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An interview with Marketlend CEO – Leo Tyndall

Marketlend is a new Australian lending platform founded and led by Leo Tyndall.

Launched in the same week that the Financial System Inquiry (FSI) of Australia released its “blueprint” for the Australian financial system for the next ten years, this new platform shows how innovation in financial products is  global.

We were lucky enough to get a chance to speak to Leo in the week of his launch.

Leo provides us with an interesting insight as to how Marketlend is a necessary addition to the Australian business finance marketplace and what makes its offer so distinctive.

The FSI report is generally encouraging towards crowdfunding and new and novel approaches to finance and we can be sure that where Leo’s team lead others will certainly follow.

You can stream the interview from here, our Podbean account or download it for later listening

 

 

More information on Marketlend can be found here

IgnitionDeck – An Interview with Nathan Hangen

DIY Crowdfunding is becoming an increasingly popular choice for those seeking to raise funds for the organisation or project. In this process crowdfunders choose to host their campaign themselves rather than use one of the well known crowdfunding platforms. As organisations come increasingly to understand the value of their crowd assets and social capital we will see this choice being made more and more, and a whole industry is already emerging to provide the tools and services that help make this possible. Amongst the frontrunners in that at present is a WordPress plugin called IgnitionDeck developed by Virtuous Giant. It is an increasingly sophisticated tool that has already helped raise many millions of dollars for thousands of projects. We had the chance to speak to a co founder of Virtuous Giant Nathan Hangen and asked him about the past present and future of Ignition Deck.

We recorded the interview and offer it here as a podcast, an MP3 download or streamed for your use and the full transcript is below.

Our report detailing the fascinating sector of DIY crowdfunding is available here.

 

Transcript
TW
Afternoon Nathan

NH
Hello how’s it going?

TW
Alright although its morning your time isn’t it?

NH
True – near afternoon

TW
Nathan you are based in Florida – is that right?

NH
That’s correct about 20 minutes outside Tampa

TW
Okay and you’re a man with a finger in a number of pies – Virtuous Giant is one of them and its from Virtuous Giant that IgnitionDeck came – is that right?

NH
That’s correct. Virtuous Giant is with my friend and partner Shawn Christenson – who is in Alberta in Canada and we started long ago actually to work on iPhone Apps

TW
And then you decided to create IgnitionDeck. What was the thinking behind the production of IgnitionDeck, what made you go down that path?

NH
Well we had a couple of games and iPhone apps out that were doing well and we had a game concept for the iPad and we had another friend who was a musician out in California and the three of us wanted to get together and build this iPad game. And we heard about crowdfunding and thought we would do a Kickstarter and I started the application and I got about halfway through that and something about the application just turned me off. So I thought I would look for a WordPress crowdfunding solution – so basically Kickstarter for wordpress and it didn’t exist! So we put that off for a while whilst we went round the country a little trying to raise money for the game and that didn’t work out. So we came back and thought we would look again for that solution and it still didnt exist and so at that point we built it. We actually at the time, because I was doing a lot of iOS stuff, hired a developer to help us to build something that we could use for ourselves to raise money for the game and in the end we had so much interest that it changed quite a bit and so the game never saw the light of day.

TW
Okay so thats one for another day?

NH
Yep

TW
So when did IgnitionDeck first become available, what was the date at which people could start using it?

NH
We launched a very rough and basic beta in October 2011

TW
Okay and what was the response?

NH
We had quite a bit of early interest. We had a little email form up and people could sign up before we released it and I think we had maybe 200 people on the list before we launched and I would say more than 50% of them purchased and we gave them a discount for the beta release. And since then we have gained traction every single month. It took us a little over a year to reach our first 1000 customers and it kind of started to snowball after that.

TW
How big is the install base now – do you have any idea?

NH
It’s somewhere between 2,500 -3000 with our base product and some of our themes

TW
Thats amazing and you mentioned there that you have extended the product so now its got theming elements so you can present it in different ways, and there is a range of extensions isn’t there?

NH
Yes. We thought we would just build this plugin and be done with it. We would sell it and support it and move on to other things. But people kept asking for more and more features and, as you know, crowdfunding is an industry that’s changing every day and growing very quickly. So things like stretch goals, people had created that on the fly in Kickstarter, so we thought lets build a stretch goals extension and additional gateways and we just keep listening to customers and kept trying to build things that made sense. We don’t put them in the core product because we don’t want to make it too big and bloated but we do enjoy adding things on.

TW
And some of third party things in there so you have Stripe, and Bitcoin and Constant Contact and some of the important names there in the associated services and functions of crowdfunding. Do they come to you or do you go to them?

NH
Well most of it is a customer request on our forms saying “Have you thought about integrating with this…?” and we wait to see how many people say the same thing and if a lot say it we build it. Or I really like Stripe and their api is gorgeous and so that is one that I set out to use. So most are requested by customers over a period of a couple of months, but if we see a neat product or payment system we will go out and build it.

TW
Going back to your install base, are you mainly shipping to US or are you aware of it going further and it being used in any other geographies?

NH
Well that’s one of the things we really like about what we are doing. We have a huge international install base infact I can pull up a little map here .The US and North America is about half of our base but we get a ton in Europe and we get a ton in Asia. We would love to do some internationalisation of our website and improve that but we are all over and in 93 countries right now

TW
And have you got plenty in the UK?

NH
We do. Maybe 30- 40 % of our install base is in the UK

TW
Amazing – and do you have a feel for the sort of amount of money that has been raised through your extraordinary plugin? Course you obviously have got one very high profile and extraordinarily successful user in Star Citizen but beyond that do you have a feel for what this is generating for people?

NH
Well it goes all over the spectrum. We have some bands that have used it to raise $3000 to make an album or $5000. There is an open source analytics programme called Piwick who are crowdfunding each feature one at a time each one being a few thousand. Then you have a documentary called Sirius that raised… gosh – 3 or $400,000. The Precinct game had a Kickstarter and the used IgnitionDeck to raise a couple of hundred thousand dollars. And we are getting ready to launch a project called SkiNation featuring a team of olympic and x-games skiers who are building an app for skiers and they are seeking to raise about $300,000 so its really all over the place.

TW
That is extraordinary and you mentioned there this idea of people running a campaign on another platform like Kickstarter and then they are sort of jumping ship from that and then running another one Star Citizen being the same having run a successful fund on one of the big platforms and now they are using IgnitionDeck. Are you finding that is something more common or are people just starting from scratch with IgnitionDeck saying we will just do it ourselves?

NH
Well we are getting a mix of it. I would say IgnitionDeck with Star Citizen, for example, they actually started on IgnitionDeck first and then went on Kickstarter and moved back. A lot of fans had said they wanted to pledge on Kickstarter too, and it has a huge base so I think its smart to hit that and people seem to have best success when a) they launch simultaneously using Kickstarter and IgnitionDeck as paypal donations or b) they already have an audience and they don’t need Kickstarter or if its the second crowdfund they don’t really need to give away that 5% so they can just take their email list and launch on IgnitionDeck. Or they have a successful Kickstarter campaign but they want to continue to raise money an IgnitionDeck is a great fit for that and we have seen that quite a bit too

TW
And IgnitionDeck allow you to fulfill lots of different styles of crowdfunding, so you have the “keep it all” and “all or nothing” models but you seem to be able to accommodate most configurations within a crowdfunding model.

NH
That’s correct. We started off with a level base then we offered “pay what you want” because that is another thing people wanted. And of course now the big thing is equity and a lot of people are asking us about how we could do equity or something besides money so we are figuring out how to approach that. But really we want to be a tool that people can use no matter what they are trying to do. We figure the more options we provide people the more useful we become. We are really in it because we are entrepreneurs and we developed it because we needed to raise money, so anyway we can help other entrepreneurs we are into that.

