how can equity crowdfunding help my business?

Have can

Equity Crowdfunding help my

Business?A brief introduction to Crowdfunding

This webinar will give a brief history of this new internet phenomenon and its place in the funding of new ideas and companies. Equity crowdfunding, in particular, will be discussed and illustrated with a particular (successful) example.

There is a link at the end of this deck to the associated blog and webinar recording.

Biz Smart Webinar :

A Brief Introduction to Crowdfunding


• 1. What is Crowdfunding ?


• 1. What is Crowdfunding ?• 2. Will it be right for me?


• 1. What is Crowdfunding ?• 2. Will it be right for me?• 3. Where can I get it ?


• 1. What is Crowdfunding ?• 2. Will it be right for me?• 3. Where can I get it ?• 4. How much will it cost ?


• What is Crowdfunding ?


• What is Crowdfunding ?• It is getting a large number of individuals

to provide you with small amounts of money for your business rather than asking a single entity or a few people to provide large amounts.




• This can be in the form of a loan or equity or even by a “reward scheme”.




• This can be in the form of a loan or equity or even by a “reward scheme”.

• All done online

Sources of Finance

• DEBT

Sources of Finance

• DEBT• EQUITY

Sources of Finance

• DEBT• Family and Friends

Sources of Finance

• DEBT• Family and Friends• Banks

Sources of Finance

• DEBT• Family and Friends• Banks• Peer to Peer Lending (P2P)

Sources of Finance

• DEBT• Family and Friends• Banks• Peer to Peer Lending (P2P)• EQUITY

Sources of Finance

• DEBT• Family and Friends• Banks• Peer to Peer Lending (P2P)• EQUITY• Potential Partner or Business Angels

Sources of Finance

• DEBT• Family and Friends• Banks• Peer to Peer Lending (P2P)• EQUITY• Potential Partner or Business Angels• Venture Capital

Sources of Finance

• DEBT• Family and Friends• Banks• Peer to Peer Lending (P2P)• EQUITY• Potential Partner or Business Angels• Venture Capital• Equity Crowdfunding

History of Crowdfunding

• Started as a method of collecting many small contributions by means of an online platform, typically in return for a “reward”



• First people to do it were a UK Rock Band called Marillion to finance their reunion tour of the USA in 1997.



• First people to do it were a UK Rock Band called Marillion to finance their reunion tour of the USA in 1997.

• According to the US, it started in 2003 with a jazz album through a platform called Artistshare in New York.


• In return for a contribution to the Marillion tour fund, fans were essentially guaranteed a ticket - probably for the best seats in the house - to see their heroes.

• The band had the reassurance that they could afford to tour the USA, with all the attendant costs, before leaving these shores.


• With the jazz album, rewards varied.• $10 got you the right to download the

album first• $250 got you a listing on the album credits• $10,000 made you an executive producer• The $130,000 raised was used to rent the

recording studio, pay the musicians and produce and market the album which won a Grammy in 2005


• Artistshare (2003)


• Artistshare (2003)• Indiegogo (2008)


• Artistshare (2003)• Indiegogo (2008)• Kickstarter (2009)


• Artistshare (2003)• Indiegogo (2008)• Kickstarter (2009)• Expanded into other areas of the arts


• Artistshare (2003)• Indiegogo (2008)• Kickstarter (2009)• Expanded into other areas of the arts• Theatre, Dance, Fashion, Video, Film


• Artistshare (2003)• Indiegogo (2008)• Kickstarter (2009)• Expanded into other areas of the arts• Theatre, Dance, Fashion, Video, Film• Social Causes, Animals, Health, Charity


• Artistshare (2003)• Indiegogo (2008)• Kickstarter (2009)• Expanded into other areas of the arts• Theatre, Dance, Fashion, Video, Film• Social Causes, Animals, Health, Charity• Moved into the Business Sector in 2012


• KICKSTARTER• Hosted over 250,000 campaigns• Success rate of 40%• These 100,000 have raised appr. $2 billion• Music and Film/Video still largest sectors• Moved into the Business Sector in 2012• Restricted by US Law in what they could do

in the Business Sector. JOBS Act 2012


• KICKSTARTER• In 2012 a campaign aimed to raise

$100,000 for a Pebblesmart watch.



$100,000 for a Pebblesmart watch (Put in $100 and get one worth $150 RRP)



$100,000 for a Pebblesmart watch (Put in $100 and get one worth $150 RRP).

• Money to be used for development, tooling, production, marketing.



$100,000 for a Pebblesmart watch (Put in $100 and get one worth $150 RRP).

• Money to be used for development, tooling, production, marketing.

