The Ones to Watch: Darren Westlake, Crowdcube

 

Crowdcube is a crowdfunding website where UK entrepreneurs can raise seed finance from a 'crowd' of investors (ordinary people rather than exclusively high-net worth individuals) in return for equity.

 

 

I'd always found the most frustrating part of building a business to be the challenge of raising seed capital. It's difficult to get in front of a business angel and the banks are rarely keen to lend money to a business that is on the face of it just an idea. Years later I was watching Dragons' Den one week and was reminded that high net worth individuals really do have all of the power. I was sure there must be an easier way for start-ups to raise money without relying on a few business angels.

 

That got me wishing that I had enough capital to invest in those start-ups myself. And then the penny just dropped. Maybe other people were, like me, all sitting at home watching Dragons' Den and really wanting one of the businesses to succeed. If we could all join together to pool smaller amounts of money, perhaps we could raise the required amount for the start-up. This would certainly bypass the need for a few, wealthy individuals to back a venture. From here I started thinking about how this could happen and leveraging the collaborative power of the internet was an obvious choice. I was ready for a new challenge and so started researching the idea in more detail.  

 

Ironically raising the finance to kick things off was our first challenge. Finance aside though, by far our biggest obstacle was how to deal with the regulations that govern how equity and shares are exchanged in the UK. We spent the first two years working with a legal firm (Ashfords LLP) to develop a framework that worked. Without their expertise Crowdcube could have been just a good idea!

 

Now that we've launched, our biggest challenge is spreading the word to start-ups and small businesses as well as potential investors. Since Britain is generally renowned around the globe for its creativity, invention and entrepreneurship, we know there will be plenty of great business ideas and start-ups out there needing funding. It’s a bigger leap to promote a completely new investment model for the general public. We've shaken the investment market up a bit and that might take time to sink in.

 

Like a lot of start-up businesses, we're privately funded. We were fortunate to be able to turn to our family to invest in the early stages. Without their support it would have been very difficult. We did run the gauntlet with the business angel networks, but ended up with nothing but wasted time and a huge amount of frustration. It was ironic that when we were talking to friends about the concept in the early days, they would have loved to invest but didn't have the large sums of capital needed. At that time there was no way that they could have pooled smaller amounts of money together to support us, which kind of proved the concept.

 

 

Exploiting word of mouth, PR, networking and making partnerships are our core activities at the moment. PR has been really important in establishing our brand to a wider audience. The concept underpinning Crowdcube is really innovative which makes for a very good story and we are leveraging this. 

 

Word of mouth is key. If an entrepreneur has a good business idea then word will spread, people will invest and tell their friends who will also invest. Exploiting this 'buzz' is made much easier with online social network tools. We aim to capitalise on this.

 

Our website is also optimised to make it much easier for entrepreneurs and investors to shout about good businesses with sharing links to Facebook, LinkedIn and Twitter.

 

Buzz aside, we will be networking at small business conferences and events. We also want to develop partnerships with other organisations that supply services and support to start-up businesses.

 

 6. What are your plans for the future?

 

We're going to spend the next few years focused on executing our plan to grow our UK operation. As well as working alongside all of those early-stage businesses looking for investment - something I am thoroughly enjoying as a serial entrepreneur – we'll be improving and enhancing our service and developing partnerships with those organisations that are already working with start-ups and small businesses. Further down the line we'll move the focus to international growth. We've had calls from people all around the world that are interesting in what we're doing here, so will work on defining partnerships or agreements to support this growth.

 

 

Don't be afraid to challenge existing conventions. Just because people have always done something one way doesn’t mean that it is the only or best way of doing something. If you have a really good idea then you need to be committed, take a leap of faith and go for it. Then focus, stick to your principles and work hard. 

 

Read all of BusinessZone.co.uk's The Ones to Watch