TW
So tell us a little about the Star Citizen story

NH
That was great story. Chris approached us maybe 6 – 8 months before they launched and they were looking for something. They didn’t want to do Kickstarter because they like to do things their own way – like a lot of our customers – and so they didn’t want to go the traditional route and we worked with them for about 6 months to build a custom platform. At the time IgnitionDeck was very young and we built some custom payment systems for them and the whole thing was custom, and Chris is a smart guy and he knows what he wants so he had a lot of requests and we built those requests. And once we finally launched and the first day he is on stage giving the link out he got so much traffic that the site went down! So there was a period there in the first week when our team didn’t sleep for multiple days at a time. It was quite intense. But we got it back up and migrated the site and continued to make improvements. Of course he met his goal of between 6 and $8 million and he continued to use IgnitionDeck even after that campaign was over and they reached $14 Million and by that point we had moved on and they began to build a system that would integrate with their game. But the tally was about $14 Million before they moved over which was rather impressive

TW
Yes that is pretty good. So on a technical level how does it work. In effect you install the plugin onto your WordPress site and then does it back end into some of you payment and settlement systems or does it buy pass you guys completely and go straight to the settlement providers?

NH
It bypasses us completely. That was a decision we made early on, we didn’t want to be a middle man we don’t want to get in the way although a lot of people suggested we do that. But right now its not something we are interested in so you download the plugin and you get the extensions say Stripe payment s or WePay or Constant Contact you install it just like any other wordpress plugin and it goes straight to the gateway. You keep all the money besides the fees that they charge

TW
And what do you think are the motivations that are driving people to go down the DIY path?

NH
I think there’s a lot to it. I think first of all I know a lot of people who thought they could go on Kickstarter and because it is popular and because everyone knows about it their project would get found out and traffic would come to them and it doesn’t work that way. Kickstarter don’t make a big deal about the folks who fail but there is a lot of them and it really crushes people when that happens. I think one of the nice things about IgnitionDeck is that you don’t have to go through an application process you can just get started right away, create your own rules and you can raise money for as long as you want. If you don’t meet your goal you can tweak your project and do it again, and if you need to extend your date you can extend your date. We don’t encourage anything that is not ethical but people can do it their own way and the platform really suites that especially when you don’t have to pay an extra 5% – why pay that if you don’t have to?

TW
So go on tell me how much does it cost currently?

NH
Right now IgnitionDeck is $79 for updates and support for a year and you can get all the extensions for $20 a month. But otherwise they range from about $19 to around $49 for payment gateways and those are all yearly licences. Beyond that we are launching an enterprise product called IgnitionDeck Eenterprise and that is $199 during preorder – which is now – and it will eventually be $499. We had a lot of requests for people wanting to build their own white label product or platform and we didn’t want to build that into the core product because from a technical standpoint we could make it work but in the back end it would not be pretty and we wanted to keep our core product doing what it does. So IgnitionDeck Enterprise will be basically a white label platform product that allows you to work on WordPress multisite. Also you can have a membership site or something like that . It will have Stripe connect that will allow you to charge money or a fee on top of every payment that comes in, it will allow people to submit projects from the front end and an admin can approve them. It will have integration with FirstGiving, this is really big with charities as the donations go straight through there and they don’t touch an intermediary which is important when you are dealing with that kind of business and cash flow. So things like that and we are going to continue iterating on that as we see fit. But its basically going to be designed for multiple projects and running a platform rather than running a single project.

TW
And what is the timeline for that being available?

NH
Well if you go to ignitiondeck.com and Fund the Future that is our page that takes the payments and the more interest we get through pre orders the quicker we will build it. But at worst case it will be the end of this year, best case sometime this Fall

TW
Okay. Do you get a feeling that there is a particular sector that is more inclined to run DIY or is it like most crowdfunding, across the board?

NH
It’s hard to say. It’s great for charities and nonprofits because its one things to ask for donations but another to run campaigns and they have been doing this for a long time and making it up as they go but now there are tools to do it. So I think its going to help them. I think its going to be trickier for hardware as we see a lot of hardware companies these days that don’t have their manufacturing lined up properly and I think, with the exception of a few, that will go back to seeking venture capital again and investment banks and loans again. I am really excited about what it can do for artists and creatives, so a musician – if you like their music lets get an album together or an author who might write the chapter of a book and it gets people excited and people want to see the whole book. So I think with things like that where there is low overhead and creative overhead I think it’s especially going to be helpful to them. Down the road, because it doesn’t really take a lot, you don’t need to get a prototype together. You can record a song or write a chapter to your book or paint something, I think its a little bit easier that way

TW
Okay. So what, for your money, are the upsides and what are the downsides of doing your own crowdfunding rather than going on one of the platforms?

NH
I think if you are going to do it yourself you really need to be prepared. We work with a lot of clients who by the end of it we usually end up in pretty good shape. But they come in just thinking they are going to crowdfund and they have a rough idea but you have really got to put in a ton of time. And that is one of the things that the Kickstarter application does it helps you refine your campaign based on what works on their platform. So if you are going to do it yourself you are going to have to study what works well everywhere and it never hurts to have a base already on social media or email lists. The most successful people with our product already have social media or email followers and I think its important. You can start a campaign and let it go slowly but you’ve got to keep working. But if you don’t have an audience you are foolish to expect that in 30 days you are going to have your money unless you get a surge in press or something like that.

TW
We stress this a lot. Its a lot of our work in helping people prepare for crowdfunding campaigns. We won’t run the campaign for them, we think that is quite wrong, but preparation is the key and we run people through what we refer to as the TAMP process to get them prepared for their campaign and I think a lot of them, before they have done it, don’t realise how many things they have got to consider and how much work they have got to do to prepare the grounds for a successful fund, particularly if its a big fund.

NH
Absolutely and one of the things about cowdfunfing, and this is one of the reason I am a little cautious about crowdfunding for equity, its one thing to be accountable to investors but you customers are much more dogmatic for good and bad. They will research everything they can about you they will ask questions that you have never even heard before and they will want to know everything, and if you don’t have an answer to those things you are going to have a hard time building trust. And the other thing is you notice the successful campaigns offer updates quite often during the campaign and often people think they can just throw up the form and the money will come in. But they want updates and they want to know what’s going on and something you don’t get to work on your product during your campaign because you are so busy dealing with communications

TW
So what is next for IgnitionDeck? Obviously you have the enterprise solution coming which will keep you busy but are there more extensions going to be coming out and what sort of look to the future can you give us?

NH
Well as I mentioned the Fund the Future page we are taking pre orders for the extensions so it depends what will come first but Amazon payments is getting requests for, Ideal payments which is popular in the Netherlands, Paymill which is a popular gateway in Europe – very similar to Stripe, so these are some of the things we are working on. We are also getting ready to release a membership plugin for WordPress called Member Deck which will essentially function on its own and will be included in IgnitionDeck Enterprise but if you want to use IgnitionDeck with membership it has an integration with IgnitionDeck. We will be launching that this month. What we really want to do is build tools that help entrepreneurs and so we have payments taken care of, we have a lot of the basics done so what we want to do is build a great experience working on themes and we want to build powerful analytical and communications tools so people can know their audience and make the most of it. So for example you have just finished with Kickstarter and and you have this CSV file with all of your customers – what do you do with that? So we want to help people in that situation and that will take us to the next level.

TW
So CRM tools and that you can plug into so you can up-sell and cross-sell and all that good stuff?

NH
Exactly – to help people build a real business and part of that is taking pre orders so we are working on that.

TW
Well thanks for that Nathan really good speaking to you. Thanks for taking the time to tell us a little more about IgnitionDeck

NH
Thanks Tim, I appreciate it

Crowdfunding Bicycle Building- An Interview with Andrew Denham of The Bicycle Academy

Crowdfunding Bicycle Building- An Interview with Andrew Denham of The Bicycle Academy

The Bicycle Academy, an innovative plan to train people to build bike frames whilst providing bikes to the developing world, used crowdfunding to generate the funds it needed to set up. The campaign was one of the most successful reward based campaigns raising £40,000 in just a few days.

