Crowdcube is a vital player in the UK startup ecosystem, offering an innovative approach to fundraising through equity crowdfunding. Securing funding is often one of the most challenging aspects for early-stage businesses, with traditional routes like bank loans and venture capital being complex and highly competitive.
Crowdcube, however, democratizes the process, enabling startups to raise capital from a large pool of everyday investors in exchange for equity. This guide delves into how Crowdcube works, its benefits, and how you can leverage the platform to fuel your business growth.
What Is Crowdcube?
Crowdcube is a UK-based equity crowdfunding platform founded in 2011. It has since become one of Europe’s leading investment platforms, facilitating over £1.4 billion in funding for more than 1,300 businesses.
Startups create a pitch on Crowdcube, set a funding target, and offer shares in their company. Investors can then support the project, gaining a stake in the business and the potential for future returns.
Crowdcube operates with transparency and is authorised and regulated in the UK and Europe, providing a safe and secure environment for both investors and entrepreneurs.
Why Should You Choose Crowdcube for Your Startup’s Funding?
Crowdcube offers several advantages that make it a top choice for startups seeking funding:
- Access to a Large Investor Pool: Crowdcube’s community comprises over 1.7 million members, providing startups with access to a diverse investor base. This extensive community not only brings potential capital but also creates brand advocates who can support the business’s growth.
- Effective Marketing Tool: Running a crowdfunding campaign on Crowdcube serves as a marketing tool, boosting visibility and building trust. Investors often become ambassadors for your business, helping to spread the word.
- Transparent Fees: Crowdcube operates a clear and straightforward fee structure, ensuring businesses and investors understand all associated costs.
- Tax Relief: Investors on Crowdcube can benefit from tax relief through the Enterprise Investment Scheme (EIS), claiming up to 30% of their investment value back on qualifying investments. This incentivises investment, providing additional appeal to potential backers.
How Does Crowdcube’s Equity Crowdfunding Work?
Crowdcube simplifies the crowdfunding process, breaking it down into the following steps:
- Create a Pitch: Start by preparing a compelling pitch that showcases your business model, vision, and financial projections.
- Set a Funding Target: Decide how much capital you need to raise and how much equity you will offer in exchange.
- Launch Campaign: After approval, your campaign goes live on Crowdcube. Potential investors can then review your pitch and invest.
- Promote Campaign: Use marketing strategies, such as social media, email newsletters, and press releases, to attract investors.
- Secure Investment: If the target is met, Crowdcube processes the investments, and your business receives the capital.
How Can You Prepare Your Business for Crowdcube?
Preparation is key to a successful crowdfunding campaign. Here’s how to get ready for your Crowdcube journey:
- Build a Strong Business Pitch: Create a compelling narrative that outlines your business vision, market potential, and financial projections. Make sure to highlight your business’s unique value proposition.
- Organise Financial Documents: Prepare detailed financial documents, including profit and loss statements, revenue forecasts, and investment plans.
- Develop a Marketing Strategy: Leverage various marketing channels such as social media, newsletters, and press releases to promote your campaign. Engage with your audience to create excitement around your pitch.
What Is Crowdcube’s Transparent Fee Structure?
Crowdcube has a straightforward fee structure that applies to both investors and businesses, ensuring transparency throughout the process:
Investment Fee
Investors are charged a 2.49% fee of their investment amount, subject to a minimum fee of £2.49 and a maximum cap of £250. This fee covers several costs, including running the platform, conducting compliance checks, and managing the completion of investments.
Example of Fees:
- £10 Investment: £2.49 fee (minimum applied), total collected £12.49.
- £250 Investment: £6.23 fee (2.49% applied), total collected £256.23.
- £25,000 Investment: £250 fee (cap applied), total collected £25,250.
Success Fee
If an investor makes a profit on their investment, Crowdcube charges a 5% success fee, aligning its long-term success with that of its investors. For example, if you invest £10,000 and later receive a return of £100,000, Crowdcube’s success fee would be £4,500 (5% of the £90,000 profit).
This transparent fee structure provides clarity for investors and helps startups understand the costs involved in raising capital through Crowdcube.
What Are the Tips for Running a Successful Crowdfunding Campaign on Crowdcube?
- Set Realistic Funding Goals: Your funding target should reflect your business needs while considering the equity offered.
