How we used crowdfunding to raise £150,000 growth finance for our digital start-up
Co-founder Geoff Anderson reveals how PixelPin closed their pitch in record time with 193 investors – and how you can too
In April 2013, new disruptive tech business PixelPin became the first start-up to raise £150,000 through crowdfunding platform Seedrs. Here, co-founder Geoff Anderson shares why they turned to crowdfunding for growth finance and how to ensure a potential pitch is successful.
“Deciding when and how to get additional finance is one of the biggest decisions a small business has to make. For us at PixelPin, once we were aware that we needed additional funds crowdfunding became the obvious solution for a number of reasons.
As a start-up company at the seed funding stage, pre-revenue, but actively engaged with clients, we found ourselves in a position at the beginning of the year where we needed to raise further finance in order to manage our business to business sales cycle in a professional way.
Although we were in discussions with angel investors, we decided that crowdfunding gave us the best opportunity to raise the monies we needed, whilst keeping full control of the company. Crowdfunding enables you to pitch over the heads of the investor community directly to the public, and if you believe in your product, what better way to get product endorsement? PixelPin still had its full SEIS allowance available, which was a great incentive for investors.
Choosing a crowdfunding platform and preparing your pitch
We decided to use Seedrs, as the investor's interests are managed by one representative, making future decision making easier. There is a cost to this, Seedrs take a 7% cut of the investment, but this is inclusive of legal fees and we were pleased that we at least would know what our legal costs would be up front.
The process of generating a pitch required preparation. Every statement on the pitch needed evidence from emails, papers etc. On Seedrs the business plan is not made available online, something that was important to us as it contained commercially sensitive information. It is important to have your business plan ready though for potential investors who want more detail than is available via the online pitch.
Break your business down for the crowd
It is important to write the pitch in a clear and understandable way. Although our technology is simple to understand (to us), we use a disruptive technology that replaces passwords with pictures, it is easy to fall into using industry jargon and you need to remember that you're pitching to a crowd.
The security industry is probably guiltier than most for assuming knowledge but bear in mind that potential investors may have a very limited understanding of the mechanics of your particular business. We received many questions on the Seedrs platform which we always answered promptly and politely. The investors are now all champions for us so it is important to be open and responsive.
How to ensure the crowd invests in you
Bringing potential investors to the online pitch is key to success, and we used a mixture of social media to generate excitement about our proposal.
Momentum is also important for crowdfunding, and we never let up telling everyone to invest. Many investors hold back and wait and see how the pitch progresses before investing themselves so don't be disheartened if interest takes a while to build. We raised the last £60,000 in a few days, so once the pitch has momentum it can close quickly.
Ultimately, we had a very successful pitch for PixelPin, raising the full SEIS amount of £150,000 in record time from 193 investors. Key factors for our success were:
- The PixelPin solution is simple to understand and solves a pain point that everyone has, i.e. passwords
- We could demonstrate good traction already in the market
- The market is very large i.e. global
- We could back up our pitch with a strong business case
Interestingly many of our crowd investors did turn out to be from the IT and security market, and a number of VCs have been impressed by the speed in which we raised the full amount. The whole crowdfunding experience was really positive and we're looking forward to the future with the support of our new investors.”
Geoff Anderson is co-founder of cyber-security start-up PixelPin