I had the chance to speak to Andrew Denham, the founder of Bicycle Academy at the very end of 2011. In this interview Andrew:

  • Explains how the Bicycle Academy works and what inspired him to set it up
  • Why he chose to crowdfund it
  • Why he chose the platform that he did
  • What he believes made the campaign such a successful one
  • Gives advice for anyone else looking to run a crowdfunding campaign
The interview is transcribed below but, if you prefer, you can listen to the interview or download an MP3 here.

TW: Andrew, thanks very much for taking the time to speak to us. Why don’t you start by telling us a little more about the Bicycle Academy?

AD: The Bicycle Academy is a place to learn how to make bikes, so it’s a frame building school. It has a bit of a twist on normal frame building schools in that the first frame you build you don’t actually get to keep. So you are taught how to make a bicycle frame by way of brazing, which is like welding, but rather than getting to keep that you give it away and it goes to charities, it goes to help people in Africa who really need bikes to get through their everyday lives.

TW: So what gave you that idea?

AD: Well, it’s a bit silly really. I run a bicycle event in my home town called the Cobble Wobble. It’s a bicycle race up a really steep cobbled hill, and I thought it would be really funny to try and build a custom bike that would look a bit like a funicular train going up hill. So, it would have a tiny front wheel and a big rear wheel so it would look level as it ascended the hill, and I started looking at frame building course and first of all they are very expensive. And secondly, you couldn’t really build something silly like that for a couple of reasons.

One because you probably would not want to spend all that money on doing so, and two they are really geared up toward more touring frames or mountain bike frames so it wasn’t an option to build a Frankenbike. So, I was thinking about that and at the same time I was also trying to do some work to help some bicycle charities and one who distributes bikes in Africa. It was apparent that there was a distinct shortage of certain types of bikes, so adult male bikes, so a gents bikes really. And not only that but some of the bikes that were sent out were sent with the best of intentions but in many ways they take an awful lot work to keep these bikes going. You may or may not know that there are 31 different types of seat post on a bicycle, in terms of the diameter of the post so imagine that across all of the other components on a bicycle and all these bikes being sent out to Africa, just imagine how difficult it is to keep those bikes running when things go wrong or break?

So, I had the idea, and it’s not a new idea, wouldn’t it be great if there was a standardised bike and I was thinking how could I help to make that happen? And so the two things got married together in my head and I said what if you went on a frame building course and the first frame you built was this standard bike and that got given away. For that to work, people would only be willing to do that if there was a bit of a trade off so let’s make it a bit cheaper than other frame building schools and let’s allow people to come back and build their own frame as and when they want to. So they can make use of the workshop as a hack space to build their own bikes. So it all started to balance out and things seemed to make sense. There was a nice philanthropic thread to it which gave it heart and soul but it was also democratising frame building so that people could do so that otherwise perhaps wouldn’t have been able to afford to do so.

TW : I guess these are also skills that are disappearing as well as these days a lot of frames are carbon fibre, so frame building is a declining skill probably.

AD: It is, yes; and we are going focus on steel frames for two reasons. Firstly it’s far more accessible. Brazing is an accessible method of joining two metal tubes together. So, we are going to specialise on steel and you can do an awful lot with it. It’s cheap and it makes an awful lot of sense, but you are right these are skills that are fading, there was a time when every town had a bicycle frame builder and now there are very few and there are only two places in the UK now that offer frame building courses and they are quite expensive. They are very good training providers but most people can’t afford it.

TW: So you are setting up the Bicycle Academy, people can go learn how to build a frame, first frame goes out to Africa then they can come back and use the facilities again. To do that from scratch takes significant capital investment and the way you decided to do that was using Crowdfunding. So what made you want to use Crowdfunding as a method for raising funds for this particular scheme?

AD: I think it was a number of things. First of all Crowdfunding is a really romantic way of funding a business, and that is a deliberate choice of words. I think there is something lovely about people rallying together to make something happen that they believe in, and the Bicycle Academy is something I certainly believe in and a lot of people who have joined us along the way certainly do as well. And so it made sense that this was a way of funding that might work.

But if I was being objective about it, I wasn’t hugely keen to go to the banks or an investor because it can be really expensive and it can mean you have this horrible thing looming over your head, which can add a lot of pressure. But that is not to say you don’t have a responsibility to the people that back you during crowdfunding– you absolutely do but it’s different. The mentality is different, they are not simply in it to make money. In fact, typically crowdfunding is not equity-based, it is reward-based. So, someone will contribute money to your project in exchange for something.

So, for the bicycle academy we offered a number of rewards. £20 would get a lovely T-Shirt and bits an pieces. £50 got a T-shirt and bespoke bag; right up to £1000 for a one-to-one course at the Bicycle Academy. And so what it has allowed me to do is effectively pre-sell almost a year’s worth of course places and put that profit from those courses straight back into the bicycle academy which pays for the start-up costs before we have delivered any courses. So, it’s a sort of backwards way of operating in any ways but it’s what makes it so attractive because I have the money up front and I can invest in the set-up costs and tooling I need and know I have people coming on the courses.

TW: It’s an interesting point because this is one of the great propositions about crowdfunding, particularly for a product-based enterprise in that you are essentially selling pre-sales and it’s quite a nice way of getting into commercial operation. So did you know much about crowdfunding before you started the campaign?

AD: I had seen some of the almost fairytale success stories on Kickstarter, the Lunatik watch amongst others so I was aware of it. But I think when I came up with the idea of the Bicycle Academy it wasn’t something that I thought of as something I wanted to pursue as a business venture per se, it was just something that I want to see if I could just make happen and potentially set up as a not for profit. But it evolved and is something that has a lot of potential and so I am committed to making a business of it.

But crowdfunding seems to fit quite early on and after coming up with the idea in November 2010, I did a lot of research into crowdfunding over the following six to eight months looking at other projects and basically seeing what worked and didn’t work and to look at other brands as well as I think there are brands that if they were to crowdfund almost anything they would succeed just because they have the right sort of following. People who really believe in the brand or products. I think if you want to succeed in crowdfunding, unless you have some ground breaking product that people don’t want to know where it came from or about you they just want the thing, you need to have a connection with your audience so you have these evangelists customers if you are already trading or people that just know what you are trying to do and are supporters.

TW: So they have been exposed to the theme and idea of what you are trying to to?

AD:Yes so over that period I had been blogging and updating people, and from the first point that I starting telling people I had this idea that’s is pretty cool and it could be a really good thing, people started following and it picked up some momentum. And the people that were following it really believed in it and I was fortunate to have those kind of supporters I guess so it really fitted that crowdfunding would work for Bicycle Academy.

TW: So before you began the process of raising money you had built up a rapport with followers you had primed them to exactly what the academy was about, got them enthused about it before you had even begun to raise the prospect of starting a crowdfunding campaign.

AD: Yes absolutely, and the next stage was to explain that the crowdfunding was going to come. In June I announced that we were going to crowdfunding and June to November (when the crowdfunding began) is a considerable time to be building up anticipation about it. I had a countdown on my website and people were really excited to the extent that when we actually did launch people were falling over themselves to back the project, they were so eager to do it. In fact Peoplefund.it , the platform we used, launched on November 1st but the actual site was visible a couple of days before and people were so eager they found the website and we had put a couple of test pledges on it just to check the functionality but people thought that the site had gone live and were really worried that they were likely to miss out and before it had launched we had already secured £6000 in pledges. A couple of people had seen it and another couple saw it that others were pledging and I started to get all these emails saying “I thought it hadn’t launched yet” which was brilliant.

TW: And you were using blogging tools, so were you using any other social media tools to build that rapport and that relationship?

