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Introduction to crowdfunding for startups and sm es 9.11.17

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Clive Reffell Crowdfunding Presentation 9-11-17

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Introduction to crowdfunding for startups and sm es 9.11.17

  1. 1. Introduction to Crowdfunding for Startups and SMEs 9 November 2017
  2. 2. What is crowdfunding? • A new online and alternative way of raising money to launch or expand a business • Through selling products, selling equity, or taking a loan • Get a little from a lot of people rather than everything from one source • Largely based on effective social media and digital marketing to spread the news • £47m invested in 82 equity crowdfunding projects Q1 2017
  3. 3. The Cheeky Panda: a £5m business in under two years Copy this link: bit.ly/The-Cheeky-Panda-case-study
  4. 4. Crowdfunding provided a full template to build the business
  5. 5. Julie Chen and Chris Forbes
  6. 6. More than just money • Target of £10,000 orders through donations-for-rewards crowdfunding • Start date, end date and all-or-nothing funding process focused efforts • Proved public demand existed • Recovered some of their initial £5k outlay • Provided samples for meeting with stockists • Effective PR generated media coverage – Good crowdfunding = good marketing • Crowdfunder link to Amazon Launchpad for innovative start-ups
  7. 7. Some donations platforms
  8. 8. Niki P Designs 103 backers pledged £17,773 against a £17,500 target
  9. 9. Landmark Locations
  10. 10. Angel investors
  11. 11. An angel investor liked The Cheeky Panda • Initial investment in the business meant the founders could ditch their day jobs • Grew distribution through online and offline stockists • Tackled the corporate supply chain to sell to hotels and airports • Maintained media coverage
  12. 12. Equity crowdfunding • Target of £350,000 • Crowdfunding platforms make it easy to invest • Raised £500,000 for 10% equity • They had a business valued at £5m!
  13. 13. Equity platforms in a crowded market Market leader, claims 48% market share No. 2, recently raised £10m From early funding to public listing Minimum investment is £25,000 Industrial and B2B businesses. Minimum £1,000 investment. VC interest. Angels, equity and debt all under one roof
  14. 14. Generous investor benefits • Exist to encourage investments in private companies • Companies using crowdfunding register under EIS, Enterprise Investment Scheme – Minimum 3 year lock-in for investors – 30% tax relief on up to £1m invested p.a. – That can be carried back to the previous tax year – Capital gains are tax free – Further tax benefits if the investment tanks – Exempt from inheritance tax after 2 years • £16bn invested in 24 years
  15. 15. Seed Enterprise Investment Scheme • Each company can raise £150,000 • 50% tax relief* for investors – who can be directors - up to £100,000 per person • Can be carried back to the previous tax year • Zero CGT after 3 years • Maximum loss of 27.5% of sum invested if the business fails * assumes 45% rate tax payer
  16. 16. James and Emma Yeomans
  17. 17. • 2013: sold 34% equity for £58,000 to establish a craft brewery based in the Royal Arsenal 3 year sales growth to 4 x original capacity January 2017: traded 12% equity for £750,000, a company valuation of £6.25m – Original investors sit on a 3,600% paper profit • Target is 8 x growth in the next 3 years
  18. 18. More than just money • Crowdfunding provides a template to launch and build a business – Business plan and cash flow projections – Research the marketplace – Marketing – Selling, to early backers and customers – Deadlines – De-risk initial production • Isn’t it what all startups and SMEs should be doing anyway?
  19. 19. It isn’t easy • Chris and Julie, The Cheeky Panda – 4 months of 20 hours per week – £5k budget – Downloaded Harvard Business Plan – 8 weeks thinking about the video • James and Emma, Hop Stuff Brewery – Working to 3am on financial projections
  20. 20. Debt crowdfunding for existing businesses • Investors seeking better returns than from traditional options, though risk averse • SMEs get faster decisions and better terms than from traditional options, retain equity • Borrowers usually need minimum two years’ trading history and/or assets as security • P2P lending platforms include
  21. 21. Clive Reffell 07788 784373 clive@comcomms.com http://www.comcomms.com @Cliveref

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