Crowdcube is chasing more blockbuster investment deals to list on its platform as it looks to cement its position as the biggest crowdfunding platform in the UK.
Cofounder and chief marketing officer Luke Lang told Business Insider: “We love great deals, we love working with brilliant entrepreneurs in exciting businesses. So there’s a real focus to get more businesses like goHenry, like Mondo, JustPark, Sugru.”
App-only startup bank Mondo crashed the Crowdcube website with demand from investors earlier this year. Ultimately it raised £1 million in just 96 seconds. And parking space rental service JustPark raised £3.7 million on the platform last year, over 3x what it originally set out to raise.
“Ultimately, those great inspiring deals are what pushes our dials,” Land says. “It’s what inspires investors and it’s why we’ve got the largest investor community. There will be several this year that raises the bar.”
As well as targeting more well-known or up-and-coming consumer businesses, Lang says Crowdcube will this year look to raise bigger sums. He says the platform has succeeded in opening up the so-called “Angel” investment market — where rich businesses give early stage funding to businesses at the idea stage. But now it wants to target “Series A” and “Series B” rounds, multimillion pound funding deals usually reserved for institutional investors like venture capitalists.
Lang says: “Us moving into the more Series A and B rounds opens the door for us to do much larger raises. Last year Made.com raised £30 million from a French institutional investor. Crowdcube should have had a slice of that.”
‘Mondo and Tom were very gracious’
Crowdcube has beefed up its platform to handle more demand in the wake of the Mondo crash. Lang says: “It wasn’t planned bringing the site down. I know a lot of people think it might have been a PR stunt and we charged extra for it but we didn’t.
“We’ve been working hard on all that sort of stuff, there’s a big plan of improvements that we’ve put to work. But it was unprecedented demand. It was thousands and thousands of people all clicking the same link and trying to register to invest at the same time. It was phenomenal. It was terrifying at the time but looking back it was a wonderful kind of period. Mondo and Tom [Blomfield, Mondo’s CEO] were very gracious and really good about it.”
Lang sat down with BI to discuss Crowdcube’s fifth anniversary and where it’s going. Since launch in 2011, Exeter-based Crowdcube has helped almost 400 companies raise over £160 million on its platform. It has over 280,000 registered members, who can buy equity on companies raising money on the website from as little as £10. It is the UK’s biggest crowdfunding platform.
“Crowdcube’s success reaches much further than the numbers and the deals that we’re funding,” Lang says. ‘We’ve created or safeguarded over 10,000 jobs now. Businesses are exporting overseas, they’re creating new products, opening restaurants and cafes, building brands. It’s all amazing stuff.”
‘We’re poking people in the eye and kicking sand in their faces’
Reflecting on the company’s journey, he says: “I always think, looking back, that Darren [Westlake, Crowdcube cofounder and CEO] and I have made a living proving people wrong. Month after month, year after year people have constantly said no you can’t do that.
“It’s partly because we’re going around poking people in the eye and kicking sand in their faces. It’s really nice to be able to tick off and prove people wrong and make a business you can generally be proud of.”
Along the way Crowdcube has certainly made enemies. Rival CEOs always love to have a pop at the company whenever I sit down with them. The most common criticism is that Crowdcube is simply a volume player — it makes money from a success fee charged to successful raises. That means the emphasis is on getting as many people to list on the platform rather than checking the out to see if they’re actually a decent business. As a result, rivals say you’re more likely to get sold a pup.
Lang refutes this — robustly. “That’s bullshit if I’m perfectly honest. Ultimately the long term success of crowdfunding is down to track record. It’s your ability to deliver returns for investors. That’s my skin in the game.”
Crowdcube is building technology that will create company profiles that pull in publicly available data on any company listing, rather than simply all the documents they present as is the case now. Still, the documents they present now contain financial information that is closely vetted.
It’s also not simply a case of “fire and forget” for companies that successfully raise funds either.
That’s bullshit if I’m perfectly honest. Ultimately the longterm success of crowdfunding is down to track record.
“We track all of the companies that we fund,” Lang says. “In certain instances we’ve helped businesses with legal advice when they have needed it. We’ve notified them when they’re falling behind on updating their companies house. We’re helping them to scrub up their corporate governance.”
He adds: “We’re out there actively talking to and engaging with our companies because we recognise that their long-term success and ability to deliver returns is integrally entwined with Crowdcube’s longterm success.”
‘I don’t think there’s a halfway house’
Another criticism I hear of the platform is that while it does vet proposals to make sure they are accurate, its due diligence is lighter than that of a traditional investors. This perception was emphasised when The Times revealed that Rebus, a claims management company that raised money on Crowdcube before collapsing, was being advised by a man who had been banned from regulated finance by the City regulator.
Crowdcube has beefed up its due diligence processes since the collapse of Rebus and Lang says: “Any statements on a pitch, we’ll check. Any statements on the size of a market, we’ll need to see third party validation. If they have got any significant material contract in place or IP we’ll look into it and check it. The facts that are presented on the pitch are fair, clear, and not misleading and an investor can read it and make their own decision.”
He adds: “What we don’t and what we’d never confess to do is decide whether or not it’s a good business in a great market opportunity. That’s for the investors to decide.”
What we don’t and what we’d never confess to do is decide whether or not it’s a good business in a great market opportunity. That’s for the investors to decide.
You could argue this is having it both ways — just enough due diligence to keep investors happy, but if there’s a failure then Crowdcube can wash their hands and say it was down to the wisdom of the “crowd.”
Lang says: “I don’t think there’s a halfway house. We’re regulated as a firm so we’ve got certain responsibilities in terms of the due diligence that we do and making sure a pitch is fair, clear and not misleading.”
Crowdcube is building a “knowledge hub” that will include investment guides and it is looking to get more blogs from external people giving investment tips and tricks. But Lang adds that among Crowdcube’s investors “the top profession is finance and then business, sales. They understand finance.”
Rival crowdfunding platform Seedrs is currently planning US expansion but Crowdcube is happy to stick in the UK. Lang says: “There’s no plans to do any other overseas European offices this year. We’re very, very focused on the UK market. It’s a £2-3 billion market here so there’s a lot to go after.”
For now he is taking a moment to enjoy the success that Crowdcube has had here. He says: “We looked at our portfolio and the value of our business came to £1.2 billion, the companies that we’ve funded on the platform. Lil’ old crowdfunding is actually growing up and making a big impact and people don’t realise the value of the companies being invested in.”
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