AD: Absolutely, it started with a posterous blog and then a Facebook page, and I stress page rather than account because people often set up a personal account and that is the wrong thing to do for a number of reasons. One it’s not what is designed for and it’s not fair in terms of people’s privacy because you can see a lot more about them that is reasonable if you’re an organisation but pages also offer a lot of insights in terms of visitors which is really beneficial so it was a page and not an account. We also had twitter and a website. Now I am not someone that is an expert in these things but what I have learned, and I still do it, I refer to “we” as opposed to “I” because it is something bigger than you, it’s an organisation and people often speak of we even when it is just themselves that are doing something and makes them feel good and gives the whole thing credibility but I don’t think it does and one of the lessons I have learned other the past few months is just say “I” and sign of with your name because ultimately it is you that’s doing it and it’s important to create that connection.

TW: You mentioned that you used the platform Peoplefund.it What made you choose that particular platform?

AD: It was quite exciting really. I was approached by somebody involved in the project in June at the Bespoked Bristol – the hand made bicycle show. I spoke to them about the Bicycle Academy and they said they were starting this crowdfunding platform and that it would be ideal for me to crowdfund on their platform. So I learned a bit more about it. Peoplefund.it has been created by Keo Digital – which is part of the River Cottage Group, so it’s something that Hugh Fearnley-Whittingstall is involved with running and they are responsible for River Cottage, Fish FightEnergy Share Landshare.

The Bicycle Academy – Crowd Funding from The Bicycle Academy on Vimeo.

TW: So to put this in context for an international audience, these are very high profile organisations in the UK. Certainly Hugh Fearnley-Whitingstall a very well-known television personality within the UK.

AD : Yes absolutely and they have a hell of a lot of credibility and rightly so. They are very accomplished. There are a number of other crowdfunding platforms in the UK. It should be said you aren’t able to start a Kickstarter project from the UK unless you have a US bank account so that immediately closed that off but I believe that is something that is likely to change in the next year or so. So there are a limited number of platforms but crowdfunding is relatively young in the UK. There are not that many projects that have been started, not that many that have been successful and also of those that have been there are not many that have raised the amount of money that I needed. So it wasn’t as if there was an obvious choice in the UK and Peoplefund.it were new and they were launching and Bicycle Academy was selected as one of their 12 launch projects, so that was all very exciting. It was a bit of a gamble I guess, but everything felt right, and I believe in what they do outside of Peopelfund.it and so I thought it was a good fit.

TW: Great. And to cut a long story short, yours was a rip roaring success wasn’t it?

AD: Yes – I think we were 66% funded within 24 hours. We needed to raise £40,000 and we would have been 100% funded in three days but I ran out of course places. I had put a cap on the number of course places we offered, just because I wanted to see what happened really. We might have sold lots of the smaller pledges, but I got so many phone calls and emails begging me to release more than I did and we were 100% funded in five and a half days. So it was the first ever Peoplefund.it project to be funded, it’s the most funded UK reward-based crowdfunding project and I believe it is the fastest funded of projects over £1000, but I am sure that is changing all the time, so those claims may have changed by now, but certainly it was only a month or so ago.

TW: Well it certainly attracted a good deal of attention hence us speaking to you about it because it is such a recognised and successful campaign. You said that you did quite a lot of preamble and preparation work and that you feel this was useful in making your project a success. Are there any other factors do you think that helped make this a particularly good and successful campaign?

AD: I think there is two things really. You have to have something that people believe in. What I am trying to do with the Bicycle Academy are quite noble things to be doing and that’s not me being unreasonable. I am trying to generate bikes for people that really need them and I am doing that at cost and donating. I am taking far less money than I could for the courses to make them more accessible to a wider range of people. I am not personally going to be drawing any money from the project for the first year because I have planned it such that there will not be enough money to do that because what money there is goes straight back into it. But it is a profit making business, it’s not just a charity and I think that is important as well because for it to work in the long run it has to sustain my involvement. That means I have to generate some way of living from that. And I think people respect that and those kind of values resonated with people. We are making a wonderful skill accessible to people who would otherwise just not get a chance to do it and whilst doing so we are doing something really good for someone else and that completes a nice circle where everyone gets something from the process . So we generate bikes for people that need them, people learned skills themselves and they create an opportunity for themselves and they can go on to continue to build frames and if we do a good job then I get to make a living from it.

TW: But you also had quite a range of rewards available didn’t you?

AD: Yes and you have got to appreciate I was asking £500 for a course and whilst that is very reasonable for a frame building course it is also a lot of money and there are lots of people who support the Bicycle Academy but simply can’t take a course. So it was important to offer a broad range and so I offered pledges from £20, £50, £150, £300, £500, £1000 and £2000 and the only pledge tier that was not taken was the £2000, but every other pledge tier was used. We sold out of the £1000, £500, a large number of £300, £150 and scores of the smaller pledges as well.

TW: So there is a real diversity so that people with different tastes, different requirements, some people will want to build a frame some won’t, but you had something for all.

AD: Yes and it’s important to understand that whilst I have talked about the noble aspects of the Bicycle Academy, the people that back it, not everyone does it for purely philanthropic reasons, most people are doing it because they want something in return. It’s an exchange. So just as an equity investor would expect equity, you would expect that the vast majority that invest in this want something in return. Of course it has to be said that some don’t, so there was an option when someone backed the project, well there were two there was an option for people when they pledged to not take a reward, and an option for people to pledge more money than the reward value, so you could pledge £60 for a £50 reward, and it was really heart warming that there were a reasonable number of people who actually did that.

TW: So you had tangible and intangible returns really?

AD: Absolutely yes.

TW: So how much work was it? I know it was all over in six days but how much work was it if you take into account the setting up of the project the running it through the course of the six days? Was it straightforward, did it take more than you thought or less than you thought?

AD: It’s incredibly intensive. I can’t overstate how much work was involved simply dealing with people wanting to contact me during that period of time. Backers, various media outlets that had picked up the story being published by other outlets and gaining a lot of interest. And of course you want to, and it’s absolutely crucial that you, speak to everybody, that email and reply to everybody because crowdfunding is done over a finite period of time so you don’t get a second chance, so you need to take every opportunity. So I had a day job and still do and I did a very bad job during that week. So I had to retrospectively sign off a lot of my time to holiday and grovel to my boss and apologise for the impact that it had. But leading up to it, this is going to sound a bit silly but it’s absolutely true. I was working a five day week condensed into 4 so I would get to work for 9 and leave at between 8 and 8:15 and then I would get home from work and I would work almost every evening till 3 or 3:30 in the morning and be back at work at 9 the next day. And that was time spent doing everything from promoting, conceiving the idea. Obviously conception starts very early but you need for it to evolve into something that is tangibly viable and that takes an awful lot of time because you are planning a business. It’s important to state that crowdfunding isn’t something that you do once you have had a great idea and you say I have these people that know me or follow me and you just give it a go, because even if you succeed with the crowdfunding you are very unlikely to succeed with business unless you have though tit through fully because you might have overcommitted yourself. So it took a lot of time to understand how much money I needed to raise to be able to have a known amount of money to be able to set up the Bicycle Academy. So I guess from June through till November I was working at least 30 hours a week at the very least up to sometimes 40 to 50 hours a week on the Bicycle Academy. And lots of that isn’t just sat in front of your computer, you are speaking to people meeting people, but it’s time not doing other things.

TW: So would you advise anyone else to use crowdfunding? Do you think it’s a sensible method?

