What is Crowdcube?
In a nutshell, Crowdcube allows ordinary people like me and you to invest in new businesses with as little as £10. Or perhaps several thousands pounds, it is your risk and unlike crowd-funding platforms like Kickstarter or IndieGogo, with Crowdcube you actually own equity and as such reap the rewards of being a shareholder. You can now play Dragon’s Den from your laptop!
This is no game however, all of the startups listed are real and are probably semi-established with plenty of investment already. The idea of Crowdcube is to have lots of small investments (buzzword being ‘micro-investing’) to lower the burden of failure on investors and also to get start-ups pitching to the public in the first instance. If you can’t find investors on the internet, where will you find them?
As of writing this post Crowdcube has been launched about 1 month and has 8 potential businesses to invest in. I believe that Crowdcube vets each pitch before displaying it for obvious anti-fraud measures. Each pitch has 6 months to find 100% of the money sought or any investors will get their money back.
Is Crowdcube Working?
The problem with the pitches so far are that they are seeking too high an investment, IN MY OPINION. Ranging from £30,000 to £150,000 it is going to take thousands of micro-investors to be interested enough to take action to successfully raise funding. If the average investment was £50 (high but counters lots of low investments with big investments), you would need to attract up to 3000 investors within six months. Combine that with a guestimated percentage of visitors taking action of 5%, it would need something like 60,000 visitors for that pitch to secure funding. Don’t forget this site is only 1 month old. I’m not questioning the integrity of the businesses or pitches, I’m saying that the pitches at Crowdcube’s launch should be seeking lower funds if they want to see lots of investors. I don’t believe there is an upper limit for investments but if you want to put in more than £5000 you have to contact them directly and yes it is possible that this may happen. But would a heavy investor want to use a non-negotiable, non-executive platform like Crowdcube?
So what should be there for launch? Smaller businesses looking for £5-10,000 IN MY OPINION. If I were to invest now, I see the attraction of White Van Ads, Bubble & Balm and IYGO, but I wouldn’t invest now because I don’t see them raising because of the amount sought. If they reach 50-60% funding I might just invest then, does that mean I’m adding to the problem? Yes. Is that my fault? No.
Each pitch has its own forum for potential investor and pitcher to liaise and discuss the business further and this is open for others to see. This is also great for gaining the general consensus of the pitch. You can see who is interested and obviously if somebody else has seen the attraction of a pitch and/or raised brilliant points, so will you see the attraction and invest, or not. I should imagine that the first 5% of funding would be so much harder to find then the final 50% due to the snowballing effect. Would a pitch that raises 100% be able to dilute shares and open up to a second round investment? Would it be better if new pitches seek smaller amounts and then second round investors? After all the first investors have bigger balls. There’s an idea but then I’m not a business major so those last sentences might not mean what I think.
Would I Invest On Crowdcube?
I love the idea of Crowdcube because I love unique new websites and innovation. But I don’t understand the risks involved with investing at all so it would be important to me to read the FAQs, T’s&C’s and legal jargon about seven times before I put in a tenner. At registration you have to agree with this statement; explicitly saying that you have read and understood the bullet points.
I read that about 5 times and I must confess I don’t understand it. Also, say what now? I’m a member by subscription of 1p of… This means nothing to me and probably won’t to most micro-investors. Seasoned business heads may but I thought the purpose of Crowdcube is to get average person investing. Perhaps a ‘business 101′ would be in order for noobs like me to get involved.
I wish Crowdcube well and will be watching closely and following new pitches.