Designed to protect both crowdfunders (people pledging or investing capital) and fundraisers (people raising capital), the CAPS program’s mission is to foster the sustainable growth of the crowdfunding industry to provide much needed capital for projects and initiatives, start-ups and small businesses.

Darren Westlake is also a member of the CAPS Advisory Council which is made up of leading platform operators and industry experts.

US based Crowdsourcing.org was founded in 2010 and is the leading industry resource offering the largest online repository of news, articles, videos, and site information on the topic of crowdsourcing and crowdfunding.

More can be found on Crowdsourcing.org and CAPS at http://www.crowdsourcing.org/caps

Obama backs crowdfunding revolution in the US

A year on……

On the other side of the pond, the UK has already seen the birth of crowdfunding and its popularity increases as the demand for funding increases as high street banks limit their lending. We, as Crowdcube have also come a long way. We celebrated our first birthday last month and to date funded 15 businesses on the site raise over £2.75 million, from a database of almost 12,000 members. In November last year the Rushmore Group raised £1 million on our platform, the highest amount ever to be raised via crowdfunding. And in December we raised over £300,000 via our own crowdfunding platform to fuel the next phase of our growth. From organic salad dressings to outdoor patio heaters; from private member club expansions to search engine optimised website packages, the business represented on Crowdcube are as diverse as its members.

The name of the US bill – JOBS – was clearly designed to shout exactly what it wanted to achieve and make it very difficult to vote against. Prophetically, that is exactly what’s happening in the UK with the investment successfully raised through Crowdcube set to create 320 new jobs over the next three years. Our success over the past 12 months is a clear sign to the US that crowdfunding is a powerful and empowering mechanism that simply works and can help boost JOBS!

Blog post written by Sam Gutu.

“Phyzog.tv will deliver cutting edge caricatures direct into the hands of the public and hold those that think they are ‘the powers that be’ to account,” says founder Chris Chapman, announcing the launch of the ‘direct satire’ show.

The first interactive animated satire show – phyzog.tv – will be delivered to mobile devices twice a week from early summer with a plan launch on TV before the end of 2012. It is the brainchild of former head of R&D at Spitting Image Projects Chris Chapman. He has formed a new company, Fizcast, to launch the show and to exploit the ground-breaking interactive mobile technology that has been developed to make it happen.

Peter Fluck, co-founder of Spitting Image with Roger Law, comments: “Spitting Image satirical puppets were a new technology for the end of the last century. This could be the new technology for satire in the 21st century and I personally would love to be the first investor.”

“We can place our digital caricatures in a myriad of environments and cover that day’s news for an evening broadcast,” says Chapman, “with viewers becoming participants and interacting directly with the animation and show. If you’ve always wanted to suggest a sketch for David Cameron, or prod him with the arms of ‘the poor’, now you can.” The team making Phyzog includes former Spitting Image caricaturists, puppeteers from Harry Potter movies, app builders who’ve worked on Lara Croft titles, as well as new writing talent. Among the team is Steve Nallon, the voice of Margaret Thatcher in Spitting Image, who takes on the role of David Cameron in phyzog.tv.

Fizcast technology enabling mobile app broadcasts has also attracted attention beyond the world of comedy. “It enables the rapid performance of interactive animation which can be delivered at lightening fast speeds to mobiles. This is a major breakthrough and is already proving of interest to other content producers,”explains Chapman.

To fund company growth, Fizcast is currently raising a minimum of £350,000 using the Crowdcube small business finance platform to invite members of the public to invest in the business in return for a share of the equity. “The people investing in small businesses on Crowdcube love the sort of innovation that phyzog.tv is about,” comments Crowdcube director Luke Lang. “Media, mobile and entertainment are all popular sectors and Fizcast combines all three.”

Fans of Darlington Football Club have taken the future of their much-loved team into their own hands by aiming to be the first sports club in the World to use a crowdfunding website to raise funds. The 129 year-old club, which is under threat of closure, has so far raised £291,450 (39%) of its £750,000 target from 722 supporters in just 14 days on the crowdfunding site, Crowdcube.*

Darlington Football Club

Fans of the Quakers from across the UK have supported the bid so far and local schools across the town are running non-uniform days to raise funds. The support extends beyond the north-east with an Italian man who has followed Darlington FC since he was first randomly assigned the club 20 years ago playing the Championship Manager football computer game. He has never visited the town and has invested £100 to help save the business.