AD: Yes I think so it’s a wonderful way of realising a project. The fact that you generate the backers who become evangelists for your project ad your potential new business, that is something that some brands never have. And if you do it right you can get them straight away. But it’s really important to realise that none of it can be contrived. You can’t fake passion for something and you can’t fake the things that resonates with people. You can try and you may get away with it to a certain degree but it will quickly become apparent. I don’t think crowdfunding is right for every business. If you have a very straightforward profit making business that is focused on profit and not much else and it sells a thing or you distributes a thing that you buy and don’t really have much to do with, those sorts of businesses are fine and are a means to that end, but I don’t think they would work well with crowdfunding. I think crowdfunding works well if you have something that is special, be it a unique product or service or something that you are trying to achieve that is greater than that, then it’s ideal.

TW: And if somebody is going to run a crowdfunding campaign, given that you were a great success and I think we have identified some of the factors in that, if you were going to advise somebody who was taking up a crowdfunding project what would you advise them to avoid doing?

AD: Don’t overcommit. Be very realistic. So you might have the best of intentions to deliver upon the rewards that people have pledged for by a certain amount of time but add a really healthy buffer. That’s the first thing. Otherwise their first real experience of your project will be one of disappointment as they get their reward far later than expected. You can do that by being vague or giving yourself a lot of room. Be completely honest. You are not going to benefit in the slightest by trying to tow a corporate line, be open. So, if you don’t know how to do something, for example with the Bicycle Academy you got the idea for most things but you don’t know how where to get your frame building jigs from – that might have been the case, say “I know about this but I don’t know about this but I am going to learn” or “I could do with some help”. I have had over 300 man hours pledged to the Bicycle Academy from backers a lot of which is skilled advice. So Health and Safety advice for running a workshop and all sorts of things that are incredibly valuable to the project, because I was open about it and said look I could do with some help. And finally, consider the whole thing as an exchange. Don’t see it as something that backers are going to do for purely altruistic or philanthropic reasons. So asses if the reward you are offering is really fair and it should be something that is better than they could achieve outside of the crowdfunding project. So if you have a product, for example our course would normally be £600, which is still significantly cheaper than our competitors I guess, but I was offering them for £500 with a number of other rewards in addition so it makes it very attractive and encourages people to back the project.

TW: Fantastic. That is really interesting and very helpful and I am sure lots of people that listen to this or read this will see this as an inspiration to go out and do their own crowdfunding project and hopefully draw on some of the lessons you have shared there. Would you do it again Andrew?

AD: Yes I will, and it’s I will as opposed to I would. I can see that there will be a phase in the Bicycle Academy’s future where it would benefit again from crowdfunding. I have a lot of right ingredients, this wonderful group of people who really believe in the Bicycle Academy who have already backed it and as long as I can deliver on everything I promised I can’t see any reason why they wouldn’t be open to doing the whole thing again, at the right time. So there are times in its future then I can see it happening again for sure.

TW: Great. Well thanks for taking the time to speak with us today Andrew and we wish you well with the Bicycle Academy and hopefully if you are running some more crowdfunding projects in the future we can hear more about those and more about your success. So if anyone wants to find out more about the Bicycle Academy where do they go?

AD: Our website is www.thebicycleacademy.org twitter @bicycleacademy and we have a Facebook page. Once you go to the website you can pick it all from there.

TW: Brilliant. Thanks for speaking to us.

This article was originally published on Social Media Week blog

Interview with Stuart McLaughlin, CEO @Fund_it

Interview with Stuart McLaughlin, CEO @Fund_it
[This post was originally posted on Social Media Week blog]

A few weeks ago we had the privilege to interview Stuart McLaughlin, CEO of Fund it, Irish-based crowdfunding platform.

The success of Fund it demonstrates some of the principles that should be at the base of every crowdfunding initiative: widespread and well-established networks, strong community engagement, commitment and passion, and of course a good understanding and exploitation of Social Media potential.

The Irish market is particularly favourable to crowdfunding for three main reasons: the natural disposition of Irish people to charitable giving; the relatively small size of the country, which makes it faster and easier to get the word around; the difficult economic situation in Ireland, which was among the first to experience Europe’s crisis.

A distinctive element of Fund it is the moderation process they apply to projects: the “free money syndrome” unfortunately affects many project holders, and a sort of vetting process in place is becoming crucial for a crowdfunding platform. Fund it accepts projects that fulfill its Terms & Conditions, but not before having given some precious feedback to the crowdfunders. And this approach works very well, as demonstrated by the high success rate among projects: an outstanding 75%, compared to 43% of the ‘pioneer’ of crowdfunding, Kickstarter.

And it’s not all about having a project funded: “The ability to have this authentic participation and conversation in your project with your audience or with your consumer is absolutely invaluable” Stuart says. It’s great to raise the money you need for the project, but – as Stuart puts it – “you should be looking at a longer term relationship, and a relationship that pays dividends back over a longer period of time”.

This and much more to learn from the interview below, enjoy the read and thanks again to Stuart and the team at Fund it for the precious insight.

 

Stuart, thanks for taking the time to speak to us about Fund it. Can you tell me a bit more about the origins of Fund it, how and why did you set it up?
Fund it emerged from a partnership between our organisation Business to Arts – which is an Irish not for profit – and Martin McNicholl, who we work with on technology.

Business to Arts works to develop corporate support and sponsorship of culture, and one of the things we were hearing a lot from arts organisations was about how many ‘likes’ they had on Facebook or followers they had on twitter. When we were having those conversations we would say ‘so what, what does that mean?’ We were concerned that, if anything, arts organisations were giving away value to social media followers: they often have offers online for facebook friends, which traditionally they might have given through membership schemes where they used to get money and exchange it for offers, but now are giving those things away for nothing.

The other thing we recognised about social media is that if you have 5000 likes on Facebook the best case is that 5000 people genuinely like what you do, and the worst case is that 5000 people just clicked the button. My favourite example of this was when Ireland was knocked out of the Football World Cup by Thierry Henry knocking the ball across the goal in his hand. A Facebook group was created immediately in protest that within 2 days had half a million followers. But, when the person who started the group announced a march on the Football Association to ask for a replay, only about 30 people turned up.

We felt instinctively that there was some underlying value within those friends, fans and followers, so we took that principle, and started looking internationally to see how others were leveraging them. We did a few informal campaigns on Facebook, not particularly linked to any platforms, just asking some of the cultural organisations we worked with to ask their friends and fans if they would support their projects in a different way. We looked at some of the models and practice that existed internationally and we linked that to the fact that we knew that the cultural organisations we were working with were quite good on social media and at developing their networks.

Finally, we felt that there was a particular opportunity in the Irish market for crowdfunding for a couple of reasons: one is that the Irish are very good at charitable giving in small value but high volume. We’re not good at large scale philanthropic giving, but very good at small scale philanthropy. If you look at any of the international indexes around charitable giving, the Irish are topping Europe and are the third best in the world.

We knew also that people recognised that traditional funding models in creativity were changing. The music industry doesn’t work the way it used to; theatre won’t be funded the way it used to be; traditional routes to funding were breaking down whether that be from financial institutions or from government. That’s an obvious thing to say, but we thought that the consumers recognised that as well and some of the research we did around it backed that up.

Armed with those pieces of information, we went on to develop the Fundit.ie platform. We got a small grant from the Irish Department of Arts, which was part of a cultural technology grant scheme that the Department runs. Subsequently we matched that with a philanthropic foundation we worked with who also gave some support, and then over time we built a couple of other pieces of foundation funding into the business model as well. Therefore all the start-up costs of the organisation were funded – partly through the government grant but more significantly through philanthropic foundations’ funding. That’s been good for us, since it has given us a great deal of flexibility.

We developed the site and got it up and running. One of the other key things of the Irish market is that it is limited in scale, which presents challenges in terms of business model but at the same time it has got advantages, for example you can get the word around in Ireland very quickly. Because of the scale and because it was funded and created within an existing organisation that had a very strong network of cultural partnerships, it meant that we could communicate what Fund it was to the creative sector very quickly, which I believe put us at an advantage to some other sites internationally.

