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Misguided, Risk Creating Regulations

One of the great challenges with the pace of development in technology and the innovations that emerge from it allowing us to do things differently, faster and cheaper is that the regulations that have traditionally governed these transactions lag far behind. This is largely because the processes that create these rules, laws and standards have not accelerated or become more inclusive.

The result? Industrial age laws irrelevant, ill suited or obsolete in the digital world.

In many respects this should not be a problem. It may not be necessary to change, add or amend rules. At the same time where they are needed a bit of extra time to get the “rules right” should be a help. But generally it is a problem not least because any suggestion that new rules are unnecessary is generally perceived as a threat by those who set the rules. They feel they have been by passed, or just that they are perhaps being made redundant or obsolete.

Maybe it is this sense of siege that really compounds the problem with regulators creating poorly informed regulations through no, or faux, consultation, founded in industrial age closed mindsets, or simply trying to squeeze new development into old models.

Responses to collaborative economy models and companies like AirBnB are cases in point as cities look to “approve” people using their own resources to the benefit of the city.

Similarly in the UK we can see the FCA introducing unnecessary additional regulations in the crowdfunding sector.

This might all be just an irritant but unfortunately it can be worse than that. By failing to understand changed models regulators run the risk of creating poorly conceived rules that may strangle new innovations and make the new models inherently less safe – the opposite of what the rule makers would tell us they are seeking to do.

Consider for example the FCA regulations on equity crowdfunding. The so called “unsophisticated investor” is constrained in how much of their investable portfolio they can invest without having their hands held by those “masters of the universe” that did such a fine job of managing the financial markets a few years back. The motivation to mitigate the risk is perfectly fine. the problem is that the process put in place is founded in old world thinking and has no understanding of how crowdfunding mitigates risk – through atomisation.

If the rules had said no individual investment could be more than 1% of an investable pot this would have forced a spread of investment – atomisation – that would both make sense and would be fitting in to the philosophy and principles of crowdfunding.

Another example is the misconceived notion of the “Right to be forgotten” regulations from the European courts. This is both ridiculously difficult to enforce, very easy to by-pass if you can be bothered to put in the effort but at the same time opens up huge risk. The transparency and scrutiny of the crowd is a key self regulating aspect of many crowd based novel innovation online, not least in the crowdfunding world and by permitting individuals to hide aspects of the past, or making it more difficult to check, you expose all of us to risk.

The problems persist now and you need to act. The current consultation by the FCA on the use of social media in crowdfunding intends to constrain and clamp down on what you and I can say online. This will almost certainly increase risk in crowdfunding. The widest reach and greatest scrutiny is driven by awareness is reliant on social media. To constrain it is bad for all of us. So, its very important that you respond to the consultation process.

As it happens I have little faith in the validity and effectiveness of the consultation given the FCAs record. But you must have your say in an effort to get them to wake up to the reality of how the crowd empowered works supports itself, but to defend your own safety when crowdfunding.

Respond here

http://www.fca.org.uk/your-fca/documents/guidance-consultations/gc14-06

Shorter is Generally Better – Components of a Good Crowdfunding Campaign 6

alarmIt might seem that a longer campaign is a better idea as it gives more opportunity for funding but this is very rarely the case. A sense of urgency and time pressure is generally helpful for all concerned. The principle of “the burning platform” works well in a campaign where you will experience a lull and a drop in momentum.

You also need to bear in mind that running a crowdfunding campaign is tremendously demanding so how long can you keep up that level of focus and commitment? That is carried through in the amount of good quality material you will need to have to maintain the sense of freshness and urgency of a communication campaign. People can rapidly become bored unless new and vibrant updates are available. Trotting out the same message repeatedly over a long period will certainly begin to seem thin, dull and potentially annoying.

Many platforms only actually offer set time frames fro campaigns to remain live. Not all by any means, and if you are running a DIY campaign it is up to you. Typically equity campaigns can take longer. This can be for a number of reasons: the sums raised can be larger, the process of registering as an investor often takes longer, the evaluation process in deciding to purchase can be a longer cycle, and the scope for “advertising” an offer is more regulated and constrained.  But even here momentum, awareness and freshness is still important and it hard to sustain these over a longer period.

As we have said in a previous post, you should run your own campaign, so how long can you be away from your day job? You cannot afford to neglect your key role in the organisation. Maybe for a short period and maybe with good reason, but you cant extend that too far without having an impact on your role. When you factor in the amount of time required to prepare for a campaign as well as the time running the campaign you begin to see that crowdfunding is by no means “easy money”. It takes effort and commitment so you need to balance that effort effectively.

So, don’t lose the urgency and imperative of a campaign by making it unnecessarily long. Use your focus and energy effectively by channeling it to a shorter campaign to keep the energy and enthusiasm high.