Jenny Chapman, MP for Darlington and a Quakers fan comments: “If Darlington FC went bust it would be a disaster for the local community and economy. With clubs around the country experiencing financial difficulties we passionately believe that fan ownership is the future for Darlington and other clubs to ensure that they are run sustainably and are here for future generations to enjoy.”

Shareholder benefits

This month football finances have come under increasing scrutiny with two high profile clubs – Rangers FC and Portsmouth FC – being placed into administration. Darlington’s bid for survival aims to give fans a genuine voice in the future running of the club with opportunities to vote in annual elections, to appoint directors to run the football club and to sit on the board. They will also receive invitations to investor-only events, a regular exclusive newsletter, as well as a named mention on the football club website and on an investor ‘thank you’ plaque that will be erected at the stadium.

Luke Lang, co-founder of Crowdcube says: “Crowdcube was designed to be a platform to help entrepreneurs raise growth capital but Darlington is proving that it is just as effective for sports clubs seeking to raise money. As a personal supporter of Exeter City FC, who faced its own financial difficulties in 2003 and is now owned by fans, I’m especially happy that Crowdcube could provide that platform to make this fantastic dream one step closer to becoming a reality. Crowdfunding has tremendous potential for the public to step in and take ownership to safeguard important organisations such as a village pub, post office or in this case a football club.”

For more information visit Darlington’s Crowdcube pitch.

*Figures correct as of 29 February 2012.

The Next Generation Finance Consortium (NGFC) has been formed by a group progressive thinking finance-oriented organisations who are seeking to change the finance landscape in the UK in response to growing demand for alternative sources of business finance. The group will provide entrepreneurs and small businesses with much needed advice and support about new and traditional finance options available to them. It will also liaise with Government bodies and other organisations to lobby for support on key issues related to small business finance.

The founding members and steering committee behind the Next Generation Finance Consortium include: Crowdcube, MarketInvoice, People fund it, Capital Enterprise, Community Development Finance Association, Angel Capital Group and North London Community Finance.

Access to finance continues to be one of the biggest challenges facing British start-ups today. Official figures released last week showed that high street banks missed their ‘Project Merlin’ lending target to small firms by £1.1bn. This pain is amplified in London where 25 per cent of the UK’s new businesses start. The continued economic turmoil is stifling growth and threatening to create a lost generation of entrepreneurs.

Brent Hoberman, founder of Lastminute.com

“When we started lastminute.com in 1998 it was very hard to find seed investors – we were lucky to find some by serendipity, directory inquiry and persistence. The latter will still be necessary but NGFC can help companies find finance in a more structured way.”

The Next Generation Finance Consortium, which represents every alternative to bank lending, aims to increase awareness among entrepreneurs of other new and emerging solutions now available to them. It will also organise events for entrepreneurs to network – finding out more about the optionsthat best suit their needs and discussing their experiences with other entrepreneurswho have successfully raised finance by an alternative means. John Spindler, managing director of Capital Enterprise, one of the founding members of the NGFC said: “This is an exciting time for the business finance industry in the UK; the emergence of so many innovative new models has given entrepreneurs the widest choice of solutions for some time. The emergence of crowdfunding and peer-to-peer finance models are game-changing developments that promise to change the finance landscape forever. Our goal is to raise awareness of these new models to catapult them into entrepreneurs’ consciousness.”

To find out more about the Next Generation Finance Consortium visit: www.ngfc.org.uk.

How did you hear of Crowdcube?
I initially heard of it via Twitter, it was a Press Release from The Telegraph announcing the launch of Crowdcube. The tweet mentioned “small business funding” which obviously attracted me as I was trying to get funding at that time and had been looking at a variety of sources. I had been looking at Kickstarter and had been trying to find something similar based in the UK, so I had an idea of the concept of crowdfunding and what was involved, although obviously Kickstarter’s model is different as it’s not crowdfunding for equity.