We identified a number of specific projects with people we had strong relationships with and that we were confident in their product. People and organisations who had strong social networks. We spent a lot of time with them making sure they understood how the crowdfunding model was going to work, we took their feedback on the development of the site and then we got the operation up and running very quickly.

When did you go live?
We went live towards the end of March 2011 with 6 projects.

After 9 months we have learnt a lot obviously. People have been extraordinarily supportive of the initiative here in Ireland. We’ve had 103 projects fully funded, about 440k euros have been pledged by 8000 pledgers, so the volume got significant pretty quickly. The average pledge has been around 50 euros.

A lot of the things that we felt at the start in terms of the conditions that existed in the Irish market have proven to be true. There has been a huge amount of goodwill, and the site has attracted a lot of positive media coverage. It’s very much seen as a good news story here in Ireland, and there are not that many good news stories here at the moment, so the idea of people helping themselves, people supporting other people ideas and initiatives really captured the imagination. We have featured in the national Irish media at least three or 4 times per month, and sometimes more. Projects get a lot of coverage here as well so we provide the platform, project creators work to communicate their own campaigns.

It’s been a great experience and people have been very positive towards it. The volume and the numbers are pretty strong and now I guess we are at the point where we work out what’s next, having proved that the model works in an Irish context in terms of creative projects.

Because of the heritage of the site, coming from within an organisation that works with the arts primarily, projects on the site tend to lean heavily towards arts and culture, so performance is very big for us, and music is becoming increasingly important.

Do you think there is a particular creative sector that is more likely to succeed in a crowdfunding campaign, or what are the success factors of a project?
I don’t think there’s one that is more likely, for me it’s all about how the individuals in question run their campaigns. There are certain pre-conditions that need to be in place for campaigns to be successful. The more you gather your network, the better. The more you communicate what you’re about the better, and do so in advance of going live too. Having an established network both online and offline is critical, and then how you communicate to that. There are great ideas showcased on all the crowdfunding sites but if you know the project creators personally you might view the project and know it’s a good idea, otherwise how would you find them? Ultimately if they don’t have those core elements in place, it doesn’t really matter if it’s the best album you’ve ever heard, it’s not going to happen if people don’t hear about it and support it, if they haven’t done those key steps.

A big thing for us is that we moderate the projects probably more intensively than other sites do. Our success rate on the site is 75%.

Which is very high compared to Kickstarter, around 43%…
Yes, it’s very high. What we’ve learnt from this is that we’re like any online business: your best aim is to anticipate what consumers will do; the next best situation is you’re able to react very fast; and the worst thing you can do is react slowly. Constantly there are assumptions or suppositions which are based on data that flexes a lot because consumers behave in a different way all the time. But ultimately what we see is that we’re spending a lot of time moderating the projects onto the site. We don’t refuse a project as long as it fits our criteria and terms & conditions, but we give a lot of feedback to people and say “based on our experience we think that you need to do A, B and C”. Most people take that advice on board. The success rate is quite high and we feel that is for the level of moderation that we’ve got in place.

Absolutely, what we’re noticing more and more is that many people seem to think that they just have to put up their project on the platform and the money will start rolling in. Instead we think probably platforms should have a kind of vetting process in place for the projects, because sometimes you will find projects where there is no interaction, not even commitment by the people, therefore it’s quite important what you’re saying, that the platform has got this moderation…

We call it the ‘free money syndrome’, people see projects being successful and think if they put theirs up online that’s all they have to do. Some people communicate so little that not even their mum and dad fund them. If your parents won’t fund you, you’ve really got a problem!

What you’re seeing on Fund it, and it’s true for all sites, is that projects either tend to fail badly or to get over the line. There seems to be a sort of tipping point at around a third of their target; most projects that get over a third tend to get to 100%, and anybody under it doesn’t get there.

We had quite an established musician on our site with a project that didn’t make it. He’s established in the old fashioned way, he was in a well-known band, his music is great but he doesn’t have a network he can access. He’s got a band, he had a record deal, he made music and the music got published. They have fans, but they don’t engage their fans in any real way. So at the same time you’ve got a guy who’s been in a big name band for years and can’t raise money, and then you’ve got this band from central Dublin that most people have never heard of who raised 2000 euros in a weekend, because their networks were all activated in the right place.

People often think it’s free money and easy money, and increasingly we work with project creators to make sure they understand how it works and the level of work they need to put in.

The other thing that we do is we look for projects that might grab specific attention. For example, the largest project on our site so far has been a singer called Julie Feeney. Julie raised 23k. Julie’s profile would be quite high in Dublin, and she got a lot of publicity for her project, which helped us and consequently other projects in return. Sometimes we specifically look at some core projects which are going to help us in terms of profile.

 

Can you confirm that the platform is only for projects in Ireland?
Currently the site is set up for projects and creators from the island of Ireland – both Northern Ireland and Republic of Ireland. We’ve only had 1 successful project in Northern Ireland so far, but we’re physically based in Dublin and we haven’t had much time to build our network in the North as yet. For us the longer term plan is the strategic question whether we move into other sectors and markets.  One of the things we’re aware of, something that is important in an Irish context, is that Ireland has got a strong and highly engaged diaspora network. There are 70 million people around the world that call themselves Irish. The ability to engage a much wider network of people away from funders that exist in the island of Ireland is critical to us as well. So, the funding can come from anywhere, the projects come from the island.

The platform uses an ‘all or nothing’ model. Why did you choose this rather than a ‘keep it all’ model?
The reason we chose the ‘all or nothing’ model is because we feel quite strongly that the ability to deliver on the rewards is the critical part of the transactions. I see crowdfunding as having a far broader reach. Point one about crowdfunding is around getting your project funded, point two – which I guess is as important – is about a new way to engage your audience and consumer. When you get away from the all or nothing model then you’re increasing the level of risk that people can’t fulfill their commitment and deliver their reward, and that ultimately is damaging for everybody, it’s damaging for the project creator, a risk for the funder, and for Fund it as well.

We would be very conscious that in such a small market as Ireland relationships are key. When you look at this, the idea of the way that you engage your audience is as important to me as the market.

We’re very lucky that one of our supporters is a philanthropic fund called The Arthur Guinness Fund which is linked to Diageo, producers of Guinness. As part of that fund we get to spend time with their marketing and comms teams. They have a very interesting perspective on this.

When I think about the project creators, I compare them to a consumer brand. So if I’m a mobile phone company I’m constantly working to get into an authentic conversation and participation with my consumer. However, somewhere down the line I’ll have to remind the consumer that the reason we’re having a conversation is because I want them to sign a new contract or upgrade their mobile phone. The difference with Fund it and crowdfunding in general is that the products are created by the project creators themselves, whether that’s an artist or a musician or whatever.

The ability to have this authentic participation and conversation in your project with your audience or with your consumer is absolutely invaluable. If you think about your fan engagement, or about why people get involved, and the idea that they get closer and they become part of the experience of creating the work, the better you do and the more this is going to pay off. It’s great that you raise the money that you need for the project now, but for me you should be looking at developing a far far longer term relationship, and a relationship that pays dividends back over a longer period of time. And the all or nothing model I think is part of all that.

Where do you see crowdfunding going in the next year? For example, there seems to have been an explosion of new crowdfunding platforms offering all sorts of niche offerings, do you see that as something that will go on, or can you identify any other trends?
It will be interesting, I think that crowdfunding will go on to develop and grow. However, in my opinion some platforms work better than others, for example I really love Unbound. I think as a niche that is a great model that absolutely fits in that industry. There are other niche platforms that I don’t think work so well, the idea of just doing a platform for one sector is of course limiting. One of the things I see from Fund it is that the reason for the growth in scale we’ve been able to achieve is because it came from within an organisation that had an established network within the cultural sector and that enabled us to achieve things more quickly than we might otherwise have done.

