000 2,919 15.61% March 2015 [20]
Enclothed £748,430 369 34.71% February 2015 [21]
The Solar Cloth Company £967,130 392 12.53% December 2014 [22]
Cell Therapy £689,246 297 1.07% December 2014 [23]
Grub Club £288,560 270 17.62% November 2014 [20]
easyProperty £1,420,680 396 2.03% September 2014 [24]
Shopwave £340,710 214 15.92% September 2014 [25]
Rollasole £269,240 135 12.7% September 2014 [26]
Open Desk £310,010 171 18.59% June 2014 [27]
LoveSpace £1,574,590 259 28.17% May 2014 [28]
Crowdfunder £500,000 10% 10% April 2014 [29]
Zero Carbon Foods £659,480 454 29.04% March 2014 [30]
Estates Direct £493,550 181 9.87% March 2014 [31]
Hab Housing £1,972,150 642 26.29% September 2014 [32]

Mini-bonds

Mini-bonds allow members of the public to lend money to the issuing company in return for interest and / or rewards. Mini-bonds have “particular appeal for established businesses”.[33]

In June 2014 Chilango launched Crowdcube’s first ever mini-bond campaign. Since then a number of other businesses have launched mini-bond offerings via the Crowdcube platform. Some of the businesses that have funded bonds via Crowdcube include:

Company Amount Raised No. of Investors Interest paid Date
BrewDog £2,312,000 815 6.5% Oct 2015 [34]
Taylor St Baristas £1,805,000 493 8% Jan 2015 [35]
Eden Project £1,500,000 355 6% October 2014 [36]
River Cottage £1,000,000 285 7% June 2014 [37]
Chilango £2,035,000 347 8% June 2014 [38]

Caterham F1

In November 2014, Crowdcube partnered with Caterham F1 to raise £2.35 million to get the team to the final Grand Prix of the season in Abu Dhabi.[39] Designed to empower F1 fans to help Caterham return to race, the project successfully completed on the 14th November,[40] with Caterham F1 finishing in 17th place with Grand Prix newcomer Will Stevens.[41] Caterham F1 went bankrupt in 2015.[42]

Investor motivations

In 2012, Crowdcube surveyed investors to better understand their behavior. It found that investors were aware that most small businesses fail and they therefore spread their investments and that they also invested in companies to which they felt an emotional attachment.[43] The research highlighted that investor decisions are driven by the business' idea, its market potential, and the entrepreneur's experience.[44]

Recognition

Crowdcube was nominated as one of the Top 20 Start-ups of 2011 by Startups.co.uk[45] and are No. 11 in the Startups 100, 2012.[46] Crowdcube were also awarded the Smarta 100 Award in 2011.[47]

Presented By Awards Title Date
Real Business Everline Future 50 Winner We Are The Future March 2015 [48]

Press coverage

In May 2012, Crowdcube was accused of misleading investors by showing a conditional grant from the UK Technology Strategy Board as an “investment.” In response, Crowdcube modified their practices to show only funding from site investors during a pitch’s progress.[49]

