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How we achieved business success through crowdfunding

posted Oct 18, 2014, 1:42 AM by J Shaw   [ updated Oct 18, 2014, 1:43 AM ]
You have just four minutes to impress with your business idea. Your audience? Not Lord Alan Sugar, but the general public. And a public that is increasingly familiar with this form of pitching – crowdfunding.

To get them on your side, the budding entrepreneur must present a solution to a problem and wow with their enthusiasm. Three sets of business owners explain how they used three different crowdfunding platforms to make their bright ideas a reality.

Emilie Holmes had been working in advertising for three and a half years while nurturing her passion for quality tea. In 2012, she decided to launch her tea business - a decision that coincided with the arrival of a now well-known crowdfunding website in the UK.

“I had two thirds of my budget, but I didn’t know how to make up the shortfall,” she explains. “I discovered Kickstarter and I saw on Twitter that they were coming to the UK.” The platform offered her a way to fund her idea of converting her 1974 Citroen van into a custom-made tea bar.

Kickstarter is a rewards-based platform, so fans of a business idea bid in exchange for rewards related to the project. Backers offering £15 were promised a bag of Good and Proper Tea while a generous £1,000 resulted in free hire of Holmes’s tea van and free tea for up to 100 guests. Holmes’ Kickstarter page included a detailed summary of her idea, a target pledge, an explanation of what the money was for and a short video that showcased her enthusiasm and plan.

Holmes’s video was around three minutes long – short enough to keep viewers’ attention – and she thinks the music she picked for it had a big impact. “I used Fleetwood Mac – everyone loves Fleetwood Mac,” she says.

She advises other pitchers to be in their video. “Backers were supporting me as they could see I was passionate,” she explains. The only way for a video to be effective is to make sure it’s seen and shared by lots of people. Humour is a big motivator for this, says Holmes. She received pledges from 376 people. Her target was £10,000 and she raised £14,000.

Holmes benefited from the surge in interest in Kickstarter’s debut in the UK. Now competition is tougher and viewers more discerning. “You probably have to work even harder for traction now,” she says.

Other crowdfunding platforms have followed Kickstarter, including equity models where fans pledge for a stake in promising startups. One website that runs in this way is Seedrs, the preferred platform of Tom Ball, founder of NearDesk. On NearDesk, the “Oyster card for desk space”, people can rent desk space by the hour at locations around the UK.

Like Holmes, Ball wanted to solve a problem with his idea. “On average we spend eight and a half hours commuting each week,” he says. He wanted to give people the option to work close to home, and to do that he needed funding. “We needed lots of people to support what we do. Seedrs felt like a good fit. We have 500 investors and they’re all managed by Seedrs.”

On Seedrs, investors can put in anything from £10 to £75,000. “We’d raised £200,000 at closing,” says Ball. “We’ve had amazing numbers of people investing across different industries”. As with Kickstarter, on Seedrs ideas are presented through a pitch and video. Ball says: “You need to say enough about the idea that people can understand emotionally and then think it’s worth taking a proper look at it.”

However Ball doesn’t think the video is the most important tool for securing backers. “Investors don’t generally bid on a 0% investment company. You should raise 20% investment yourself before it goes live,” he advises. Finding reliable investors who believe in your idea can be tough, but following Ball’s example by being simple and concise when presenting your pitch is effective.

With success on their first campaign, NearDesk has followed with two more, the most recent of which made £1m from 346 investors. Ball describes them as partners in the business’s journey. The business now operates in 150 locations with 25,000 cards in circulation, and continues to grow.

While some entrepreneurs take Ball’s approach of rigorous brainstorming, ideas and pitches can also come from a chat between friends. That was the start of The Bloody Oyster, a double decker bus serving cocktails, including Bloody Marys, and oysters. The idea sprang up over pub drinks between Ben Hamilton and Ed Ford. Fans of cocktails and seafood, the pair wanted to bring them to a mass audience. “The more we looked into it, the more enthused we were,” says Hamilton. “I have a business mind and I knew we needed to raise some money.” The pair invested their own cash, but it fell short of converting a double-decker.

Hamilton’s job as community coordinator at rewards-based crowdfunding platform Zequs meant crowdfunding was hard to ignore. After a string of successful pop-up events of their oyster and cocktail stall in December 2013, the pair launched a campaign to renovate a bus.

Like Kickstarter, Zequs offers different levels of reward in return for different levels of pledges. The Bloody Oyster pitch offered 11 different pledge options ranging from £20 to £1,500, the rewards starting with an invite to the bus launch event to a private hire of the bus and catering for up to 40 guests. As an added incentive, the first 100 backers were added to a draw for an all-inclusive holiday in Morocco.

The two partners raised more than £22,000 on the platform, outdoing their £20,000 target. This allowed them to kit out a bus and they secured a residency on the Southbank. Since then, both Hamilton and Ford have quit their jobs and are pursuing their venture full-time.

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