This post is one of a series called Components of a Good Crowdfunding Campaign. Other posts in the series can be found here

Monitor, Respond, Update – Components of A Good Crowdfunding Campaign 5

RecycleIn our continuing series of advisory blogs on how to run a good Crowdfunding campaign we address three key activities in any campaign – Monitoring, Responding and Updating

Monitor

It is important to understand what is going on in your campaign so that you can amplify the positive aspects and tailor any aspect to any emerging patterns. So, in simple terms, keep doing what seems to work well and don’t flog a dead horse. To help you with that many of the platforms offer quite sophisticated dashboards that can provide insights on your project. Traffic rates, engagement, referrals etc., and a good analysis of this can lead to continued stream of actions and tweeks designed to improve the campaign. But the platform is not the only mechanism for monitoring the campaign. If you are using multiple communication channels then it is important to review what is happening there and monitor the results of your efforts. Using too many channels will be time consuming and using channels that are not being responded to is a waste of effort. So, for example, if you are sending email campaigns then use a tool that will provide specific insight about its impact. This might show how many people opened the mail, how many clicked on links, or forwarded it, the time of day these things happen. Create tracker tokens for links and see who is sharing and using them. All of this can help you tailor and enhance your campaign as you go. It may even be possible to find the time to compare different approaches and arrive at the best approach from a number of different messages. Build a monitoring framework and keep to it. Set yourself targets and benchmarks in order to measure progress. And be sure to act on what you discover.

Respond

If you are asked questions respond to them and do so quickly. Be open and friendly and take account of what is being said. If people are confused about something then clarify it in your response and check to see if the message needs amending elsewhere. In a reward campaign you may need to amend change or expand the range on offer as you go based on feedback. Platforms have varied rules on these matters but honest amendments responding to community demands are usually okay. In most cases, on reward platforms you cannot change the specifics of a reward once one has been purchased.

Update

Keep people updated. It might seem obvious but one of the great strengths of crowdfunding is that it establishes, or it should, a high touch relationship with your funders. Keep in touch with them and keep in touch with your community generally. Not everyone invests immediately, get them back to do it. Updates make your investors feel engaged, valued and involved. This sense of direct engagement in a project is a key motivator and one of the main principles of digital empowerment so it is a good principle to respect. By doing this you also maintain momentum which is key to a campaign. But this is demanding and time consuming so you should plan some distinctive trigger points prior to your campaign for releasing prepared material. The majority of what you publish will be responding to events, but having materials to hand to keep the campaign alive is essential. An important part of your preparation campaign is to prepare a publishing schedule for your project. This will include scheduled communications and publications, and material prepared ready for specific times, which might for example include announcements about hitting a specific target. Clearly bombarding people endlessly with repetitive messages will become annoying. Be creative, inclusive and informative and do be careful to avoid crossing the “irritating” line.

Remember this process can be prepared for and structured but, in many respects, it is an art not a science and never forget the old adage – we are given two ears and one mouth so listen hard to your crowd!

If you would like to attend one of our Preparing to Crowdfund workshops or some individual advice on your campaign then get in touch

Alternative Finance Is Coming of Age

Alternative Finance is coming of age and becoming mainstream in the UK as Governments begin to actively embrace and legislate for its effective use.

Earlier this month we had the privilege of organising a Parliamentary Reception at Holyrood entitled “Crowdfunding in Scotland – The Way Forward”

Hosted and initiated by Chic Brodie MSP the event brought together a wide range of interested and engaged parties alongside Parliamentarians exploring the opportunity presented by crowdfunding. It was great to see real interest and leadership at a Governmental level exploring and recognising that crowdfunding represents a real change in the way businesses and organisations across all sectors can find novel approaches to funding, and recognising this is more than a passing fad. The assembled participants heard stories of active and successful use of crowdfunding from a number of perspectives. This included Stuart Patrick CEO of the Glasgow Chamber of Commerce and their engagement with Funding Circle to help Glasgow business. Kevin Miller of RunRev who have recently closed a second crowdfunding round this time a DIY campaign for £250,000, explained why crowdfunding works for them. Warren Bader of Plan Bee who have successfully run a an overfunded round on Crowdcube set out the importance of this type of funding for such an innovative startup, and Neil Simpson if Brewdog revisiting their extraordinary successful fourth equity raise.

On the same day the Chancellor, George Osborne made further announcements that underpins the UK Government’s support for FinTech and alternative finance in particular. One of the key points was the promise to introduce legislation that mandates that Banks who turn down a business loan application will become obliged to offer to pass their details onto alternative finance providers. This builds upon the existing Alternative Business Funding website that provides a simple traffic light approach to assess the high level suitability of an firm to alternative finance.

All this is demonstrating a growing maturity in the alternative finance sector and how it is increasingly important for businesses, and all the groups and services that deal with them, to understand what is on offer. Our expertise in crowdfunding has already proven invaluable to many organisations wanting to understand, use, engage and succeed with crowdfunding.

We will continue to offer the sort of unbiased and balanced advice to clients from all areas as the sector progressively innovates and develops.
So, alternative finance is rapidly becoming part of the mainstream and part of your finance mix, do you know enough to maximise this opportunity? If not then be sure to contact us.

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