I’m not sure where we’ll see crowdfunding in a year. Ultimately, over time, I think some consolidation would be good, looking at how things have done, there should always be an element of competition because it’s healthy for everybody and keeps everyone on their toes, but ultimately the business model for crowdfunding organisations is very challenging. I think we’ll see over time a lot of people getting caught up in the wave but actually relatively few survivors in terms of the ability to achieve a workable crowdfunding business model. We will start to see more organisations think a little more about how they tweak that model a bit, what can be done over and above the idea of pledging rewards, commission, etc. There are other ways to start thinking about how these things work, so I guess what I would expect to see is the models that exist will work in many other sectors. It has been prevalent in the creative industries so far, but obviously what you start to see is an increasing number considering the social space and so on.

Then, in terms of small business funding, there’s an opportunity as legislation starts to adapt. At the moment what we’ve got is a lag in terms of regulations, which currently don’t really support crowdfunding as an approach, but it’s becoming clear in a lot of markets that there’s actually an opportunity there. What we’ll start to see is other areas, people becoming specialist, and again, certain niches really will work and others won’t. For me one of the best examples is Unbound because it creates a very publishing-specific model, but when you look at music for example I’m not sure there needs to be a music industry specific platform because the principles are very much the same, so looking at the role of those developments will be interesting.

But I guess the other thing is in a year, who knows, the nature of this world, looking at how consumers behave, moving constantly. Analysing every day how they behave, how they’re changing, looking at how we access new market and potential funders, understanding what the role is of the creative funding platform in building communities versus the projects themselves. That’s a very underdeveloped area at the moment. Probably a year feels a long way. If I look back 9 months, 80% of the stuff we know now we didn’t know before.

In terms of investors or pledgers, are they mainly Ireland-based or international?
Predominantly from Ireland but increasingly international. The international actually have grown over the last 4 months, lots of that project-specific but some of them will be to do with funding developing connections internationally as well.

In your last blog post you talked about super-users…
That’s one of the interesting things actually, we have quite a high proportion of multiple pledgers, people who pledged two or more projects in the first 9 months. What we’re seeing is that they tend to be category-loyal too. But we’re seeing a pretty high proportion of pledgers, right through from people who funded 2 or more to people who funded up to 20 or more projects.

It would be interesting to know what motivates them to pledge again…
Actually, we have just been looking at the data and our next step is to do some work looking in to that. If you speak to a digital marketing agency, they see crowdfunding as a kind of funny blend – it’s not retail but some of the behaviour you’re trying to drive is retail-like. For example, if we consider the people who register on the site: in the first instance they’ve come to Fund it because they have clicked a link, been told by someone in their network, and they want to support a project, that’s usually the motivation. The number of shoppers browsing is growing but it’s limited at the beginning. As that number of shoppers and browsers grows then the ability to convert them from a browser to a registered user to a pledger is going to be critical. Of course that’s very different to a traditional model of online shopping: you know getting into that idea of the Amazon-type model – ‘if you like this you will probably like that’ – starting to look at those technologies is going to be interesting as well.

Thanks again for taking the time to do this interview, Stuart.

Interview with Luke Lang, Co-Founder of Crowdcube

[This post was originally published on Social Media Week blog]

Crowdcube is the world leader in equity-based crowdfunding. Launched in February 2011, the UK based platform has set the pace in bringing to the fore a new mechanism of raising capital for entrepreneurs and established businesses alike. Just before Christmas twintangibles managed to get the chance to speak to Luke Lang, one of its founders shortly after they had successfully used their own platform to raise a significant investment. This is a transcript of that interview. The audio version is available here.

TW: Luke thanks for taking the time to speak to us about Crowdcube. Can we go right back to the beginning and tell us a bit about the origins of the project?

LL: The idea behind Crowdcube has been developed by myself and my co-founder Darren Westlake. We are both experienced entrepreneurs set up business in the past, and experienced for ourselves the challenges of raising finance for a start-up and growing business can be. And it was our opinion that there must be a better way of doing things. It’s very much our opinion that business finance hasn’t really changed a great deal for the past two hundred years with bright entrepreneurs with a good idea go cap in hand to wealthy individuals looking for money and those wealthy individuals are not necessarily the best people to decide whether you have got a good idea or not. So we firmly believed that there must be a better way of doing it and a way of democratising investments so that anyone can get the opportunity to invest in small start-up and growth businesses, and really give entrepreneurs the ability to tap into new money, people who would have previously been priced out of being a business angel because they didn’t have enough savings, say £50,000 or £100,000 in the bank to invest.

Crowdcube empowers entrepreneurs to attract investment from friends and family easily, and give customers and suppliers the opportunity to become part of their business and to engage with their business on a new level. So that was essentially the core foundation of it. I guess if you wanted the two founding principles they were, firstly anyone should be able to invest, we really wanted to democratise investment and empower the general public and we coined the term “armchair dragons” so people sitting at home could make the decision if they wanted to invest, and secondly the people that did invest should get real shares in that business. So it was really important to us that those people investing were taking a real stake in the business.

TW: And that is something that is very distinct about Crowdcube isn’t it? There are other crowdfunding platforms that allow you to fund a business but Crowdcube is specifically about taking equity isn’t it?

LL: Yes taking a real equity stake was really, really important to use. You know when you’re raising money for businesses or investing you are investing for the future, you are investing because you think that a company has a future and you believe in it, and you want to be part of that future and that success. It’s very much the case that we see that there are two main reasons why people invest in a business, firstly its participation and a new level of involvement and engagement with the brand, helping the brand, advocating and supporting that company and really helping them to kick on to the next level.

So, firstly there are there these very philanthropic reasons, and those reasons are equally applied to the person investing £10,000 as £10 pounds. Secondly, for those that have traditionally invested larger sums of money, they also want to get payback they want to get a return on their investment. They are not just doing it for the from the goodness of their heart, although that may be a contributory factor, they are really keen to generate a return and those are the two core reasons as to why people are investing, and having equity is a key part of that as without it it would be difficult to attract the larger sums of investment.

TW: There is an inherent risk I suppose in it as with a reward based model, be it a “keep it all” or “all or nothing” model, if they make the target you get your reward, but with an equity model you are buying a potentially more risky investment, it could go up or it could go down. So it’s a quite a different relationship involved because of that added risk.

LL: Absolutely. We make no bones about it. It certainly is risky investing in any business, particularly start-up business, we have developed the facility for people to have rewards as well as the equity stake, so we recognise that certainly for the smaller investment between say £10 and £2-300 there was an idea that those investors should get something earlier on the process, and so get something back a little quicker so we have gone some way to mitigate those risks.

TW: So if you buy some of this equity, you register to be a member of Crowdcube to become an investor, you get access to the portfolio of opportunities, and choose your investments, buy the equity, can you sell that equity at some point?

LL: We see liquidity of investments in limited companies as a possible barrier to people investing at the moment. Currently you are very much in it for the longer term – 3, 4, 5 years up until such a point the company reaches a point to either sell, float or there is some kind of management buyout. There is the provision for dividend payment as you would get in any kind of shareholding but you are absolutely right in that at present you can’t sell.

TW: So going down the equity model that presents a lot of legislative barriers, so that must have made setting up Crowdcube a little more challenging than setting up a reward-based model.

LL: Yes it did. We spent over two years developing the model with our solicitors. It was a long and painful process and I guess a lot of people would have probably given up but between myself, Darren Westlake and our lawyers, Ashfords Solicitors, we had the tenacity and will to think that there must be a way of doing this and after numerous attempts we managed to navigate our way through the regulatory requirements and to make sure we are fully compliant and where we can’t be we outsource that to an authorised third party.

TW: Sounds like a tortuous process – when did you actually launch Crowdcube?

LL: We launched February 2011.

TW: So this coming February will be your first full year’s operation?

LL: It will yes.

TW: And how many projects do you think you will have had through by then?

