Why one start-up shunned the City and turned to the crowd
Escape the City co-founder Rob Symington tells Startups why his business turned down a venture capital deal to launch an ambitious – and successful – crowdfunding campaign
It’s been a busy month for Escape the City. First, the two-and-a-half-year-old start-up turned down a £500,000 venture capital (VC) deal. Then, having decided to launch an ambitious crowdfunding campaign, the business raised £600,000 from its own members in two weeks – a record amount for an online start-up using equity crowdfunding (where equity is offered to backers instead of – or alongside – rewards).
Escape the City co-founder Rob Symington shares his thoughts on the decision.
An idea that turned into a movement
Escape the City started in late 2009 as an anonymous blog, written from the security of our frustrating corporate jobs. At first it was just a project, but when the number of sign-ups to our weekly newsletter began to explode, we decided to leave our jobs to see if we could turn it into a business. The vision? Let’s build a platform that helps liberate talented people from the corporate world.
Early progress – DIY style
We spent two years building a community around the idea. We started Escape the City with £5,000 each. We bootstrapped our way through building two websites, made over £100,000 in revenue, attracted a community of more than 60,000 wannabe corporate escapees, started a base in New York, signed a book deal for our Manifesto, and had an absolute ball in the process.
Let’s start pitching
Two years down the line and we were convinced the idea had real legs. So, at the beginning of 2012, we started seeking investment to help us fulfill the potential behind the concept. At first we went down the traditional route – meeting with early-stage venture capitalists (VCs) and angel investors in London. We had a combination of encouraging responses without any clear yes’s or no’s.
Then someone told us about equity crowdfunding…
The Escape the City bible is Seth Godin’s Tribes. We built this as a genuine community and movement first, and a business second. The prospect of raising investment from our own members seemed too good to be true. However, our big concern was whether we’d actually be able to raise a considerable amount of money from our own members.
When you least expect it…
When we started exploring the crowdfunding route we agreed that we would take a step back from VC pitching. Fundraising is a big enough distraction as it is. Then, typically, when we’d mentally checked out of the VC process we ended up attending one final meeting (with probably the best firm we’d met) and leaving with an offer of investment on the table!
Who passes up on venture capital?
Suffice to say we were now faced with the biggest decision we’d had to make since quitting our jobs to ‘live a life on our own terms’. The VC offer was good-to-go. It would come with a fantastic network, brand and expertise. The crowd route was still an unknown quantity. Our heads said take the VC deal, our hearts said to go with the route that excited us the most.
A big decision – no regrets
We reflected on why we started Escape the City. Freedom and Love (man). We escaped the corporate world because wanted to love our work and we wanted the freedom to do it on our own terms. When we realised that we stood a great chance of achieving our goals while also allowing our own members to invest we decided that we would charge at the ‘crowd’ route.
The crowdfunding process itself
We registered our pitch on Crowdcube (the UK’s first equity crowdfunding platform), uploaded a business plan, financial model, FAQ and video. We then let our members know what we were doing. The result? A stunning £600,000 raised in two weeks from 394 investors. We gave away 24% of the business.
Seven lessons from our VC to crowdfunding journey:
1. Big doesn’t always mean better
There is so much macho, one-dimensional spiel out there about building BIG businesses. The more you venture into VC land the more you’ll hear this kind of rhetoric. We agree with Seth Godin: “Big doesn’t equal better. Better equals better.”
2. To someone with a hammer, everything looks like a nail
To some people crowdfunding seems a nightmare route. To some people you shouldn’t touch VC money with a barge pole. Often opinions are based on people’s own experiences. Ask for advice, listen politely, don’t take things personally, assimilate, assess, but gowith what you want to do, not what other people want you to do.
3. Private individuals (not angels) are up for investing in ideas they like
Since the banks that we’re helping people escape from messed up our economy so royally, there is a shocking lack of viable places for people to invest their money. Granted, there are safer places to put your money than investing in an early stage start-up, but lots of people seem to be thrilled by the idea of supporting an idea they believe in.
4. Different routes come with different chances of success and failure
Call us conservative, but we would rather have a larger chance of our business surviving than a smaller chance of hitting the absolute big time (when you’re pitching to VCs you’ll hear this question a lot: “Do you want to build a $1bn dollar company?”). You don’t hear what happens to the majority of businesses that don’t reach this point.
5. Remain true to the core reasons why you’re doing this
The more you get into ‘start-up land’ the easier it is to feel insecure that you should be following the VC-funded aggressive growth route taken by every other start-up featured on Techcrunch. Online businesses aren’t a world apart from offline businesses. There are millions of online businesses and a handful of Instagrams. Stick to your mission.
6. There is no right or wrong way
From Derek Sivers – When you build a business you can create your own utopia with your own rules and guidelines. There are no rules. Do what you want. Back yourself. Build your business in your own way and make sure you have fun while doing so.
7. The beginning is nigh
We acknowledge that not everyone has a ready-made community to make a crowdfunding pitch to. However, our experience shows that there is a power-shift happening – the choice is no longer IPO or VC/angel. There is the third way, a round that goes above a friends and family round but allows you to retain management control as a founder.
Equity crowdfunding privately is a legal minefield in the UK unless you fulfil one of these criteria: – Your investors are all self-certified HNWIs (like this: http://crowdfunding.trampolinesystems.com/) – You get your investment opportunity checked by an FSA authorised firm (like this: http://www.brewdog.com/equityforpunks) – You use an FSA approved / financial promotions exempt crowdfunding platform. The two current UK ones are www.crowdcube.com (including Startups’ crowdfunding portal, which is powered by Crowdcube) or www.seedrs.com – Here are the early-stage VCs in London: http://blog.imranghory.org/seed-stage-vcs-london – This could be useful: http://bamlondon.blogspot.co.uk/
Rob Symington is the co-founder of Escape the City, an online community for corporate professionals who want to ‘do something different’. In less than three years, the company has amassed more than 70,000 members, and has placed more than 1,000 professionals into exciting, non-corporate roles.
Image: Escape the City co-founders Dom Jackman and Rob Symington