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Crowdfunding – an alternative source of funding for growth
Quick definition:
Crowdfunding is raising money from a large number of people, typically via the Internet. The crowdfunding model has three key players: the project initiator who needs the funds; individuals or groups who support the idea; and a moderating organisation (the online platform) that brings the parties together.
Get dressed before the crowd sees you
Imagine that nightmare where you are standing in the middle of a packed Wembley Stadium about to make a speech, and you have, shall we say, a significant wardrobe malfunction. Well, crowdfunding could be like that, only worse – the world might be watching. Fortunately, crowdfunding does not have to be stressful at all as long as the right professional advice is gained and suitable preparations are made, writes John Burbedge
In fact, crowdfunding can be a dream of a way to fund an innovative start-up or early stage commercial venture, as ambitious entrepreneurs and leaders of fast-track businesses are discovering daily.
According to Forbes, the American business magazine, crowdfunding raised over $5.1 billion worldwide in 2013, and the industry continues to grow exponentially since it came to notice around five years ago. Crowdfunding is tangible evidence of the power of the Internet at work.
The alternative online option of crowdfunding is also rapidly evolving with many different and specialised investor websites now in operation, offering finance solutions from rewards-based platforms to equity sharing.
The Financial Conduct Authority stepped in this April to regulate UK crowdfunding and ensure user clarity and confidence in online peer-to-peer lending and investment-based funding.
THE BUSINESS MAGAZINE – THAMES VALLEY – NOVEMBER 2014
But, the thing is, as the crowdfunding world gets larger and more varied, there are many more chances for newcomers to have that ‘wardrobe malfunction’ when it comes to their opportunity to face the crowd and pitch for their funding.
That’s why local organisations VitalSix and Angels Den have provided a helpful 10 top tips for crowdfunding success:
1 Be well prepared. Pitch with an up-to- date business plan, financial projections, what you want the money for, and how you’ll repay it. VitalSix can help you shape your business plan, make you ‘investment ready’ to maximise your chances of securing growth funding.
2 Not all crowdfunding platforms are the same. Do your research. Seek advice. Make sure the platform is properly regulated, professionally run and has a transparent and fair pricing policy.
3 What sort of finance do you need? At what business stage are you? If you need money to bring a new product to market, sites like KickStarter will allow you to raise relatively small sums to prove your concept. Reward-based crowdfunding enables pledges from investors to be rewarded with your goods or services – a great way to get friends and family involved in your project. Again, practical input from the experienced business experts at VitalSix will help you select the right option.
4 Some crowdfunding sites such as Funding Circle or Thincats specialise in loan finance (peer-to-peer lending). It’s a useful and cost-effective alternative to bank funding, but you will need to be an established business with at least two years accounts to access this crowdfunding.
5 An early-stage company will probably need to consider an equity crowdfunding platform, such as Angels Den. Investors will provide funding, expertise and their contacts in exchange for some equity stake in the business. This is patient capital that does not need to be repaid quickly
www.businessmag.co.uk
and will provide a solid base for business growth and expansion.
6 Getting a couple of anchor investors in place before putting your pitch live on a crowdfunding platform is a good move. Nobody likes investing in a pitch at 0% – everybody wants to be part of a successful campaign. Angels Den allows companies to pitch live to investors before their pitch goes online.
7 Get a professional video produced for your online pitch. It’s worth the investment. Remember that Wembley nightmare.
8 Make sure that your local community and social media followers know about your campaign. They could be your next investors.
9 Keep your investors up-to-date with news – both good and bad. They will welcome the update and may invest more in the future.
10 Enjoy the exciting journey that is crowdfunding.
Contact VitalSix for a free, no obligation business growth review and discussion about how crowdfunding can be an effective funding option to fuel your expansion plans.
Contact Angels Den for free expert advice on your business, the funding options available to you, and how Angels Den’s network of over 7,000 angel investors and its responsible crowdfunding platform can take your business to the next level.
Details:
Susan Elliott VitalSix
susan.elliott@vitalsix.co.uk 0118-9357115
Sally Goodsell Angels Den
sally@angelsden.com
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