Steve Folwell, CEO of LOVESPACE, Europe’s leading by-the-box storage company, was the headline guest speaker in front of the registered business members of Informed Funding at Kennington Park; telling the tale of its two successful rounds of crowdfunding as part of impressive growth plans.
The event’s session chair, Rod Brown, also boasted significant experience of alternative funding. As CEO of proptech home improvement brand, Opun, Rod oversaw the company become one of the first to launch a lift round on SyndicateRoom’s platform last year.
In 2014, Steve helped steer LOVESPACE, based at 60 Gray’s Inn Road, through its own seed round on crowdfunding platform, CrowdCube, smashing its initial target by raising 160% more. That achievement alone was enough for LOVESPACE to be crowned Crowdfunded Business of the Year at the Startups Awards and Equity Crowdfunded Business of the Year the UKBAA Awards.
But after securing additional investment in December 2015 from its existing shareholders, what made LOVESPACE return to CrowdCube for a second round of crowdfunding this month?
“We had a really good experience first time round and as we had no experience of other crowdfunding platforms CrowdCube was a platform and process we felt very comfortable with,”
Steve Folwell, CEO, LOVESPACE
“You’re not really raising from the crowd. The platform is the main ‘crowd’. But you still have to actively go out and approach investors, to get their buy-in and direct them to the platform," added Steve.
After two successful rounds – the most recent this month comfortably raising 141% of its initial £500,000 target – Rod asked Steve if he could provide some genuine advice on readying a business for crowdfunding and the pitfalls to consider as a newcomer to the platform.
If you weren’t fortunate enough to get a ticket for the event, here is a round-up of the key takeaways from “Managing the Crowd”:
Make your business proposition clear
Ensure you have an investment process and a product that is simple and clean. If your business proposition is hard to understand, your accounts aren’t clear or your investor structure is not well-defined, it’s difficult to communicate to potential investors the benefits of parting with their funds.
Stay on top of investor regulations
Compliance is everything. Make sure you are aware of the necessary regulations and compliance standards and stay one step ahead of people’s questions to make the investment process as smooth as possible. Be aware, however, that the more rounds you go through the more under scrutiny you will be. You’ll have to think much more carefully about what your investors will want to know, what they will question and make sure you have a strong and clear narrative that covers those points.
The need for transparent reporting
The crowd is less concerned with the numbers and pouring over the accounts. It seems there is an assumption on such platforms that someone else has already checked the numbers, so you need to ensure you report to your crowd responsibly and ethically in the interests of both parties.
More crowd shareholders mean more communication
There is considerable management of crowd shareholders involved. Steve revealed LOVESPACE’s A-grade shareholders vote on many business decisions. So be warned that the crowd is undeniably valuable but there is a lot of communication involved when you have more than 600 investors. You have to be timely in responding to queries about the business during investment time – whether it’s 2pm on a Tuesday or midnight on a Saturday.
And what would Steve have done differently if they could do it all again?
- Keep it simple
- Ensure you have a real – and realistic – crowdfunding target
- Acknowledge that the crowd will only get you so far
- Use the best possible marketing materials – pitch collateral really is worth the effort (Steve admitted he would have produced a better corporate video!)
Chris Dines, CEO, Informed Funding, concluded proceedings with a brief presentation on the UK’s alternative finance landscape.
Chris revealed an 80 per cent growth in volume through the alternative finance model in 2015, with the UK now a hothouse for fintech – representing 85 per cent of fintech activity across Europe.
Chris stated as many as 250 alternative funding platforms have been launched in the last few years, including a cluster of high-volume platforms namely Funding Circle, Seedrs, CrowdCube, MarketInvoice and RateSetter.
However, the national alternative funding trend appears to be evolving towards niche activity with numerous specialist platforms created catering for specific industries and sectors.