So what on earth is crowd funding?
Crowdfunding dawned a few years ago with reward-based crowdfunding on platforms such as US-based KickStarter. This is where the investor’s return is a tangible product. It’s a great way to get some ideas off the ground, but it’s only suited to a minority of businesses. With reward based crowdfunding investors are able to get their hands on innovative products early, such as the Oculus Rift Virtual Reality headset – which eventually sold to Facebook for $2bn – just imagine if investors had bought a percentage of equity in the Oculus Rift! This is now possible.
More recently, as crowdfunding becomes increasingly mainstream, regulated and mature, different models of crowdfunding have emerged. This is creating a new era of finance which is more accessible, transparent and democratised. Crowdfunding is now not just about getting a tangible reward but true financial returns can be available for investors. Some platforms conduct thorough due diligence on businesses raising funds, similar to the credit reviews a bank would do. This means that investors are able to build up a crowdfunding investment portfolio where good investment returns are available and investors can support businesses they love.
What is my business?
The Link App is set to revolutionise methods of communication between professional firms and their clients, in a time and cost effective manner. The app has, initially, been created for those working across private client legal sectors.
The Link App is the ultimate tool for busy law firms looking to thrive in an increasingly competitive market, improve customer service, save time and money and increase productivity. This is done by keeping clients ‘in the loop’ without the need for back and forth communication, freeing up valuable solicitor’s time. The Link App offers potential savings to the law firms in real costs and that all important marketing angle.
Secondly, why am I in business?
I have always loved business, even before qualifying as a lawyer I had completed a business management scheme for a global firm. With my entrepreneurial spirit I was convinced there must be a better way for lawyers to communicate with their clients. After all, this is the twenty first century. After listening to the continued grumblings of my colleagues who work in law, I had my eureka moment and The Link App was born. Having said that, I was rumbling along rather nicely before I conceived this idea and had the technology popped upon my google search at the time I had this idea, I would probably still be in law full time now. But it didn’t and here I am. Some days I think I am mad for starting this journey and leaving behind the comfort of such an amazing career as law, most days I absolutely love it with the type of passion that physically stops me sleeping.
Why did I choose crowd funding?
We’ve seen phenomenal interest in the app so far, using the crowd is a modern way to raise funds for a modern company. It fit with my company ethos and I was genuinely exciting to offer equity shares in my business to the world, to see where the passion lies for my product. Would the crowd who invested be fellow lawyers, law firms themselves, techies, supporters of female entrepreneurs or just individuals who can see potential and want large returns? The possibilities were endless. The Link App has turned to Crowd2Fund to raise the £150,000 to further develop and market our new communication tool, offering equity and the business has also pre qualified for SEIS tax incentives.
I can see why crowd funding appeals to investors too. Platforms such as Crowd2Fund offer simple and quick ways for investors to gain insight into the business with much of the usual due diligence work done for them. My investors also become my clients, product testers and can invest in future rounds so crowdfunding was clearly the best way to raise funds for us.
For those who are interested in seeing the campaign: www.crowd2fund.com/thelinkapp (please don’t judge, I shot the video straight after a two day exhibition and I was frazzled).
On a serious note I have spoken to numerous entrepreneurs who experience what I think is a real issue for UK business. When looking for funding there is a wealth of funds, banks and individuals (Angels) willing to lend to/ invest in businesses once they reach a certain (usually significant) turnover and at the start some government backed banks willing to lend small amounts but the in between stages can be a real issue. I hope crowdfunding can address this issue and support entrepreneurs on their journey.
Now for the serious bit. I consulted Chris at Crowd2Fund as I wanted the blog to be a more balanced view than just my own- He said: “There is always risk with any type of investing and that’s why investors and savers should invest in multiple businesses to protect their portfolio, in case a business fails to make a repayment. Higher risk investments, such as early stage businesses, can offer great long-term returns. This risk can be offset with government schemes like the Seed Enterprise Investment Scheme (SEIS). With SEIS an investor can sometimes claim a large percentage of the investment back from the government. If investors and savers want a safer return, lending directly to established businesses is a good option.
“Lending directly to established businesses can generate great returns – much higher than a savings account, about 6%-10%. The industry wide default rate for crowdfunding is about 1.5%, so this must be taken into account when building your portfolio.”
There are platforms that allow investors to choose from all the different types of crowdfunding which gives you, in a way like never before, flexibility and puts you in control.
Crowdfunding is thought to be critical to building a more sustainable economy globally and not relying on an out-of-date financial system which is not servicing our small business sector effectively, the lifeblood of our economy. At the same time crowdfunding can reward savers with higher returns. The old system was too reliant on a few enormous banks, which is now changing.
What is my advice for those considering crowdfunding?
There is a lot that goes on beneath the surface to these campaigns. I have been working solidly on The Link App for a year to get it to the point that it’s a truly attractive proposition to investors. It is amazing that the crowd is opening up avenues of funding to people and businesses that were perhaps previously unable to access these but it’s no quick fix. Take your time, get the necessary feedback directly from investors if possible and put the work in before the campaign to ensure your best chance of success.
I would also say, choose your platform wisely. There is a large variance in what each offers and what you will pay for their services. There is a natural tendency to jump in to these things, after all you are eager to take your business to the next stage but research is key.
I hope that delving into the world of ‘the crowd’ however briefly has been an interesting read. I have found the journey fascinating.