If you’re considering crowdfunding as a way of raise funds for your start-up, a Crowdcube funding round is going to be on your radar. But what is Crowdcube? Well, if its merger with former rival Seedrs goes ahead as planned, Crowdcube could become one of the world’s largest private equity marketplaces. What is so special about this crowdfunding platform and how easy is it to navigate and use to secure funding? All your Crowdcube questions are answered here.
What is Crowdcube?
Crowdcube is a UK headquartered crowdfunding platform. Crowdfunding platforms enable hundreds of micro investors to invest small amounts in different ventures. If you went down the crowdfunding route, you would end up with many small private equity investors owning their own little fractions of your business. The average Crowdcube investor backs five pitches, has a portfolio valued at £4,632 and invests £789 in each pitch.
Crowdcube recently reached the one million members milestone. It has facilitated over 800,000 investments totalling £1 billion. Crowdcube claims to be on a mission:
'To fuel the next generation of businesses who want to leave a mark on the world.'
Is Crowdcube fundraising effective for start-ups?
Crowdcube fundraising gives start-up businesses the chance to get their pitches in front of thousands of small investors very quickly. Successful companies can receive their Crowdcube funding within three months of launching their pitch. For startups in need of a rapid injection of capital, it can be very effective. Having multiple investors also instantly expands your global network and influence. All of a sudden you have got hundreds of cheerleaders, as your new investors will naturally promote and recommend your business, and maybe even become customers themselves.
Instead of having one major outside shareholder, as you would if you went down the traditional private equity or venture capital route, with Crowdcube fundraising you have many. This means that you can always retain the largest single stake in your business. And, while traditional private equity or venture capital investors may try to negotiate their stake in your business, with Crowdcube you set the stake that you wish to sell and there is no movement on it. If you do want to benefit from the expertise and attention of a single investor, however, the private equity or venture capital route, maybe more suitable for your needs.
Find out more about the difference between private equity and venture capital in our article: Private Equity Vs Venture Capital.
Crowdcube is not a sure-fire win for all start-ups though. It does not accept every start-up on to its platform. You must meet its eligibility criteria and it thoroughly assesses every proposal before allowing it to be put forward to its investors.
Who is eligible for Crowdcube funding?
You are eligible for a Crowdcube funding round providing you:
- Are a UK or Irish limited company with an active Companies House number, although some European headquartered companies will also be considered.
- You wish to raise no less than £50,000 and no more than £6 million.
- Your business isn’t involved in anything of a sexual nature, property development, filmmaking, or theatre.
Before accepting your bid for investment, Crowdcube will also consider your company structure, your director, corporate and financial history, your existing shareholders, and if you have any majority institutional shareholders, plus the terms of their investments.
Most start-ups fall within Crowdcube’s Seed funding category. To apply for Crowdcube Seed investment, you must be looking to raise between £50,000 and £249,000 and you must have a website and lead investment. Companies that started with Crowdcube’s Seed funding include nut butter maker Pip & Nut and sustainable product website Good Club.
If you successfully win your Seed Crowdcube funding round, there is then the opportunity to develop your business with Crowdcube, going on to secure Early-stage finance and then Growth-stage finance through the platform.
How much does Crowdcube cost?
Crowdcube has two fee packages for seed funding. The Campaign Success Team deal costs between £2,500 and £7,000, exclusive of VAT. It can include the creation of your pitch video, strategy advice, project management and investor research.
The Crowdcube deal offers a preferential success fee of 5.5%, exclusive of VAT. This is only charged on whatever you raise. Upon completion of the investment, there is a completion fee averaging between 0.75% and 1.25% of all funds raised.
Although Crowdcube is one of the largest crowdfunding platforms in Europe, there are several other crowdfunding platforms out there. Kickstarter and Indiegogo are two other big names.
You may find our feature on How to create a winning Kickstarter campaign useful too.
How to successfully raise funds with Crowdcube
Once you are approved to apply for funding via the Crowdcube platform, you must persuade its crowd of investors that your business is worth investing in. There is no winning formula for successfully raising funds with Crowdcube, but of the hundreds of businesses that do win investment through Crowdcube, all tend to have ticked all of these boxes:
- A fantastic product or service
- A viable business plan
- A great Crowdcube campaign strategy for wooing investors
- Consistent professional branding
- An entertaining and informative video pitch
- A persuasive and informative pitch deck
- A strong social media presence
If you look at the current investment opportunities on Crowdcube, you can see examples of other businesses campaigning for investment, view their video pitches and request to see pitch decks.
Once you’re ready to pitch, the Crowdcube team will also guide you through the pitch process. And, when your pitch goes live, you must create a fantastic Crowdcube campaign and promote it. This is where a strong social media presence comes in useful.
For more advice read our guide on How To Create The Perfect Pitch For Investors.
If you are successful in obtaining funding via Crowdcube or through other means, our corporate solicitors can support you with the necessary agreements to move forwards such as terms sheets and investment agreements, and also draw your attention to anything of concern.