Finance · 5 August 2015

Crowdfunding for micro businesses Charting the rise ofthe funding method

Crowdfunding harnesses the monetary value of the crowd to back new ideas
Crowdfunding harnesses the monetary value of the crowd to back new ideas
When it comes to alternative finance investment, crowdfunding is still a nascent industry. It came into being just four years ago when Luke Lang and I launched Crowdcube, the world’s first investment crowdfunding platform.

The idea behind Crowdcube was fuelled by my own experiences of raising finance and sparked by the frustration of watching Dragons? Den, and seeing great business ideas fall by the wayside if pitch didnt pique the interest of the five Dragons. It was representative of traditional routes to finance and we felt there must be an alternative option for businesses.

We wanted to harness the potential power of a crowd of investors, not just an elite few, by giving everyone the opportunity to be an “armchair dragon” and back great British Businesses. it’s an opportunity the public have relished. To date, our crowd of over 180, 000 every day investors, professionals and VCs have invested more than 80m on Crowdcube, funding over 250 businesses of varying sizes and stages of growth.

From small businesses like Righteous, a young food company producing a range of salad dressings sold in over 600 supermarkets including Ocado and Booths, tothe world-renowned Eden Project, which raised over 1.5m in less than 24 hours through a Crowdcube Mini-Bond.

Despite its relative infancy, crowdfunding has come a long way and is now recognised by many as a mainstream funding option. Crowdfunding has opened doors for businesses that would have otherwise found tough, or even impossible, to get off the ground or raise the capital needed to grow. With traditional routes to finance still difficult to access, particularly for startups and small businesses, investment crowdfunding has grown at a rapid pace.

According to a recent Beauhurst report, the percentage of seed-stage deals completed on crowdfunding platforms rose from five per centto 30 per cent between 2011 and 2014, and venture-stage deals increased by 25 per cent in 2014 compared to 2013. it’s a trend that looks set to continue with Beauhurst predicting that half of seed-stage deals and 20 per cent of venture-stage deals in 2015 will involve crowdfunding platforms.

There’s been a seismic shift in the number of businesses turning to crowdfunding, far from being a last resort it’s fast becoming the first choice for many businesses looking to raise finance from startups seeking seed-stage investment to more established businesses raising growth capital.

Pip and Nut, a brand of nut butters which raised 120, 000 on Crowdcube last year, is a great example of the power of the crowd. The company’s founder, Pippa Murray, spent three months living in a shed to get her business off the ground and following investment from the crowd, Pip and Nut is now stocked in leading retailers such as Selfridges, As Nature Intended and Booths.

There’s also businesses like Adzuna, the UK’s fasted-growing job search engine, which recently finishedpitching for investment on Crowdcube. it’s a VC-backed company with an executive team hailing from brands like eBay, Zoopla and Gumtree. The diversity of businesses looking to the crowd for investment is a real demonstration of its accessibility and appeal to businesses across the board.


 
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ABOUT THE EXPERT

Darren Westlake is the co-founder and CEO of Crowdcube, an online platform that enables startup, early and growth-stage businesses, from a range of sectors, to raise finance with the added benefit of being backed by the crowd.

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