Crowdfunding, our experiences

Back in the early part of Summer we at Shopwave took the decision to go down the crowd-funding route for our next funding round.

I've covered before what lead us to make that decision and it's fair to say we've learned a lot since the campaign began.

We are open enough to admit that we went in a little blind - none of our team had experience of this funding method and there's some lessons we'll gladly pass on.

The team over at Crowdcube leant us their experience, after all their business model is based around companies hitting their funding target - which they take a percentage of.

We approached a number of investors, some existing, and some who'd expressed an interest in our product via Linkedin and through our customer base - and got a pre-campaign agreement in place on how much they'd pre-load the 200k Crowdcube push.

We hired the Soho Theatre to announce the Crowdcube campaign to a number of potential investors, as well as showcase our future plans to the tech community.

After the first few days we had 25% of our target complete. This stirred the early adopters in the crowd to help push us on towards 50%, over the following weeks.

With hindsight, I think we'd all internally admit there's a few things we'd have done differently. We made a lot of noise in the first month, but a 60 day round is a deceptively long period of time. As a group we felt the crowd would be more consistent, relentless even, in pushing our campaign over the 200k goal we set, at a ￡2.8 million pre-money valuation. But, the trends of the investments thus far, have followed a pattern - someone invests in a figure upwards of ￡250, then in quick succession smaller amounts follow from the crowd.

As we approach our last 17 days of the 60 on Crowdcube, we've had a number of alternative offers that we're in the process of reviewing - primarily, at a lower valuation than our target figure.

As is clear from the forum, the valuation has been the main area of discussion amongst potential investors - and we'd be foolish, as a company looking to kick-on and rapidly expand, to not listen to those looking to back our journey.

As the saying goes, 'The Wisdom of Crowds' holds some weight. It's fair to say that the community on Crowdcube are wanting to invest at a slightly reduced figure. We've discussed this at length, in a structured, mostly calm manner. Looking at what we have coming, and our dream from the outset being at the centre of our thoughts - we want to disrupt a stagnant market. Being slow, and missing this funding opportunity, which will allow us to expand our technical expertise and allow us to launch our next phase of marketing, would be foolish.

We're going to listen to our crowd - those who want to back-us with their hard-earned, and give those who came in at the ￡2.8m valuation, more bang for their buck. We'll be announcing a reduced valuation to push our campaign over the line.

I guess I wanted to write this article, as there's many who've come to me to ask my advice on crowd-funding, asking me would I advise it as a genuine alternative to seed / VC funding. Well, I answer those questions:

Yes, I'd advise taking the crowd route.

Why? Well, it's taught us that the investment community see value in what we're doing. It's shown us that, as of time of writing, 88 people out there have put-up their own money, from ￡10-￡30,000 into the pot. We thank them for that.

What have we learned?

1) Listen to the crowd - that if seasoned investors are telling you something en-masse, it's worth listening to. Be willing to react - we're soon to go out to the crowd and announce a tweaked valuation. If the crowd is telling you something, react to it.

2) Get pre-agreed funding - make sure you're a well-backed business from day one of the campaign. Get your existing investors to pump-in a decent pre-loaded (25%+) figure to get your campaign off to a strong start.

3) Make it happen - use the Crowdfunding deadline as a flag in the ground, an end-point for all your pre-existing investment discussions. Ie. don't rely on strangers to push you on to your target on their own, go and find the investors yourselves. Once the crowd see that outsiders are backing you, they'll follow.

4) The crowd will back you once they're confident your campaign will close - unless you hit 100% or above of your investment-target, you get none of the money. So, investors will only spend their time reading a Business Plan, if they're confident you'll close.

5) Don't hit the refresh button continuously - we've all been guilty here in Shopwave offices of continuously referring back to our campaign page on Crowdcube - it's like watching paint-dry.

6) Have a dedicated Crowd-funding marketing campaign - make sure you are extremely visible to potential investors throughout the campaign

7) If someone's keen, they'll take a call - get an investor on the phone, or in your offices. The best way to sift through the timewasters is by offering a coffee in your office. Let them meet your team, play with the product, and see the passion for your product.

8) Keep your staff motivated - it's an emotional and motivational roller-coaster raising funds so openly. So, make sure you keep your team close, be open with them - communication is absolutely key.

If anyone's thinking of using Crowdfunding as a source of funding, I'd be happy to have a coffee with them to run through our experiences in greater detail. It's been a fantastic learning curve - and we're now looking forward to closing our round.

James.