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Funding v2
This document provides guidance on finding funding for a new business. It discusses four main sources of funding: equity, debt, public sector grants, and crowdfunding. For crowdfunding, it defines the models of donations, rewards, debt, and equity crowdfunding. It emphasizes having a clear project plan and costs, choosing the right platform, creating a compelling pitch, engaging supporters, and maintaining communication. Key tips for funding applications include having clarity, concision, realism, and understanding the funder's objectives.
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Funding v2
- 1. Finding the money StuartHartley
- 2. Finding the money •Four ways of getting money: − Equity – Dragons Den − Debt – bank overdrafts / loans / credit cards − Public sector grants − Crowdfunding
- 3. Before we startthough • How much money do you need and for what? − Calculating start up costs Start-up costs Business rent £ Business rates £ Water rates £ Light/heat/power £ New equipment £ Business insurance £ Travel and vehicle costs £ Telephone and postage £ Printing and stationery £ Advertising and promotions £ Accountancy and professional fees £ Development and training £ Stock £
- 4. What are yourcosts Page 4 Start-up costs Business rent £ Business rates £ Water rates £ Light/heat/power £ New equipment £ Business insurance £ Travel and vehicle costs £ Telephone and postage £ Printing and stationery £ Advertising and promotions £ Accountancy and professional fees £ Development and training £ Stock £
- 5. Personal funds fromfamily or friends. No guarantee that they will get the money back Business Angels investment for a share of the profits / company May want day to day involvement may not Typically for more established businesses Larger levels of investment A relatively new way of equity funding your business. Projects usually in the region of £50,000 to £1m
- 6. Funding • Be aware: −Funding applications will usually not pay for internal costs − E.g. staff salaries, − A lot of funds require a degree of “match funding” − Some will require the money to be spent and then reimbursed. − Some funds are sector specific so your business may not be eligible The majority of funding applications require a good quality business plan
- 7. Common mistakes whenapplying for funding • No wow factor − The proposition must have an exceptional differentiating factor − Why would I invest in your proposal and not another one? − Why would I buy your product / service and not your rivals? What is your sustainable competitive advantage? • Expecting a 24 hour turnaround − Plan for a longer than expected turnaround – it could take months • Touting an untested idea − For the best chance of success produce a working prototype or have demonstrable market need data • Avoid assumptions − Continue the market research and ensure your financials, in particular, are as accurate as they can be • Lack of a clear development path − What is the end goal and what will you need to achieve it?
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- 10. Definition • “the practiceof funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet”
- 11. Crowdfunding: How DoesIt Work? • Online platforms that allow people to invest from as little as £10 • Pitchers post a video, summary, business plan, financials and legal documents • No success fees until the pitch is funded • Pitches tend to be 30, 60 or 90 days • Round can be closed through the platform and only takes typically 2 weeks
- 12. Some Early Examples •Mozart 3 Lenten Concerts • In 1784, 174 subscribers from Austrian aristocracy • Statue of Liberty (1885) • Statue donated by France but cost $250,000 to erect on granite plinth • Fund raising fell short, State said “no” • The New York World launched campaign -$102,000 from 160,000 US donors, 80% were contributions of $1 or less!
- 13. Let’s name theplatforms
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- 15. Can you identifythe types?
