Richard Clarke, Managing Director of Red Advertising Ltd who is completing a pitch via the Crowd Cube Platform, tells us why Crowdcube is the way forward.
Richard said “The market place for any business trying to raise capital for equity has always been a minefield. Not least because of the amount of rogue angel support companies that want to extract large upfront fees from businesses before they actually do anything. This can include large fees for writing or reading business plans, to attend pitching events, introduction fees, monthly membership fees and so on. This is in addition to the expected listing and success fees that introducing companies command. The list is truly endless. It’s not until a business starts looking for angel support that they really appreciate how poor this market place is”
But it’s not just the premise of certain rouge angel introducers to try and take advantage. Oh no! Some of the larger VC funds act no better. Not satisfied with taking large slices of equity for their investment, some may use Regional grant money to part fund, part lend to a business at high interest rates, take consultancy fees all the way and financial incentives for the appointment of NED’s (Non Executive Directors) on your payroll. Often these NED’s are connected to the VC practice or from some other related firm and don’t add any real value. In addition to this, ongoing management and consultancy fees, placement and exit fees, there are other such charges inching up their already over inflated earnings per deal are commonplace. A business has to be very careful who they deal with and scrutinise any term sheets so that they don’t get ripped off.
From the business owner’s point of view it can all become very frustrating and depressing. From a private investor’s point of view they can end up having their time wasted reviewing business pitches that are the only ones that were daft enough to pay the massive upfront fees, whilst many good quality entrepreneurs walk away. In addition, Investors could find themselves losing money from the moment they invest because not all of their money is going directly to the business pitching”
The good news is that the climate just got better, for both businesses and private angel investors, following the recent launch of the UK’s first online equity based crowd funding platform www.crowdcube.com
Richard said “For the first time, businesses can showcase their business plans to potential angel investors and they can invest from as little as £10. With alot of smaller investments coming in to make up the total amount, it means more businesses can secure support to grow. Investors have direct access to investing in some of the most innovative companies in the UK. With interest rates being so low, it makes perfect sense for them to diversify their portfolio with some direct small cap business investments. These could provide multiple investment level returns, many of which also qualifying for EIS tax relief status. It’s a win; win for both entrepreneurs and Investors.”
For Red Advertising Ltd their pitch support level is already past the half way mark with more pledges in the pipeline. They fully expect to reach their target shortly. For further details on the Red Pitch and other investments visit www.crowdcube.com
This post was provided by Richard Clarke of Red Advertising