How was your business funded before Crowdcube?
It was funded on a shoestring! I started the business in 2009 and it had been funded through a variety of sources. I managed to get investment from an ex colleague and had also raised a small amount of funding through a Business Angel. I also won two business awards, the BT Best New Start-up and another run by Winweb, which gave cash prizes. So I was able to support myself and grow the business organically, although it was done on a tight budget.

Had you ever been unsuccessful at raising finance through a traditional source i.e. business angel network or bank?
I went to the bank and was offered a bank loan but it just wasn’t enough. In my experience banks want to see a couple of years of profitable trading history, which as a start-up, I just didn’t have. The banks don’t lend when there is any risk, which means that there is a massive gap in funding which Crowdcube are filling. If banks could provide business loans to those companies who are perceived to be higher risk but at a higher rate of interest, then I believe that would really help the small business community – it should be about risk and reward not just risk.

What attracted you to raising finance on Crowdcube?
Well obviously it was the opportunity to raise much needed funds, but it was more than just that. Crowdcube is about getting a group of people together who all have a vested interest in your company and that group of people all come with a set of skills and ideas. As opposed to raising money through a Business Angel who may expect day to day involvement, this is a group of people with no one person telling you how to run the business but lots of different skills and ideas.

Also, Crowdcube is a platform that helps the small business owner, something that is vital to our economy and is sadly lacking. I’m really interested in small businesses and loved the concept of Crowdcube, how they are tapping into that area and making it simpler for small business owners to raise money in a non-traditional manner.

What did you see were the advantages of crowdfunding your business?
Bubble and Balm has been developed around the concept of Fairtrade and supporting communities, we were the first company to offer Fairtrade certified soaps. Just as Bubble & Balm is centred around communities, so is the concept of crowdfunding, so I really liked the fact that we were both working from the same ideals of supporting and benefiting communities as well as being profitable.

What advice would you give another entrepreneur seeking to crowdfund their business?
You have to promote yourself and your pitch constantly. When I talk about promotion, I mean generating interest and driving traffic to the Crowdcube site. You can’t make bold claims, e.g. “how the business will give you a return on investment in year 1”, I always took an indirect approach to this, to make people aware of the business opportunity rather than directly inciting them to invest.

You also need to be prepared to spend time talking people through it as you’ll be contacted by interested parties who want to know more about yourself, background, experience, aspirations etc. which can be quite time consuming. There is also the Crowdcube forum which is a great source of information and many potential investors use this channel. You need to answer any questions there and engage in the conversations. If you don’t, then it implies that you’re not interested and as this is a very public domain, it can reflect pretty badly on you, the business owner. Occasionally, the questions on the forum can appear quite interrogative but if a person has compiled a list of 20 questions, then it shows their level of interest. All in all you need to spend time “courting” these parties, treat each one as a potential shareholder and with some luck and good answers, they’ll become one.

You really need to drum up support; your aim is to get the barometer on the pitch higher, to create a momentum which will then create a snowball effect. You need to mention your pitch wherever you can and never miss an opportunity as support won’t always be found in the obvious places. You need to network and create opportunities for yourself.

How long did it take to get the funding required?
I took about 4 months. We had a point when investors were sitting on their money, keen to invest but not wanting to be the first one to do so. So we brought the deadline forward from September to July which created a sense of urgency and encouraged them to put money in as they didn’t want to miss out. Saying that, some people did miss out on investing in us.

In the last 2 weeks, the whole campaign snowballed and we received 50% of the amount in, in that time. When it actually funded, I was on the phone to Darren, we were just waiting for £100 to come in, so Darren tweeted about it, and it came in within minutes! This was such a big deal for both of us, for me to have reached the target and for Crowdcube to have funded their first business – it was rather a momentous occasion.

How did you feel about being the first business in the world to raise finance in such a way?
It’s absolutely brilliant. Obviously getting the funding is great. But we were the first company to launch fairtrade certified soaps, and then first company to crowdfund for equity. I get very frustrated by the lack of small business support and am so keen for Crowdcube to succeed as it is challenging the traditional way of raising finance. Crowdcube’s model really engages people, everybody who is involved can be instrumental in seeing the small companies win through.

