Entrepreneurs: Are you ready to hustle?
I love The Sunday Times Business Section, and the 14.09.14 edition is no exception. There’s a great piece on page 9 entitled “Sow some seeds first to win with the crowd”. It deals with how, if business owners are considering uploading an investment pitch to a crowdfunding site, they have almost no chance of drawing in the “crowd”, unless they have a percentage of the equity capital raise already in the bag.
There are many examples of pitches, which start with zero, have an ambitious target, but end up not reaching it, then having to go elsewhere. Crowdcube’s own equity capital raise was a great example of how to do it successfully. Balderton Capital had already committed £3.8m to a target raise of £5m, so when the pitch went live, that fact was already in the public domain, and Crowdcube secured the remaining £1.2m from their own crowd in just 16 minutes! Justin Bieber couldn’t sell his concert tickets that fast. Crowdfunding really is the new rock and roll.
Another recent example was when Chapel Down Wines, a company listed on the ISDX stock exchange, raised £1.6m on Seedrs, the other significant player in the UK crowdfunding space. But £1.1m had already been secured by a private placement, probably secured by the company’s nomad, Finncap, from their private client investors. So, from the crowd’s perspective, this one looked like it was going to reach its target, and so, it almost becomes a case of a self-fulfilling prophesy, a bit like when popular items on eBay have a small amount of auction time left, suddenly all the bidders who have been holding back, come piling in.
I’ve noticed also on Syndicate Room, that they have a similar technique, where well known angel syndicates, and seed capital funds, put up a company they are backing, and leave the window open for the crowd to participate. The beauty of this approach, is that from a small investor’s perspective, they probably feel the more experienced syndicate investor has done a reasonable job of due diligence, and so this saves them the job of having to analyse the numbers, probably not something they are particularly skilled at in the first place.
So, what do you do if you are a business owner, and you need to rally the initial support, to get your crowdfunding campaign off to a good start? As Darren Westlake from Crowdcube so finely put it, in the abovementioned news article, “Real entrepreneurs are hustlers: they talk to people and engage with investors”. The problem with crowdfunding sites, as we see it at Match Capital, is that they don’t allow the entrepreneur to hustle, other than to upload a compelling video and financial forecast.
This isn’t enough! An entrepreneur needs to be able to establish the maximum investor audience he can, and having done this, establish who, from this audience, are the ones most likely to invest. He then needs to have the means to physically reach out and engage this audience repeatedly, to build up a core level of support.
At Match Capital, we see the entrepreneur as the seller, in that he has a slice of his company he wants to sell, and the investors are the buyers. So, as a seller, one needs to know who are all the buyers, so one can go knock on all of their doors.
This is the angle that underpins Match Capital. We keep a constant vigil for investors who are making investments, profile them into our website, so that they become visible to the entrepreneurs who subscribe to us for information about potential funders. Once visible, the entrepreneur is now in a position to reach out himself to all the investors whom our algorithm deems relevant to his proposition. He can even reach out to the ones who are long shots, but the point is, he can keep hustling until he gets a significant percentage of his target raise secured, and, at that point, he is in a position to leverage the crowd effect of crowdfunding websites.
So, actually, using Match Capital as a starting point, allows the entrepreneur to build the critical momentum he needs, to give himself the best chance of attracting the crowd. Our offering, rather than being competitive to the crowdfunders, actually compliments their services, thus giving the entrepreneur the maximum chance of getting funded.