How CornerDrop raised £75k crowdfunding Part II

Andrew LasotaIf you’re looking to launch or grow and expand a business, crowd funding is an alternative to both traditional bank lending and the more innovative small business finance loans available.

This is the second of a three part series by Andrew Lasota, CEO of CornerDrop on how they raised £75k in just two days! You can read the first part at “How CornerDrop raised £75k crowdfunding in 2 days Part I“.

How CornerDrop raised £75k crowdfunding in 2 days Part II

The Vehicle

CornerDropSeedrs came as a recommendation to me, and after some exploratory discussions and further research, I felt, for us at that time, they were a good fit. Not only did they assist with the building of the campaign, to some extent, they had the correct blend of social promotion to the wider public and also ‘weathered’ investors that we wanted.

As a true ‘seed investment’, we wanted as many people to hear about us as possible (and still do!), but importantly, we did not want to have to deal with dozens of shareholders individually.

SeedrsRaising funding through a reputable vehicle like Seedrs.com (or others, such as Angelsden etc.) means you have to get several legal issues in place first. This is because these organisations are FCA approved (authorised and regulated by the Financial Conduct Authority) – to sell you company as an investment, they MUST confirm you are legit in every way.

Seedrs take on the responsibility of managing all the communications, share certificates etc. for you, and the company only has one additional shareholder (Seedrs itself) to deal with. This also makes raising future rounds easier to deal with. They take a very hands off approach to the management of the business, asking only for quarterly updates and obviously, audited accounts as a matter of course.

There are other certain restrictions within the agreement, but nothing insurmountable nor draconian. Everything is in place to protect the shareholders and the founders (I checked!).

The product

At this stage, you also have to decide how much equity you wish to ‘give away’.
I dislike using this term as you are not giving anything away. It is a trade and as such, treat it with respect and thought. A few people have expressed surprise that we did not take the full £150k SEIS allowance, but for me, that would have been inappropriate at the time.

I had calculated what we needed to reach a minimum viable product state, live and useable. Why would I want more money at this stage, and the loss of future equity value in the business? It is important to ensure you leave equity within the company for future investors. Once launched and trading, future financing is a different (and safer) matter.

It’s a complex decision and based on feel as well as data, but one that worked for us was a £75k max raise for 15.74% equity. I think that was a very fair valuation at that time. Yours will be different.

The Facts

Seedrs check, in detail, your application (completed on-line). Every fact mentioned has to be evidenced. Each individual is ID checked, as it would be at a bank.

This makes investors more comfortable, and as a result, happier to invest in your business. It’s important to accept this process wholeheartedly as it only helps later on. It took us about 6 weeks to complete this process initially and you can see our original campaign on the Seedrs website.

Our new campaign to raise the remaining £75k (hopefully launching this week) took less than one week for Seedrs to review, including the addition of two new employees.

The Video

A promotional video is required and essential. Don’t do it until you have the all clear from Seedrs, otherwise, you may need to do it again!

Keep it short, look directly at the camera and record the sound separately. You can, very easily, do it yourself. Ours was filmed and recorded by the brother of our CTO and edited by a family friend. Total cost, practically zero!
The important thing is get a decent script together. I basically said three things, three times, three different ways in about two minutes to get the message across, maybe a few other bits as well.

Three minutes is the absolute maximum.

I also wanted to do something different to get attention, so mimicked the Fast Show ‘Brilliant’ scenes!

The Sell

Pre-launch, we spent a bit of time talking to friends, family and contacts.

We are lucky. Our business is a real pain point for a great deal of people. Getting buy-in was a relatively straight forward affair, but essential, as Seedrs suggest you need to keep momentum going during the campaign.

You do this by drip-feeding your pre-confirmed investors into the campaign, keeping the investment growth positive. They suggested (from memory) around 33% in the first week or two, an additional 33% the next few weeks, then the final amounts (if required) to boost to the end of the funding period.

We also planned a basic social campaign to get the word out – Twitter, Facebook and all the others were targeted to friends, family and contacts over the first two weeks, and then ongoing interaction.

Come back tomorrow for Part III where Andrew talks about the fund raising itself.