Crowdfunding and why Crowdcube is worth a look
A virtual Dragon's Den is proving a successful method of start-up funding
An idea spawned from watching Dragons’ Den may help businesses UK-wide to get funding for starting up and growth.
Serial entrepreneur Darren Westlake was watching Dragons’ Den on TV two years ago and got to thinking: if only he could contribute to the idea as well as the Dragons, the business would have a good stable start.
Westlake explains: “As an entrepreneur I was always aware of the problem that most businesses had with start-up funding, and as I was watching Dragons’ Den I thought I wish I could help, but I don’t have £50,000. However I do have £50.” And it was from this simple seed of an idea that Crowdcube was formed.
His idea was to allow businesses and entrepreneurs to pitch their business on a virtual Dragons’ Den and then let the investors put money towards the ideas.
But unlike the TV programme, the investors would the general public, and the individual contributions would be substantially less than the wads of money on show on the TV.
Two years later, the Crowdcube site has finally gone live and the first businesses are getting interest from the public. The site is behaving in a different way from how Westlake first imagined, though.
“At first we thought that the site would attract businesses looking for sums up to £50,000, but we’re starting to see people using the site to look for sums up to £250,000,” said Westlake.
“We also expected the site to be home for the bedroom entrepreneurs, but we’re actually seeing some established businesses using the site for funding. We’re also getting investors putting in bigger amounts than the £50 we first envisaged.”
The businesses using the Crowdcube site are often doing so as a way of complementing other funding. The businesses are adding Crowdcube to conventional bank funds and other equity funding such as Funding Circle (www.fundingcircle.com).
“Some of the business angel networks are using the site as a way of topping up funding. For example if a business wants to raise £200,000, but can only raise £150,000 from the angel funding then they will look to Crowdcube to make up the shortfall,” said Westlake.
Unfortunately for Westlake, the site wasn’t around to provide the start-up finance for itself – instead it was funded using finance from Westlake’s previous businesses and from friends and family.
However he will be looking for some growth funding soon and this time he will use Crowdcube.