Crowdfunding 101 — Breaking records and winning over the crowd
Curve’s Corporate Counsel, Victor Chang, outlines 5 tips for carrying out a record-breaking campaign
£9.9m, 11.8k investors, 54 hours.The largest-ever equity crowdfunding on the Crowdcube platform. The largest and most popular crowdfunding campaign in the UK in 2021.
Curve’s 2021 crowdfunding was a culmination of 3 months of hard work across the entire organisation. On a personal level, it felt like I had come full circle.
My first proper work for Curve as a private practice lawyer was advising them on their (record-breaking) crowdfunding in 2019. This left a deep impression on me as to how Curve was run and how I could add value to the company. Moving in-house and being part of the core team for another record-breaking crowdfunding has made this success all the more sweet, whilst giving me a platform to draw learnings from both campaigns.
1. Be clear on the ‘WHY’
It is imperative that the organisation, particularly the leadership team, is aligned on the company’s drivers for crowdfunding. Be under no illusions — crowdfunding involves a lot of time and resources across the organisation and is an expensive way to raise money. The firm’s decision-makers must therefore enter into crowdfunding with both eyes wide open.
Is money the driving factor? If so, how much do you think you will be able to raise and how do the costs compare as a percentage of the amount raised? Do you need to offer investor rewards (e.g. company merchandise, exclusive perks etc) and if so, how much more would these cost to deliver in a timely fashion? Are there any alternative ways to raise funds — debt, SAFEs or an institutional fundraising round?
If money isn’t the priority, crowdfunding has proven to be an excellent marketing tool. Statistics have also shown that retention (i.e. the ‘stickiness’ of customers) increases when customers are also investors. Customer buy-in may arguably be more valuable than the monies actually raised, especially for well-funded later-stage companies. The insights and learnings from a plugged-in and passionate retail investor base are invaluable since this cohort are usually also users of the product or service. Curve has certainly benefited from the honest and constructive feedback from its own retail investor base.
2. It’s all about TEAM
Once the decision has been made to crowdfund, it is the responsibility of the leadership team to make sure everyone is 100% on board. Buy-in throughout the organisation is essential as crowdfunding requires the support and cooperation of the entire business, from customer experience all the way to legal and compliance (especially for a regulated company like Curve). At this stage, whether or not you agree with the decision to crowdfund is secondary and must be replaced with a singular focus on the mission.
A key factor for our successful crowdfunding was having an extremely detailed project plan from the outset, which set out the multitude of tasks to be completed and against which stakeholders from across the business were tagged and made responsible. The crowdfunding was functionally led by our Finance team — with the tireless Amal Ketata burning a significant amount of midnight oil in leading the charge — and adeptly managed by Kate Stevens, our effervescent external contractor who had extensive prior experience with large-scale crowdfundings. They both did an excellent job organising and coordinating the various teams, each of which were in turn extremely cooperative and went above and beyond to ensure a successful raise. The energy throughout the organisation was inspiring and demonstrated what we could achieve when everyone was pressing towards a common goal.
3. Communication is key
The seamless cooperation across the business would not have been possible without constant and clear internal communication. Weekly calls were essential in ensuring that everyone was aligned and aware of their responsibilities for the week. Additionally, there was a clear channel of communication with the C-suite, who made themselves ready and available whenever they were required.
A strategic and well-planned external communications strategy was also crucial in ensuring that our crowdfunding reached as many people as it did. Led expertly by Zarina Banu, our Head of Corporate Communications, she ensured that bronze to gold tier news outlets were primed at the appropriate times in order to reach as many people as possible leading up to the crowdfunding and once our pitch went live. Our ‘Founder Ask Me Anything’ session was a resounding hit with our Curve Community, with the interview by Shachar Bialick, hosted by Crowdcube, providing retail investors with an inside look into Curve ahead of our pitch going live.
Crowdfunding involves exposing your organisation to the public, which can be scary as you never know how the public will respond. Gaining some control of the narrative via an effective external communications strategy will go a long way to mitigating the risk of public sentiment spiralling out of hand and save your leadership team many a sleepless night.
That said, a stellar PR campaign won’t make much of a difference if the actual execution of the crowdfunding campaign is lacking in any way. Although our crowdfunding in 2019 was record-breaking, we acknowledge that there were some deficiencies in the way we managed our investor communications and rewards roll-out. This year, we were determined to make sure these issues were rectified… and more.
In preparation for this crowdfunding, we took a critical look at our business and our campaign materials and put together a list of over 250 anticipated questions and answers so that we would be equipped to respond as quickly as possible to investor questions once our campaign went live. From a legal perspective, we front-loaded the legal work and ensured that our Legal Review and Articles of Association were agreed with Crowdcube (our crowdfunding platform) well in advance to ensure a speedy completion process.
Crucially, we communicated with our existing shareholders throughout to make sure they were on board and lined up to provide the corporate authorisations required for the crowdfunding in a timely fashion. Our efforts paid off, with their approvals being received less than 24 hours following the closing of our campaign. We’re now focused on ensuring that our rewards are rolled-out to our eligible investors in a timely fashion.
When lifting your hood to the public, you could do much worse than to over- prepare.
5. Never underestimate the power of the crowd
If events of the past year (like the Black Lives Matter movement and the European Super League fiasco) have taught us anything, it is to never underestimate the power of the masses. The crowd can be your greatest advocate or your most insurmountable foe. Few things illustrate this more starkly than crowdfunding.
It is of utmost importance to treat each member of the crowd with respect. The key way of showing respect during a crowdfunding is by being transparent, primarily through the information disclosed in the company’s pitch deck and pitch page. It must be noted, of course, that there will always still be sensitive information that must remain confidential, and companies are not expected to disclose as much as they would otherwise be expected to do if a prospectus was required. The starting point would be to disclose sufficient information to enable retail investors to make an educated decision on whether or not to invest.
Transparency is also in the form of the responses to questions from investors throughout the crowdfunding. The crowd will be able to tell right away if the answers provided are sincere and well thought through or whether they are cookie-cutter responses that attempt to skirt the question. The crowd is incredibly astute and many difficult questions were asked during our crowdfunding, which we did our best to address. It was also extremely heartening to see our existing customers and investors leaping to our defence and helping to address some of these questions on our behalf (sometimes even better than we could have done ourselves!).
Crowdfunding has been an intense but highly fulfilling experience. There is no greater form of affirmation for a company than its customers investing their money into its mission. In the meantime, it is back to business as usual as we make good use of the monies we’ve raised and go full speed ahead to execute on the promises we made to our investors during our crowdfunding!
Would I suggest crowdfunding again? It would really depend on the need. As mentioned above, crowdfunding is extremely taxing on an organisation and is an expensive method of fundraising. I would certainly think it through very carefully and would recommend anyone reading this to do the same.