• Raised over $10 MILLION


• KICKSTARTER• In 2014 the CoolestCooler Coolbox asked

for $50,000 for tooling,production and marketing and got………………..


• KICKSTARTER• In 2014 the CoolestCooler Coolbox asked

for $50,000 for tooling,production and marketing and got

•$13,000,000

Is Crowdfunding the right thing for me ?

• .


• Depends on what you want the Finance for and your view of traditional routes.



• Capital Equipment or Premises - • Likely to be a Loan : Bank or P2P



• Capital Equipment or Premises - • Likely to be a Loan : Bank or P2P• New product with a large upfront cost -• Loan or a Kickstarter approach



• Capital Equipment or Premises - • Likely to be a Loan : Bank or P2P• New product with a large upfront cost -• Loan or a Kickstarter approach • A New Stand Alone business -• Equity : Partner, Angel, VC, Crowdfunding

Where can I get Crowdfunding ?

• Loan : Peer to Peer lender• Reward : Kickstarter type platform• Equity : Equity Crowdfunding platform

Peer to Peer Lenders P2P

• Zopa (2005), Ratesetter (2010), Funding Circle (2010) all lent over £1 billion

• Members of the Trade Association• Peer to Peer Finance Association • along with Thin Cats, MarketInvoice,

LendInvest, Lendingworks, Landbay and Madiston

Peer to Peer Lenders Who Borrows ?

Zopa : New Car, Home Improvements, Debt Consolidation.Ratesetter : Individuals, Small Businesses, Property Developers.Funding Circle : Business loans between £5,000 and £1million for 6 months - 5 years. LendInvest and Landbay : Professional Landlords and Developers.

Peer to Peer Lenders What is the cost ?

Ratesetter : Fees are risk weighted. They cover arrangement and management of the loan and a contribution to the bad debt provision fund.Funding Circle : Fee to FC of between 2% and 5% depending on length of loan and credit risk assessment. Interest rates ? % Depends on amount, security etc.

Peer to Peer Lenders What is the risk ?

In 2015, Trustbuddy – aptly named – filed for bancruptcy shortly after its UK opening.In 2016, Funding Knight ran out of cash.Even Funding Circle (n.b. lends £1.5 billion) and is the third biggest lender to UK SMEs after RBS and Lloyds.Had losses last year of £40million on turnover of just £32million. Secured £120million investment for themselves in 2015.

Reward Based Crowdfunding Platforms

• Kickstarter UK• Indiegogo• Crowdfunder.co.uk• Sponsume.

• Fees around 5% PLUS 3 – 5% for processing !

Equity Based Crowdfunding Platforms

• Crowdcube• Seedrs• Syndicate Room


• Syndicate Room

• Backed by Experienced Angel Investors• Mainly for startups• Fee 4% plus £1500 set up PLUS £1500 to

£3000 annually until the shares are sold.• Both EIS and SEIS


• Seedrs

• Mainly run by lawyers• Fee 6% up to £150,000, 4% for £150 -500k• 2% above £500k• Plus £2000 completion• Mainly EIS


• Crowdcube• Started Equity Crowdfunding in 2011• Startups• Moved into raising large loans as well.• 300,000 InvestorsFees 7% plus completion fee of £1750• Almost all SEIS or EIS

SEIS and EIS Schemes

• UK HMRC schemes for encouraging investment in SMEs.

• Enterprise Investment Scheme for companies which have not been trading for longer than 7 years

• Seed Enterprise Investment Scheme for companies which have not been trading for longer than 2 years

SEIS and EIS Schemes

• Income Tax Relief • Capital Gains Tax Relief• Capital Gains Tax exemption• Loss Relief against Income Tax

SEIS Scheme

• Income Tax Relief : 50%• Maximum £100,000 Can carry back 1 year• Capital Gains Tax Relief : Half Rate• Capital Gains Tax exemption : FULL• Loss Relief against Income Tax : Max Rate

• Company Maximum £150,000

EIS Scheme

• Income Tax Relief : 30%• Maximum £1,000,000 Can carry back 1

year• Capital Gains Tax exemption : FULL• Loss Relief against Income Tax : Max Rate

• Company Maximum £5 million

Example : Crowdcube : FLOODKIT

• Amount Raised £135,000 SEIS (for 20%)• Number of Investors 110• Length of time 6 months• Costs • Crowdcube £8000. • Lawyer (completion) £1750. • Video for “pitch” £1500• NEW Company

Can you now answer these questions ?

• 1.What is Crowdfunding ?• 2. Will it be right for me?• 3. Where can I get it ?• 4. How much will it cost

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http://www.biz-smart.co.uk/portal/webinar/101

http://www.biz-smart.co.uk/blog/can-equity-crowdfunding-help-business/

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