Crowdfunding is one of the most well recognised forms of alternative finance, with platforms such as Crowdcube and Kickstarter firmly embedded in the public consciousness. But how many people can say they’ve set up their own crowdfunding platform from scratch to help their business prosper? Farah Khalique talked to Tim Fouracres, founder and chief executive of cloud accounting software firm, Clear Books. With over 7,000 customers and 32,000 followers on Twitter, he has tapped into the company’s loyal following. Find out about Clear Books.
Why did you decide to go down the alternative funding route instead of using a bank?
We did actually apply for a bank loan; our bank manager could see the business was growing and suggested we apply. But once he sent it off it was spat out - computer said no. The main reason was we’re a technology company with no assets to secure the debt on. It was a complete waste of time and very frustrating.
Why did you build your own crowdfunding platform?
We shied away from crowdfunding platforms because, although they do a fantastic job in helping companies get investment, they cost between 5-10%. If raising £3.33m, that’s £300,000 that could be better spent on building the business. We surveyed customers to see if they would be interested in part owning the company and had a fantastic response.
How much have you raised?
Last year we raised [our target of] £840,000 in 40 days. This year we have gone for a more ambitious target of £3.3 million, and have already raised £570,000.
What are the advantages of crowdfunding?
It puts community at the heart of the company. People enjoy investing - all our customers are small business owners that like being part of a movement and it’s quite unique being able to directly buy shares in a company.
The cost has been negligible because we didn’t go through another [crowdfunding] platform or a bank. Also, it’s been quite easy to set up a second funding round; we created the groundwork last year so we can raise more money this year, it’s a question of updating the numbers and re-using existing technology to launch a second round.
Would you recommend crowdfunding to others?
I would say as long as you’ve got a customer base. It’s really important to have a crowd of people that can potentially invest. We found in the first round a lot of activity happens near the end. We raised half of the money in last three days. You wait for three weeks then it snowballs near the end; it’s an interesting ride.
Find out more about Clear Books fund raising here.
Tweet out to @FarahKhalique and @WorkspaceGroup and tell us about your experience of crowdfunding.