How have you used the money that you raised? Has it made a difference to your business?
It’s made a massive difference to the business. Currently I’m in the process of developing a new range of products and we are launching two of these new products in Oxfam this month, which will make up part of their everyday range. If I’d not raised the finance, I would be a lot further behind on my plans than I am and many of my plans would not have seen the light of day.

Would you recommend that someone uses Crowdcube to raise finance?
Absolutely, as long as you can see that there are some slight disadvantages to it as well as the obvious advantages. If you are looking for a person to be directly involved with the business, such as a Business Angel, then Crowdcube is not for you as you won’t have that mentoring and involvement with your company.

Crowdfunding means that you will have lots of people who have different ideas and they have to be managed. Having approaching one hundred shareholders also creates a lot of paperwork and administration, what I call non profit generating activity. For example, the administration for the EIS certificates is lengthy, I have 25 forms to fill in and I was faced with either paying my accountant to do this or doing it myself which increased my workload. I believe Crowdcube are looking into ways that they can ease the burden of managing multiple shareholders for the entrepreneur, which will be a godsend.

I set up an investor forum on my site that all items of information are posted there and they can ask questions there, this has been really useful in managing everyone and their expectations.

The wonderful thing about having this group of shareholders is that you have a community of people who all have a vested interest in helping you and they are there to be taken advantage of. Where else get 100 people who committed to helping your business? I have found through my group of shareholders, a person who is in HR and has offered their skills without charge and a lawyer who is willing to answer my questions should I have any, both of which are a fantastic help and which I’m really grateful for. They will also help promote the brand and are honest enough to give constructive feedback when it comes to questions on packaging and branding, as they can be objective in a way that is more difficult for friends or family.

The whole experience has been tremendous and I would certainly advocate it as a method of raising finance.

Infographic: The story and stats behind Crowdcube's success so far..

With more than 8,800 people registered on the site to receive information about the companies seeking finance, Crowdcube expects that the Government’s tax boost for investors via the Seed Enterprise Investment Scheme (SEIS) as well as the poor performance of other investments will drive investors towards new types of investment opportunities.

Co-founder Darren Westlake comments: “People who are frustrated with the performance of their existing investments and want to find new types of investment, as well as Government tax incentives like SEIS, is fuelling an interest by people to invest in Small Business Britain. We’re seeing a good mix of new armchair dragons and traditional business angels signing up to Crowdcube. The more people that invest using sites like ours, the more small businesses will find the finance they need to start-up or grow. It’s positive to see the impact we’re already having on Britain’s economy. The emergence of alternative sources of business finance, like crowdfunding, is already proving to be a very effective and popular solution for both entrepreneurs and investors.”

Gem Misa of Righteous aims to raise £75,000 to fund a major marketing campaign to promote its natural salad dressings said: “What I really like about Crowdcube is that it isn’t just about funding; it is a fantastic opportunity to use the power of the crowd to spread the word and build the brand as well. We are finding that the investors we’ve attracted through crowdfunding are interested for the ‘right reasons’ – because they simply love our products and really believe in what Righteous is about, and therefore want to be a part of it. So in a way we aren’t just gaining investors, we are gaining a group of supporters who can help tell more people about our products.”

Since its launch on 15 February 2011 Crowdcube has:

software; Kammerling’s, a new kind of lower proof alcoholic drink; Personal Development Bureau, a professional consultancy helping ex-public sector workers facing unemployment to retrain or retire.

Other facts include:

It is free to register as a potential investor on Crowdcube. Entrepreneurs only pay a fee when they successfully hit their investment target.

Click here to view the full infographic.

The most important part of the plan is the executive summary.  This page and a half summarises the 9 areas of the plan that an investor expects to see.  Investors will read it and then decide if they want to finish reading the plan or throw it away. It should be no more than 1.5 to 2 pages in length and it should contain the mandatory 9 points:

• A description of the business;
• a description of the product or service,
• the marketplace;
• the potential of the business;
• the 3 year turnover and profit forecasts;
• what investment is required and what it will be used for;
• what investment have the directors made;
• what are the prospects for the investor , and
• what is the exit strategy.
• The executive summary is normally one of the last parts of the plan that is written.