- Engage with Investors: Actively communicate with potential investors on the platform, providing detailed information and addressing their questions.
- Create Engaging Content: Use videos, images, and detailed business plans to present a professional and transparent campaign.
- Provide Regular Updates: Keep investors informed about campaign progress, milestones, and business developments to maintain interest and momentum.
- Highlight Growth Potential: To attract more investors, showcase your business’s growth potential, market opportunities, and team strengths.
What Does Crowdcube’s B Corp Certification Mean?
In line with its mission to use business as a force for good, Crowdcube proudly holds B Corp certification. B Lab, the non-profit behind this certification, awards it to companies that meet high standards of social and environmental performance, transparency, and accountability. Crowdcube scored an impressive 87.2 out of 200 during its assessment, far exceeding the average score of 50.9.
This certification not only reflects Crowdcube’s ethical approach to investing but also its commitment to gender inclusivity.
Crowdcube actively supports female-founded businesses, challenging the status quo by being a more inclusive way for female entrepreneurs to raise investment.
As part of its ongoing commitment to positive impact, Crowdcube aims to uphold and improve its standards, preparing for reassessment in 2025.
Which Startups Have Thrived with Crowdcube?
Numerous businesses have successfully used Crowdcube to raise funds and achieve remarkable growth. Some of the standout success stories include:
- Mr & Mrs Smith: Raised £5.9 million and was later acquired by Hyatt Hotels Corporation in 2023, providing significant returns to its 2,029 investors.
- GoHenry: Raised £11.9 million across multiple campaigns and was acquired by Acorns in 2023, offering investors lucrative returns.
- Nutmeg: Raised nearly £4 million on Crowdcube before being acquired by JP Morgan Chase in 2021, providing investors with a 2.3x return on their investment.
- Mindful Chef: Backers of this healthy food delivery service saw a 350% return when it was acquired by Nestlé in 2020.
These examples highlight how Crowdcube can help startups gain the capital they need while providing investors with the opportunity to achieve substantial returns.
How Can You Build a Diverse Portfolio with Crowdcube?
Crowdcube empowers investors to build a diverse investment portfolio by offering a variety of opportunities across industries, sectors, and stages of growth.
Whether you’re interested in tech startups, sustainable projects, or luxury brands, the platform enables you to invest in businesses that align with your values and interests.
Spread the Risk
Crowdcube allows investors to spread their investments across different markets and industries, which is crucial in managing the inherent risks associated with equity crowdfunding.
By backing multiple ventures, investors can balance potential high-risk investments with more stable options.
Capitalise on Emerging Opportunities
Crowdcube helps investors capitalise on emerging trends and businesses with high growth potential. Investing in innovative startups early on can lead to significant returns if the companies succeed.
A Community-Driven Approach
With a community of over a million members, Crowdcube not only facilitates investment but also promotes a culture of shared success and innovation.
This community-driven approach helps investors connect with businesses that share their vision for a sustainable and innovative future.
What Happens After a Successful Crowdcube Campaign?
After a successful funding round on Crowdcube, the platform guides both businesses and investors through the next steps. These include:
Payment Processing and Share Issuance
Crowdcube captures the payments from investors and conducts necessary anti-money laundering checks. Following this, Crowdcube issues share certificates to investors and updates the company’s shareholder register. This process is crucial to formalise investors’ ownership stakes in the business.
Ongoing Support
Crowdcube offers ongoing support post-campaign, managing communications between investors and businesses. This includes regular updates on business performance and growth, as well as managing investor votes on significant business decisions.
This level of post-investment support is unique to Crowdcube and ensures investors remain informed about the health and direction of the businesses they have backed.
Managing Future Rounds
Crowdcube facilitates future funding rounds, allowing investors to maintain or increase their stake in the company as it continues to grow. This follow-on funding option can be instrumental in securing additional capital to fuel expansion.
Exit Opportunities
When businesses achieve significant growth, Crowdcube assists with exit opportunities, including mergers, acquisitions, secondary share sales, and public offerings.
By providing support throughout this process, Crowdcube helps investors realise returns on their investments when companies they back undergo these transformative events.
How Can Equity Crowdfunding Investors Realise a Return?