See also

References

  1. ↑ "How we came up with our big idea'" Virgin.com, February 2015.
  2. ↑ "Crowdcube targets growing businesses with new mini-bond funding option" Real Business, June 2014.
  3. ↑ Hurley, James (15 February 2011). "Crowdcube brings angel investing to the masses". The Telegraph (London). Retrieved 12 July 2012.
  4. ↑ Chu, Ben (15 March 2012). "Online Lending "Could replace" banks". The Independent (London). Retrieved 4 July 2012.
  5. ↑ "On the side of Angels - New ways of lending to small businesses". The Economist. 25 February 2012. Retrieved 4 July 2012.
  6. ↑ Norman, Tessa. "FCA social media rules create retweets 'minefield'" Money Marketing, March 2015.
  7. ↑ "Capital crowdfunders help you beat smart elite". The Metro. 3 April 2012. Retrieved 12 July 2012.
  8. ↑ "British regulator okays start-up investment website for public". Reuters. 4 February 2013.
  9. ↑ "Archived copy". Archived from the original on 26 April 2013. Retrieved 8 April 2013.
  10. ↑ Avi Geller. "Europcar's acquisition of E-Car Club ‘world’s first successful crowdfunding exit’". Growthbusiness.co.uk. Retrieved 2016-04-21.
  11. ↑ "The Europcar Lab takes majority stake in E-Car Club" (PDF). E-carclub.org. Retrieved 2016-04-21.
  12. ↑ Andy Sharman in London (2015-06-15). "Europcar plans Paris IPO to fund push into ‘mobility solutions’". FT.com. Retrieved 2016-04-21.
  13. ↑ "Resounding success of Europcar's listing on". Euronext.com. 2015-06-26. Retrieved 2016-04-21.
  14. ↑ "Here’s Camden Town Brewery’s letter to shareholders about the AB InBev takeover". FT Alphaville. 21 December 2015. Retrieved 22 December 2015.
  15. ↑ Davies, Rob (21 December 2015). "Camden Town Brewery sold to world's biggest drinks company". The Guardian. Retrieved 22 December 2015.
  16. ↑ "Crowdfunders stick Sugru glue record 3.5m raised" City AM News, July 2015.
  17. ↑ "Chilango Closes Funding on Crowdcube at £3.4 Million. Will Open 50 New Locations" Crowdfund Insider, December 2015.
  18. ↑ "Former Apple executive Jeff Martin Joins Crowdfunded Start-up Pavegen" International Business Times News, July 2015.
  19. ↑ "Job search site Adzuna Raises 1.5m via Crowdcube to get Britain Working" Business Matters News, June 2015.
  20. 1 2 "JustPark becomes UK's largest equity crowdfunded start-up" TechCity News, March 2015.
  21. ↑ "Enclothed Gets Dragons Den Boost Doubles Equity Crowdfunding Goal" Crowdfund Insider, February 2015.
  22. ↑ "New Solar Cloth To Turn Uk Rooftops Into Batteries" The Telegraph, December 2014.
  23. ↑ "BioTech Firm Cell Therapy Claims Crowdfunding Record With Heart Drug" Herald Scotland, December 2014.
  24. ↑ "Stelios latest wheeze easyProperty smashes crowdfunding target by 30%" The Telegraph, September 2014.
  25. ↑ "Shopwave" Startups, September 2014.
  26. ↑ "Rollasole smashes crowdfunding target as investors lap up roll up shoes" The Telegraph, September 2014.
  27. ↑ "OpenDesk raise £150,000 in 12 hours" Westminster Impact Hub, June 2014.
  28. ↑ "LoveSpace hits £1.6m as Shazam Venture Capital firm adds £250,000 to funding pot" UK Business Angel Association, May 2014.
  29. ↑ "Reward-based crowdfunding platform secures £500,000 target in just over three hours" Startups, April 2014.
  30. ↑ "Growing under the Tube: 141% Funding for Zero Carbon Food’s Crowdcube Campaign" Crowdfund Insider, March 2014.
  31. ↑ "Poundland founder raises double crowdfunding target for online estates agency business" Startups, March 2014.
  32. ↑ "Kevin McCloud is a hit with the Crowd(cube)" Management Today, September 2013
  33. ↑ Bridge. Rachel, "Soapbox: Established businesses should consider using crowdfunding too, says Adam Blaskey" Telegraph, December 2014.
  34. ↑ "BrewDog Bond raising investment on Crowdcube. Capital At Risk". Crowdcube.com. Retrieved 2016-04-21.
  35. ↑ "Niche coffee house chain Taylor St Baristas secures £1.8m Crowdcube mini-bond" Startups, Feb 2015.
  36. ↑ "Eden Project crowdfunding raises £1.5m in 20 hours" BBC News, October 2014.
  37. ↑ "Fearnley-Whittingstall's River Cottage raises £1m through mini bonds" Real Business, June 2014.
  38. ↑ "Will Chilango's £2m Success Herald An Affordable Mini Bond Revolution?" Forbes, June 2014.
  39. ↑ Wise, Mike. "Caterham launch crowdfunding project to fund team's return for the Abu Dhabi GP | F1 News". Skysports.com. Retrieved 2016-04-21.
  40. ↑ Strickland, Jamie (2014-11-14). "Caterham to race in Abu Dhabi finale after fundraising success". BBC Sport. Retrieved 2016-04-21.
  41. ↑ "Past Results - Abu Dhabi Grand Prix". Skysports.com. Retrieved 2016-04-21.
  42. ↑ "Caterham hopes fade as team's remaining assets go up for sale". BBC. Retrieved 13 April 2016.
  43. ↑ Guy Clapperton, “Why Successful Crowdfunding Requires a Social-Media Mind-Set”, Harvard Business Review, 3 December 2012
  44. ↑ "Investor Research". Crowdcube. Retrieved 11 December 2012.
  45. ↑ "Crowdcube The world’s first equity-based crowdfunding platform, bringing angel investment to the masses". awards. Startups.co.uk. Retrieved 4 July 2012.
  46. ↑ "The pioneer of equity-based crowdfunding, stamping a new path in alternative finance". Startups.com. Retrieved 13 July 2012.
  47. ↑ "Crowdcube Smarta 100 winners". Award. Smarta.com. Retrieved 4 July 2012.
  48. ↑ "50 of the most disruptive British businesses in 2015". Caspian Media. Retrieved 13 April 2016.
  49. ↑ Hurley, James. "Peer-to-peer website accused of 'misleading' investors". Telegraph. Retrieved 2016-04-21.
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