Crowdfunding: is it the right route for startups?

CEO and founder
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Here we are, 18 months down-the-line on Wriggle’s journey. As the Wriggle team prepares for phase two of growth, we’ve returned to Seedrs — the crowdfunding platform where it all began for us.

When I founded Wriggle, as a new entrepreneur, I imagined crowdfunding was a tool for the first investment package. Just a first port of call. But the market has changed. Crowdfunding has come of age. Platforms such as Seedrs and Crowdcube are now legitimate players facilitating serious raises.

It’s long been the plan for Wriggle to close out this round on Seedrs — so why am I convinced it makes strategic sense for us?

There’s a headache funding-gap for startups to negotiate between heavily incentivized SEIS funding (up to £150,000), and the Series A stage , which seems to be moving later-and-later. This creates a tricky funding gap between £150,000 and £1m. Crowdfunding is an excellent tool to help startups manage this gap.

The plan was to raise the first portion of the round privately. We ensured a sizeable chunk of the round was committed privately (through Creative England and a number of angels) at the same valuation. With that in place, crowdfunding becomes an excellent tool. By directing their money through Seedrs we demonstrate their commitment and belief in Wriggle to the crowd, to attract their investment too.

Marketing is important. Wriggle is a consumer-facing product with a broad customer-base. The crowd fundraising process puts Wriggle in front of a wide audience of potential customers and gives our existing “Wrigglers” the chance to own a part of the brand.

We went into our last week of the previous round still needing investment. It’s nerve racking. ​

Finally, Seedrs has matured. Crowdfunding is a nascent industry and evolving constantly. We’ve seen increasingly larger crowdfunding rounds, with a more clued-up investor-base in the last few years as it matures. On Seedrs, more than 340 businesses from 24 different countries campaigned in 2015. And in 2015, investors from 75 countries made 38,000 investments totalling over £64m.

5 things I’ve learned from crowd fundraising

Wriggle was a month old when I launched our first Seedr campaign. I was naive. I imagined you simply created the campaign, and investors arrived — not realising the hardwork going on behind the scenes. With only a week to spare, I gave myself a fright — ultimately we succeeded — but I learnt a lot in the process.

This time round, Wriggle has matured, there’s more to talk about, better customer and business evidence to show — but most importantly we’ve prepared much better — so I’m optimistic. Here are my five tips to planning a campaign:

  1. Have investment committed before you start

There’s a herd mentality on crowdfunding, so ensure you’ve got a good chunk of the round committed to direct through the platform. It provides a strong-sign that your company is an investable proposition.

  1. Maintain momentum

Momentum is very important. Campaigns that receive a large amount of investment recently will trend on Seedrs, pushing it to the front page of the platform for more investors to follow-suit. Drum up more interest whenever there’s a lull. That could be through an investor update, releasing more privately secured investment or pushing harder amongst your own network.

  1. Have a business plan, financials and FAQs ready

Investors ask for a business plan and financials. The same questions crop up that did in investor meetings. Have answers ready to send as you’ll have a lot going on and this can take up time.

  1. Make the campaign look good

We put a lot more effort into making our campaign, video and images look good this time. As a company, we pride ourselves on communicating well and looking attractive — that should give investors confidence.

  1. Don’t count your chickens

We went into our last week of the previous round still needing investment. It’s nerve racking. I hope we’ll complete this round, but it’s going to require constant hustling to get our story out there — and the opportunity for investors heard.

Which platform? Why I went with Seedrs

I’m a former lawyer so looking at the differences between Seedrs and Crowdcube (the two biggest UK equity crowdfunding platforms) the point that really stands out is the way Seedrs structure their investments.

There’s a herd mentality on crowdfunding, so ensure you’ve got a good chunk of the round committed to direct through the platform.

Rather than Crowdcube’s direct investment system, Seedrs have a nominee structure — meaning that Seedrs are the only name on the company’s share-register and act as representatives to the Company for all the Seedrs investors.

This is certainly preferable for founders, but also, in my opinion, for shareholders: shareholders have a stronger position due to Seedrs’ collective bargaining power (for larger investors who would prefer to have a direct relationship with the company, Seedrs will allow that); and founders have one point of contact (Seedrs) for investor issues (rather than dealing with 300 individual investors).

Other crowdfunding platforms are available… in particular platforms such as CrowdBNK and Syndicate Room provide a good offering, connecting startups with angels looking to invest larger amounts. For Wriggle, we decided to go for the more public offering of Seedrs or Crowdcube — given the marketing benefits of reaching a wider audience.

View Wriggle’s campaign on  Seedrs.


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