Raising money on Crowdcube: A small business guide Raising money on Crowdcube: A small business guide

In this piece we look at Crowdcube, the largest equity crowdfunding platform, and discuss how it can benefit small businesses.

Crowdcube is the most significant player in the equity crowdfunding market

Crowdcube is the most significant player in the equity crowdfunding market

Since Crowdcube first pioneered equity crowdfunding in 2011 it has amassed a crowd of nearly 400,000 members, who have invested more than £320 million on the platform and have successfully funded 520 raises (as at June 2017). According to the latest figures from Beauhurst the platform has raised the most amount of capital of any crowdfunding platform so far in 2017, more than double its nearest rival.

Crowdcube has a track record in helping business both with their first fundraising, and larger follow rounds which attract VCs to invest alongside the crowd.

Funding options

Before raising finance on the platform you need to decide what sort of finance you want to raise.

Equity investment

The majority of Crowdcube’s clients raise equity finance whereby members buy shares in a company and look for a capital uplift in the value of those shares.

Crowdcube offers both direct or nominee structures for equity investors, as well as a combination of the two. There are benefits to both: a direct structure may help you foster a stronger relationship with your investors and greater brand advocacy, whereas a nominee structure, whereby Crowdcube holds and is the legal owner of the investment on behalf of your investors, means that you will only have one legal shareholder on your share register.

While there is no limit to how much a company can raise we would always advise that you seek only to raise what you need and that the valuation of your business is realistic and appropriate to the stage of development of your business.

Debt investment

More established businesses with at least two years trading, that are able to service debt and are looking for a minimum investment of £500,000 may choose to borrow from investors by offering a fixed term mini-bond. If you qualify, and following an initial review, our specialist bonds team will help you structure the bond including the duration, suitable interest rate and maximum raise.

What you need to know before applying

You need to be a registered UK Limited company (not an LLP or Sole Trader) and over 18. Crowdcube can also potentially raise funds for businesses with a European HQ but this will be subject to certain criteria, and legal and regulatory requirements.

Do enquire early if you qualify for SEIS or EIS tax relief. Tax relief is very important to investors and will make your pitch more likely to pass the application stage.

Ready to set the world alight?

Submit a pitch application: The pitch application is made up of four elements: a short description of the investment proposition outlining your idea, market and people. Once this has been submitted Crowdcube’s expert advisors will assess whether it’s right for the investor base.

Create your killer pitch: Once you pass the original application process you will be introduced to Crowdcube’s team members who will support you through the process of getting your pitch live. You can start populating your pitch page and upload any materials that will be relevant and of interest to potential investors, including videos, presentations and background materials.

Go live and promote like crazy: Once you are ready you can activate and promote your pitch. You will have 30 days to reach your funding target. The first few days can be crucial in generating interest, so you will need a clear action plan to promote your pitch. Using your existing network of customers and business advocates also helps build momentum.

Reach your target: Once you’ve reached your target Crowdcube will work with you to close your funding round and complete the necessary legal documentation such as finalising your Articles of Association.

Receive your funding: Crowdcube will then instigate the collection of funds from investors, deducting fees from payment providers and Crowdcube’s commission.

Issue share certificates: After all investments have been processed Crowdcube will issue share certificates on your behalf, send you the final investor list and process any necessary EIS/SEIS documentation for your new shareholders. You then need to file an SHO1 form within one month of the allotment of shares (and the SHO2 if relevant).

Join the Funded Club: Having raised funds via the Crowdcube platform you can now begin to focus on growing your business with the support of a new group of loyal brand ambassadors and investors. As member of the Funded Club you will have access to all of Crowdcube’s growth services and enjoy beneficial rates with Crowdcube’s partners. It’s important that your new investors receive regular updates about how the business is doing and any plans for the future. Most companies issue a brief quarterly update with a more detailed update once a year. Share your latest news with Crowdcube and the company will help spread the news and if you’re ready to go for a follow-up round to help you continue growing just let the platform know.

How long will it take?

Preparing for a successful campaign can take a few weeks. The maximum time for a pitch to reach its target is 30 days for equity funding, although some have secured their funding in a couple of minutes. Once a pitch has ended and if the target amount has been reached or exceeded, the time frame for completing the legal documentation and transferring the funds to the business is around six weeks.

What do I do now?

The Crowdcube website is full of tips and advice to help you raise the funds you need. There is no doubt that, for some, crowdfunding a business can be a huge learning curve. It takes commitment and energy, and the success of your campaign will be directly related to how you embrace this journey. If you are ready to take on the challenge, have a great business idea and want to access a pool of nearly 400,000 investors, click here for more information on raising money on the platform.

Further reading on equity crowdfunding

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