There’s a new kid on the block when it comes to raising cash, and over the past few years it’s been taking the business world by storm: crowdfunding.
Crowdfunding harnesses the power of the internet by allowing you to appeal for cash directly to members of the public.
Using a reputable crowdfunding website such as crowdcube.com or crowdfunder.co.uk, you can make your case as to why people should back your project.
In return you give funders a variety of rewards, ranging from an equity stake in your business to perks that make them feel part of the team.
In fact it’s a formula that’s become so successful that it’s been successfully used by some companies to raise millions of pounds.
Equity for Punks
One example is Scottish brewer Brewdog, which has grown from being a niche player in the burgeoning craft ale market to a market leader with global ambitions.
In 2013 BrewDog raised £4.25m via crowdfunding to expand from its Scottish base and launch its products around the world.
The brewery smashed all previous crowdfunding records by selling £1m of shares in the first 24 hours of the offering, which it calls Equity for Punks.
It is currently raising a new round of crowdfunding investment to open a chain of craft ale bars in the US.
Brave new world
Co-founder James Watt said: “The mental shackles that have tied down British SMEs to the staid and unimaginative traditional methods of raising funds have been untethered. We have ushered in a brave new world.”
As well as receiving equity in the business, investors also receive rewards, including a 5% discount in its bars around the world, a 20% discount in its online shop, and a VIP tour of the brewery.
Early investors in the company are estimated to have made a return of 2,800% earlier this year when San Francisco private equity company TSG Consumer Partners bought a 22% of the company in a £213m deal that values the company at £1bn.
Meanwhile Sheffield-based Abbeydale Brewery has used the power of crowdfunding to throw a huge 21st birthday party and ratchet up enthusiasm to build a new, bigger, brewery.
The ‘Piss-Up in a Brewery’, as the event was called, saw more than 550 ale enthusiasts explore the brewery and trying some exclusive brews, with many guests asking how they could invest.
Barry James, founder of fellow Sheffield-based business the Crowdfunding Center, said, “When local success story Abbeydale Brewery approached us about their hugely ambitious plans for the future, and asked whether they could be crowdfunded, we couldn't resist putting what we've learned to work for another Sheffield business.