LL: Well we recognised we were breaking new ground and being rather innovative so we were honest in our forecast that we would do one deal in our first year’s trading but in actual fact to date we have done 10 deals and the amount of investment we have raised for small businesses since our first deal in July is more that £2.1 Million. So it really demonstrates that there is an appetite and certainly a need from entrepreneurs for an alternative route to finance. Existing sources are not living up to their billing. Banks aren’t lending, and business angels have become, perhaps rightly, a bit more risk averse as their wealth has depleted somewhat over the past few years. So there was a real need for a new source of finance and there is a real appetite out there for people to invest in good businesses.

TW: So do you see this as a systemic and sustained change in the way that we invest for the future?

LL: We certainly believe so. We see the evolution of crowdfunding into business finance as a game changer and very much the next generation of how small and start-up businesses will raise finance in the future. We have got some big ambitions to take Crowdcube and crowdfunding for equity finance model to a new level as there is certainly the demand and a funding gap.

TW: You have already had some notable successes of course. To use the software developers phrase you eat your own dog food in as much as you raised £300,000

LL: Yes we did – last week we raised £300,000 in 10 days – 162 investors, and to be honest when we were originally developing the Crowdcube model we got an initial seed finding from friends and family and we were acutely aware that actually if there had been a Crowdcube out there at the time we would have used as a method for raising finance and we said at that point if we ever need finance in the future we need to demonstrate our willingness to “eat our own dog food” and do what other entrepreneurs are doing. In fact it was a really enlightening experience to go through it from the entrepreneurs perspective. The roller coaster ride that you embark on, the journey that you go through and the learning and understanding that we have gained from that and the insights to our systems have been really beneficial and we have lots of new improvements lined up for the New Year.

TW: So how easy is Crowdfunding? Kickstarter, who have been around for some time, reckon they have about a 43% success rate, but we get the feeling talking to people entering into crowdfunding projects be they equity or reward based that many of them seem to think that they just have to put up their project up there for the money to start rolling in, so how easy is it?

LL: It’s a good question. At the moment we really stress to entrepreneurs that Crowdcube is very much a platform for them to drive investor interest through their Crowdcube pitch, and the pitch page can list all their information, the business plan, financials and hopefully convert that interest into investment. It’s certainly no panacea by any means and there is effort involved. If you think that you are going to list the business on Crowdcube and all of a sudden you are instantly going to hit a £100,000 target that simply is not the case, unless you happen to have an absolute belter of an idea. So there is still work to be done but we see Crowdcube as a platform that empowers and enables entrepreneurs to target their friends, their family, their customers and suppliers, their existing stake holders, shareholders, communities that they are involved in and driving that traffic. We haven’t reached a critical mass where you simply stick a project on Crowdcube and it will fund, that’s not happened. It’s still very early days, but we stress it is a facility, a platform for entrepreneurs to use.

TW: So if you’re thinking of putting together a crowdfunding project, be it equity based or otherwise, having a plan for that, being aware of the amount of effort involved is an important factor?

LL: Yes exactly. Having an idea about how you are going to drive that interest. One of the things we always ask as part of our vetting process is “How are you going to drive traffic to your site? How will you sign post people? What is your reach? What networks do you have at the moment?” This is really important to us as if they don’t have that reach then they are unlikely to get on Crowdcube.

TW: And does social media factor into that?

LL: Absolutely. Personally I think that there have been a few factors in the last 3 to 5 years that have enabled crowdfunding platforms to accelerate. Firstly broadband internet penetration and speeds have increased; social media and social networking has really empowered and enabled people to push a message out further and faster than ever before and that has really been critical in the success of crowdfunding projects and also the more familiarity and happiness of using micro funding and purchasing on line– using Paypal and other similar payment tools. People are so much more comfortable with that now, whereas 3, 4, 5 years ago there was still a perceived risk.

TW: So what do you think are the common factors in both success and failure in crowdfunding generally?

LL: 
Firstly, you need a good idea. Be it a creative arts project on Crowdfunder in the UK or Kickstarter. The idea is really important particularly for Crowdcube, the business idea has got to be good. You’ve got to back that up with all that good information that an investor is going to need to be able to make a judgement about whether to invest or not. So you will need a well written well-presented business plan, good financial forecasts. And secondly you need to have a good team behind you, be that the entrepreneur on their own or other people from in the organisation. I always say that the power of crowdfunding is only limited by the entrepreneur or pitch owner and the idea. If you have a great idea and you can push that message out, if you can trigger a viral effect, then there is no end to what you can achieve.

TW: You mentioned there Crowdfunder – what is your involvement with that?

LL: Yes, when we were developing the Crowdcube site back in the Autumn of 2010, the regulatory framework wasn’t quite complete and we weren’t happy with it. So we were at the point we had a crowdfunding platform for businesses but we hadn’t actually launched it. So essentially the principles behind it, the software, the architecture are very similar, so we effectively cloned a site and created a crowdfunding site for the creative arts.

TW: So it’s specifically for the creative arts?

LL: Well not specifically, we don’t limit it any way. But it just so happens that creative arts it works well for them as they tend to have lots of cool funky stuff to give away as rewards for pledging money and that works for people that are interested in that . So that was launched back in November 2010 and it was one of the first UK based crowdfunding sites and continues to be one of the most popular today and we really spent no money at all on marketing it, no money on PR or advertising, it’s purely an organic engine or website because there is a need for it, it satisfies that need and it does it very effectively. So we are really pleased about how it has gone.

TW: It seems that there is an explosion of new crowdfunding sites offering all sorts of niche offerings. What do you think are the implications of that burgeoning of platforms?

LL: I think that’s a reflection of the needs that are out there and the demand effectively and at Crowdcube we welcome the competition. It will only improve the awareness of crowdfunding as a model and method of raising finance and that can only be good for everyone in the industry and help to establish it as an alternative route to finance. It’s the same in any industry, people soon start to tweak things and change things and see new opportunities so niche sites developing are not some much a common thing to occur but an obvious evolution in crowdfunding.

TW: With all the proposed legislative changes in the US – what are the implications for Crowdcube and equity-based Crowdfunding generally?

LL: Well if the changes put forward are approved I think it will have a dramatic impact on the US and probably the rest of the world as well. Crowdcube is at the bleeding edge of Crowdfunding in the UK and certainly leading the way. Now for regulatory reasons the US can’t do it but when that market opens up there is huge opportunity there. And we have certainly been approached by lots of people looking to partner with us and launch in the US and we are very keen to be involved in the US when it does happen because it is a massive opportunity and market. Interestingly we are starting to hear noises from the UK government as well which is obviously monitoring what’s happening in the UK and the US. Vince Cable last week launched a task force to look into how they can help alternative groups to finance small business and he specifically singled out crowdfunding as one of the things that they are going to look into in more detail. So certainly what we are doing here in the UK and the awareness we have generated has rippled right the way up to the corridors of power in government and they are, I’m sure, aware of what is going on in the US as well, so from our point of view it simply reiterates our view that Crowdfunding as an alternative route to finance is going to happen and is going to become big, and quite soon it will not be an alternative route to finance, it will be the route to finance.

TW: And certainly it can sit comfortably alongside other funding models of course. If you run a successful equity-based crowdfunding campaign and then go to another capital market you have got a wonderful asset there to demonstrate the willingness of people to confidently get involved with your product or service and that must be a useful thing to have isn’t it?

LL: Absolutely, absolutely! Businesses that raise money on Crowdcube, are first and foremost raising money, but they recognise that being able to tap into giving customers and people a shareholding in their business and for them to become advocates for your business is really powerful thing and from the social media point of view the publicity and the viral awareness you can create through a crowdfunding campaign can have a really positive impact on your brand and the awareness of your company.

TW: Luke thanks very much for taking the time to speak to us and tell us about equity-based crowdfunding at Crowdcube.

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