Investing in startups through Crowdcube usually involves a long-term strategy. However, investors have several ways to realise a return on their investments:
Company Exits
A company exit occurs when it undergoes a significant event, such as a merger, acquisition, or going public. When an investor exits, they sell their shares, often realising a profit.
Crowdcube has been involved in numerous successful exits, such as Nutmeg’s acquisition by JP Morgan Chase and Camden Town Brewery’s acquisition by AB InBev, both of which resulted in profitable returns for investors.
Secondary Share Sales
Crowdcube facilitates secondary share sales, allowing investors to sell their shares to third parties even if the company remains private.
This option provides liquidity and allows investors to realise returns without waiting for an acquisition or IPO. Secondary sales often occur in liquidity rounds, where multiple shareholders sell their shares simultaneously.
Dividends
Some companies, particularly those that are more established and profitable, may distribute dividends to shareholders. Although less common among early-stage businesses, dividends offer a way for investors to earn a return on their investments. Examples of businesses on Crowdcube that have paid dividends include Parcel2Go and Beara Beara.
While investing in startups comes with inherent risks, Crowdcube’s track record indicates promising opportunities. Approximately 5% of businesses funded through Crowdcube have successfully exited, and about 70% continue to trade, as of Q1 2024.
What Has Been Crowdcube’s Impact Since 2011?
Since its launch in 2011, Crowdcube has transformed the startup funding landscape, playing a pivotal role in supporting mission-driven businesses. Over the past decade, Crowdcube has helped raise over £1.4 billion for more than 1,300 companies, creating a dynamic and thriving investment community.
The platform’s influence continues to grow, as reflected in its recent statistics:
- New Members Last Month: 577
- Unique Investments Last Month: 4,149
- Total Invested Last Month: £1.7 million
- Site Visitors Last Month: 183,000
Crowdcube’s commitment to innovation and ethical business practices has also been recognised through its B Corp certification. By creating investment opportunities that are accessible to a wide range of people, Crowdcube is not only helping startups secure the funding they need but also enabling investors to take part in driving growth and innovation across various sectors.
Crowdcube’s impact extends beyond financing; it empowers startups to create jobs, drive economic growth, and innovate in areas that matter. Its community-driven approach has made it a go-to platform for both entrepreneurs and investors looking to make a tangible difference.
Conclusion
Crowdcube offers a unique and accessible way for UK startups to secure funding through equity crowdfunding. By providing a platform that connects businesses with a diverse investor community, Crowdcube enables startups to raise capital while building brand advocates.
With transparent fees, ongoing support, and a focus on ethical business practices as a certified B Corp, Crowdcube stands out as a premier crowdfunding platform.
For investors, Crowdcube provides an opportunity to build a diversified portfolio, capitalise on emerging business opportunities, and potentially realise significant returns.
Whether you’re an entrepreneur seeking funding or an investor looking to support innovative businesses, Crowdcube offers a pathway to shared success.
FAQs
How much equity should I offer in my crowdfunding campaign?
The amount of equity offered depends on your business’s valuation and funding goals. Startups on Crowdcube typically offer between 10-20% equity, but this can vary depending on the company’s growth stage, industry, and market conditions.
What kind of startups does Crowdcube support?
Crowdcube supports a wide range of startups, from tech and retail to food and beverage. The platform is open to businesses with strong business models, growth potential, and a clear use of funds.
How long does a Crowdcube campaign typically last?
Most Crowdcube campaigns run for 30 days. However, the duration can vary based on the startup’s strategy and the level of preparation and promotion carried out before and during the campaign.
What are the fees associated with Crowdcube?
Crowdcube charges a 2.49% investment fee, subject to a minimum of £2.49 and a maximum cap of £250. Additionally, a 5% success fee is charged if an investor makes a profit on their investment. There are no annual fees for ongoing support.
How do investors get a return on investment through Crowdcube?
Returns can be realised through company exits, secondary share sales, or dividends. Crowdcube facilitates these processes, ensuring investors can capitalise on successful investments.
Can I crowdfund on Crowdcube if my startup is outside the UK?
Yes, Crowdcube has expanded to support businesses in Europe, though it primarily focuses on UK-based startups.
How secure is the investment process on Crowdcube?
Crowdcube follows strict regulations and conducts due diligence on each campaign to ensure transparency and security for investors.
