The story & stats behind crowdfunding: Rebel Book Club
By Ben Keene, Co-founder at Rebel Book Club. 27th Jan 2020
Ben, my co-founder, and I had talked before about how raising funds for Rebel Book Club could help a lot more people accelerate their reading habits — both breadth and depth — and make a heap of interesting and valuable connections — ideas, insights, people.
On the one hand we could carry on as we were, running it as a successful ‘side-project’ covering its costs nicely and building a great little community. All the signals suggested it would continue to grow organically, but to realise some of the exciting ideas we had, it would take time, another 3–5 years perhaps, to have enough funds to build a small team.
So, after 50 non-fiction books read over 50 months, and with 500 active (subscribing) members bringing in around £10,000 monthly recurring revenue, we decided that in June 2019 it was time to try and take this book club to the next level!
Chapter 1: Chasing Angels
I’d experienced mixed success with fundraising campaigns and wasn’t totally sure which way would be the best, easiest and cheapest way to go with RBC.
We drafted a first version of the business plan and started to share it with people in our network and the Rebel Book Club community who we thought might be interested. Our pitch said that we were looking to raise at least £100,000 for 10% equity in the company with a minimum of £10,000 per investor.
The response was really positive. People seemed almost as excited as we were about the idea. The advantage of getting a handful of ‘angels’ on board was that it would be potentially a cheaper way to raise funds and less future shareholders to ‘manage’. The disadvantage, as we now learned, was that you really need a ‘lead investor’ to commit early behind which other investors will follow. We didn’t have, at this stage at least, a clear lead and, with the summer holidays approaching, we knew we were running out of time to convert this early enthusiasm into cash.
Chapter 2: Pitching to a Psychedelic Crowd
Our July meet-up in London at Entrepreneur First was on the brilliant book How to Change Your Mind: The New Science of Psychedelics by Michael Pollen. Ben and I were aiming to do a 5 minute presentation of the business plan at the end of the session. But by the time a dozen of our members were up-front sharing their ‘psychedelic’ experiences, projects and even careers (!) it felt like a financial forecast of a book club might seem a little underwhelming.
But this was their book club, so it was only right we shared our plans to grow it! We need not have worried, as we got a really supportive response that night and online with the overwhelming message “please let us invest too, just not at the £10k level.” At this point it seemed really clear, we would attempt to crowdfund and see if we could convert some of the angel interest and combine it with our members' goodwill.
We knew with this decision we would lose some of the angels who had shown interest as ‘crowdfunding wasn’t for them’. But, without any funds yet locked-in, it was a gamble we were willing to take.
Chapter 3: Proving Seth Godin exists
After choosing Crowdcube, the next step was to get our pitch live on the platform. This is where the real work begins and the estimated time between starting and ‘going live’ is 3–4 weeks. We wanted to do it in a week so we could get the funds raised in September and starting investing/paying salaries by the end of October.
Once we had submitted our pitch, we had over 30 compliance requests. What this means is that you have to provide third party proof that, in our case for example, Seth Godin really did skype into Rebel Book Club at Airbnb HQ. Instagram evidence of the bald bespectacled marketing guru was not enough, we needed to dig out an email from Seth himself! Fortunately, we found it.
Having written in our pitch that we had a ‘passionate’ community we then had to prove this ‘deep level of engagement’. I dug out all the data we had: endless book votes, social media, whatsapp chats, and event attendance stats, which finally got approved.
Compliance on Crowdcube is very thorough. But it’s there for a good reason, so that when investors read a pitch they know the due diligence on the claims has been done and the numbers and stories have been proven. We’d passed the test and in early September our pitch was ready to go live.
Chapter 4: Stealth mode; Crowdfunding in Private
Turning a crowdfund pitch on, after working daily for two months on plans and conversations, is a big moment. In our enthusiasm to share it we probably sent it to our full membership at Rebel Book Club a little too early.
A slightly smarter strategy might have been to get it to our early angel investor audience first, and persuade one of them to jump in, before sharing with our community. Not giving our early angels enough of an explanation as to why were pivoting to crowdfunding — on the same terms we had offered earlier in the summer — was clearly something that lost us momentum.
Our first investor was not an angel, but a mixologist: Richard Maxted, our in-house drinks creator from Mix & Muddle, taking a punt that if we grow, so will the demand for book-inspired cocktails!