I always start by deciding on the structure of the plan. It has to flow in such a way that the reader not only understands what the company does and how it will go about doing it, but also it must cover all the essential areas of interest, without repetition, and above all it must excite the reader and distinguish your plan from the pile of others sitting on an investors desk. Remember you are writing a document that has to contain what an investor expects to see and not what you want to say.

There is no mystery about the structure, just think logically about what an investor wants to know and the best way of leading him/her through the detail. After the executive summary the structure should flows in a logical manner;

• What is the structure of the company and at what stage of development is it at?
• What are the company objectives in terms of turnover and profit?
• What are the products, the need, description, and proof of concept?
• The marketplace, description and size and where do you fit?
• The sales and marketing plan, including all the detailed assumptions that have been made.
• The operations plan, how the company will run, the location, the people requirements, the order and fulfilment flow.
• Who are the management team, their track record, experience?
• The financial model, explained in words for those that do not like spreadsheets.
• The financial model, with spreadsheets for P & L and cash flow for 3 years, done on a monthly basis, and a balance sheet.

Colour and pictures are very important in a plan. Give the section headings a colour and add pictures that help explain the product or service. Make your plan different to all the others and more visually appealing.

Then you actually have to start writing. I always find this difficult, but once I have started the rest just flows. So I start with what I consider to be the easy bits, but also bits that make me think about the company. I normally start by drawing the organisation chart, making certain I have included all the people I need for 3 years. Then I create the SWOT analysis (Strength, weaknesses, opportunities and threats and after that I write the unique selling points section. The point is you do not have to start writing at page one. Start with a section that you feel comfortable with and the rest will come naturally.

Next month, in part 3 of this blog, I will describe what should be included in each individual section of the plan.

This post was provided by Peter Kelly of Pegasus Funding Resources  

Keep up to date with funding issues via Peter’s Twitter account : @peterekelly

Crowdcube’s affiliate programme enables any provider of services to small businesses to offer their own crowdfunding service. Affiliates can direct their own clients or members to a co-branded crowdfunding website – hosted and managed by Crowdcube – which they can use to seek finance or invest in one of the small businesses registered on the site. Affiliates can choose how they want to brand their portal and customise it with their own logo, wording and design.

David Lester, founder and managing director of Crimson Publishing, the company behind Startups.co.uk

David Lester, founder and managing director of Crimson Publishing, the company behind Startups.co.uk, says: “Crowdfunding business finance is a game-changing concept that puts the power firmly into the hands of entrepreneurs of start-ups looking to raise finance. Raising finance is the biggest barrier for many start-ups and so we’re excited that users of Startups.co.uk will be able to access information on raising finance as well as have direct access to an innovative way to solve the problem directly from our site.”

Crowdcube is the first crowdfunding website in the world that enables members of the public to invest and receive shares in UK-based companies that register on the site to raise finance. The company has already successfully funded £2.1 million of finance for small and growing businesses including the world’s first £1 million crowdfunding deal for The Rushmore Group.

Darren Westlake, co-founder and CEO of Crowdcube, said of the partnership: “We expect deals such as this one with start-ups.co.uk to increase the number of small businesses finding finance through crowdfunding. That’s good news for businesses and good news for the economy too.”

Pegasus Funding, a specialist funding firm for all types of business, has signed up to the programme. Peter Kelly, partner at the firm said, “Equity finance can come from a number of sources, but has always been difficult to find. Typically only 2% of companies succeed in finding equity investment. Crowdcube is revolutionising access to equity investment and we’re delighted to be able to offer our clients such an innovative solution to a difficult challenge.”

The Growth Academy, a mentoring and coaching company, has also joined the programme. Craig McKenna, managing partner at the firm said, “We are always looking at ways to grow the services we provide based on core business challenges. Raising finance is one of these core challenges facing growth companies today and so we’re pleased to be able to offer our customers assistance in this area.”

Crowdcube, named by Startups.co.uk as one of the top 20 hottest start-ups in 2011, has over 7,600 registered members who are seeking investment opportunities. To find out more about becoming a partner, visit our Affiliate Partner webpage.

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