- 16. Crowdfunding: Models • Donations: Contributionsgo towards a benevolent cause and the donor receives nothing in return • Rewards: Investors receive a tangible item or service in return for their funds. (Invest in film…and get tickets to the premier) • Debt: Investors are repaid for their investment over a period of time at a specified rate of interest • Equity: Investors receive a stake/ shares in the firm
- 17. Crowdfunding: Donations • Usedfor good causes – community projects, personal fund raising, “worthy causes” • Funding not repaid • Many of you will have used this type of crowdfunding
- 19. Crowdfunding: Donations • indiegogo.com– strong arts focus • Buzzbnk – support for social enterprises • SolarSchools: solar panels for schools
- 20. Crowdfunding: Rewards • Fundingnot repaid but a “gift” is given as a reward • Kickstarter - Creatives focus: $2.8Bn of pledges, 12m funders in 120,000 projects! • Gambitious - Games focus: Reward & Equity • Peoplefundit & Bloom VC -arts focus: Rewards • Wefund - Creativity: Rewards
- 22. Bryt Socks Results •768 backers • Range from £1 (gift) to £1,000 (50 pairs of socks plus 2 designs into production) • £27,060 of an £18,000 target in 33 days
- 23. Crowdfunding: Debt • “peerto peer” lending • Lenders receive return on their investment • Used to raise debt funding that “traditional” means would find hard to support • Also micro-finance to support poor in developing economies (interest free)
- 24. Crowdfunding: Debt • Typically9-12% per annum • Usually pre-screened through brokers, introducers, agents • Often targeted at existing businesses, with track record, who can finance debt repayments • Average funds £10-50k • 60-70% success rate, 2 weeks
- 25. Crowdfunding: Equity • AngelsDen • Crowdcube • Seedrs • Syndicate Room • Different legal structure; Angels Den provide shareholders agreement, Seedrs do nominee structure, Crowdcube provide no legal document (just articles of association) • 90-95% of deals enjoy SEIS/ EIS relief
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- 27. Success? • Funding targetof £110k in 2 days • Stretch target of £150k in 2 weeks • 119 investors • Ranked #1 or #2 on Seedrs for whole pitch period • Well planned campaign • Now looking to raise £1m for massive expansion
- 28. FFS - KeyLearning Points • Understand how rating on the platform works • Seedrs algorithm - number of big investors on board - number of smaller investors on board - speed of investor recruitment
- 29. What is CrowdfundingGood For? • Funding specific projects • Raising start up funding • Engaging your audience and growing it • Reducing transaction costs • Businesses with large “reach”
- 30. What Is CrowdfundingNot? • A panacea • The only answer • Easy!
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- 32. Develop Project • Defineclearly what you want to fund • Have a project plan – objectives, timescales, funding • Funding Plan? What element is Crowdfunding? Cost of completing the project + Cost of fulfilling rewards + Legal + PR & marketing + Platform & processing fees: ~10% + 30% cushion = Minimum Funding Goal
- 33. Choose Platform • Rewardsor donations? • Look and feel • Ease of use • Fees • Timescales • Audience and motivation
- 34. Pre-start New startEarly growth High growth Maturity
- 35. Which platform wouldbe best for you?
- 36. Pitch • Create acompelling page – pictures and video • Copy the best of others! • Use your existing networks • Publicise like mad! • Use own social media networks – Facebook, Twitter etc. • Timeframe
- 37. Donors Pledge • Allor nothing? • Automated or personal thank you’s? • Engagement – make pitch viral (1-42…….)
- 38. Project Proceeds • Keepcrowd informed • Maintain regular dialogue • Offer benefits (tangible or intangible)
- 39. Typical Costs • Pitchfee: cost of video/story? • Success fee: 3% to 5% + • Mostly all or nothing!
- 40. Top Tips Don’t relysolely on Crowdfunding Choose most appropriate platform Have a clearly defined project AND plan Have a clearly defined project AND plan Set up core team to run campaign Seed your campaign with existing supporters Find third parties to offer prizes/rewards Offer donors chance to engage as well as donate
- 41. Top Tips • Seta realistic minimum target, better to over achieve! “Stretch” at top • Good to have 30-40% lined up long before launch (pitches that reach 30% of their target in a few weeks have 80% chance to get funded) Be clear on what you are trying to achieve and what the money is for • Ideal to have own big crowd
- 42. Advantages • Much lessdue diligence (investor and investee) • Typically higher valuations (the crowd aren’t as sophisticated as angels) • Grow your own brand ambassadors, salesforce, advocates • Can be very quick But….. • Can’t normally get a Non-Executive Director/Mentor/Advisor
- 43. Sources of FurtherInformation • Great Nesta white paper: “Working the Crowd” • Great platform information source: www.crowdingin.com • UK CF association: www.ukcfa.org.uk
- 44. Key tips whenapplying for funding 1. Clarity and consistency. 2. Be concise. 3. Be realistic about what you will achieve. 4. Understand what the funders objectives are: 1. Public sector often new jobs or business growth 2. Private sector – assurance – ability to pay back the money or making money from an equity investment 5. Follow the guidance notes, if supplied, and be aware of the rules specifically with eligible spend