After Rich, followed 60+ Rebel Book Club members investing anything from £10 to £1000, so that after 10 days we had £15,000 pledged. 70% of those who invested at this stage were women, and over half of the investors were under 30. So far, not your stereotypical investor crowd. But as fantastic as the support from our members was, we needed larger investors.
After a lot more chasing we did manage to persuade our first couple of angels to join and by the time the campaign was due to go public we’d reached £35,000 or 35% of our initial £100,000 target. Not the 50% we wanted, but at least we were on our way.
^ Active (paid subscription) membership accelerated during the Crowdfund from 600 to 700.
Chapter 5: Naked Ambition; Crowdfunding in Public
Once your pitch goes public on Crowdcube you have 30 days to hit your self-imposed funding target or you walk away with nothing.
As soon as our pitch was sent to the Crowdcube investor community we saw a lot of interest — small amounts of investment streamed in, doubling our number of investors in 24 hours, but not doubling our money. No one was investing more than £100.
At the same time we started responding to questions from potential investors who had just learnt about Rebel Book Club — and perhaps hadn’t read the full business plan. How did we value the company? How did the business model work? How would we spend the money? What were the exit plans? Surely, this would business be hard to scale?
For the first time we were out of our community comfort zone and being openly challenged on different aspects of our plan. Not as intense as a Dragons Den appearance I imagine might be, but still, this was the real test.
We were a couple of days into the public phase and I was starting to worry we were losing momentum, when a fresh group of loosely connected first-time angels started showing serious interest. They all came through Ben’s social network of young, creative business leaders. One of them jumped in. Then two. Three. All of a sudden we were up to 65%. Social validation was happening.
It wasn’t just the fact that we had a solid business plan, track record and trust in us with these new investors. The Seed Enterprise Investment Scheme, allowing startup investors to claim tax relief, helped increase their willingness to commit.
Things steadied again for a few days before we were able to get two more angels on board and then we saw the real acceleration. We went from £70,000 to £107,000 (target reached) in 48 hours. Up until this point anyone who had invested £500 or more we knew personally. Once we got close to the target (£90,000+) we started to see unknown names joining in, the non-Rebel book Club crowd looked like they were starting to be convinced!
For the first time we could relax, a little, and celebrate the £100,000 milestone. We had hit our target!
Chapter 6: Overfunding & Out
But our real goal was £150,000. This would give us more fuel over the coming year or two to really give this business a go. We had 3 weeks left to try and raise a further £43,000, and at this point it seemed like it would be easy.
But the Fear of Missing Out had gone — both in terms of the timeframe and the overfunding target (which unless you read our updates you wouldn’t know about). We were back to hustling new and old potential angels, sharing new updates about Rebel Book Club (our membership was growing quickly alongside the campaign so that helped) and trying to find new audience now we had validated the business plan.
With the help of our friends at 10Yetis we started to generate some publicity, in industry magazine The Bookseller, Angel News and Insider Media. This brought fresh attention to the pitch and with one last big push we got up to £138,000. I felt like we had maxed our network and that we might not make it to our overfund goal of £150,000 but then, last Friday, a couple more of our extended network joined in and an hour after England beat New Zealand in the Rugby World Cup, our final investor took us home.
England were in the final. We had finished our fundraise. We all needed a lie-down.
Epilogue: Crowded Reflections
The money finally hit the business account on 20th December and share certificates were issued. We lost a few investors in the ‘cool-off’ period. After the Crowdcube and legal fees we banked £138,000 (after raising £148,000). The post-fund process was longer and more energy consuming than I was expecting, but we got there!
Could we have raised the money quicker than 5 months (from first plan to cash in the bank)? Maybe, with one or two larger angels coming in earlier but we’re not an obvious industry-positioned business, even though our subscription model is simple and growing nicely. Perhaps that’s why 90% of our investors were people we already knew.
But I’m so glad we went for this. Not just for the funds that will make a big difference to the future of Rebel Book Club but also for forcing us to build a really solid plan as well as giving us more momentum: 800 active members at the start of 2020 and counting. It feels great that we’ve done this together with our community. We’re now all committed to building the best non-fiction book club in the world!
The real work has just begun.
Special thanks to all our new investors for backing us as well as our current members and friends who spread the word so well. Thank you for tolerating the crowdfunding spam! Also thanks to our awesome campaign manager at Crowdcube, Ashley. We did it!
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