HM Insights

Crowdfunding in Scotland – getting down to business with the professionals

From my most recent article you will have seen which professionals you need to successfully crowdfund.

On Friday 30 November we brought some of those key players to our Glasgow office for a crowdfunding masterclass. Along with HM, sharing their experience on Friday were Crowdcube and Raising Partners.

With Crowdcube having completed over 770 successful raises, Raising Partners having a 100% track record on crowdfunding businesses and HM being one of the most experienced Scottish law firms on equity crowdfunding, the event gave a real insight into what is involved with crowdfunding.

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Attendees get the lowdown on what it takes to succeed with an equity crowdfund

Crowdcube was able to share some of the key benefits of choosing to crowdfund with them, including straightforward terms designed to leave the entrepreneur in control of the business, increased brand awareness and a loyal following of customers who want your business to succeed.

Of course, let's not forget you will also have successfully completed an investment round at the same time. This is achieved as the business is simultaneously running a marketing and investment campaign, so you're essentially killing two birds with one stone when you crowdfund.

Lead investment

If you've decided that this sounds good for your business, the key message on Friday was that you must first secure lead investment. Lead investment is essentially the money you have committed before the campaign goes live. This means the business needs a significant amount of funding negotiated and committed before you can start crowdfunding, and by significant we mean no less than 30% and ideally over 50%. A good place to start with lead investment is by scouring your network (including family and friends) to see who might be able to offer you some of that precious capital.

Your investment proposition

Another key message from Friday was the importance of focusing on the investment proposition. The investment proposition includes the pitch deck, pitch page, video and financials. Some practical tips on these points included:

  • Make sure the graphics in your pitch deck match your brand aesthetic.
  • Include key metrics, financials and differentiators in your pitch deck but keep it less than 30 pages and if the company is young, less than 20 pages.
  • Invest a fair sum into preparing a video pitch. It's now recognised that more and more investors (around 40%) are also looking at video adverts before deciding whether to invest or not.
  • Make sure the video showcases the best bits of the business and keep it less than 4 minutes 30 seconds.

Other key tips from the afternoon were:

  • Set realistic timescales and make sure you have the time you will need to commit to the raise process.
  • Have a dedicated team for the raise.
  • Understand your share capital.
  • Know your risks. Most of time, businesses aren't even aware of some of the risks that threaten them and it's these unknown risks that are always the biggest ones. Just by becoming aware of what these risks are significantly reduces the risks themselves. Once you know what you're up against, you can take the necessary steps to reduce overall risk. To do this, we'd advise seeking early legal advice so you don't end up tying yourself in a knot and spending more money rectifying things just before you're about to start your campaign.

Finally, as Crowdcube highlighted, it's an excellent time to consider crowdfunding. The UK market for crowdfunding is five years ahead of the market around the rest of the world - the market in the UK is worth half a billion dollars compared with 100 million dollars in the US.

Get in touch

If you would like any further information on crowdfunding, then please feel free to get in touch with us at jo.nisbet@harpermacleod.co.uk and we would be happy to have a discussion.