31 July 2019
My Friend Charlie is an offline dating events company based in London, offering unique activities at local venues for sociable singles. In the past 18 months, the business has gained significant traction - with an engaged database of over 2,000 users and over 50 events held in London alone, which have attracted 700+ attendees.
Here we talk to My Friend Charlie's founder and Innovating for Growth alumni, Charlotte Spokes, about how her company successfully crowdfunded when they were setting up, and she helps us to demystify the complexity of crowdfunding.
Let’s start right at the very beginning, what is equity crowdfunding?
In short, you are asking the ‘crowd’ (family, friends and strangers) to invest money into your business in exchange for equity. The appeal of crowdfunding is that most people invest small amounts (anything from £10), so it allows everyday investors to get involved where previously they wouldn’t have been able to. The main platforms for equity crowdfunding in the UK are Crowdcube, Seedrs and SyndicateRoom, but there are lots of others, so do your research to see which will be the best fit for your business, based on the industry and the amount you need to raise. There are lots of success stories from these platforms including BrewDog, Monzo and Revolut, and of course there are much smaller companies raising money there too.
Why do people choose crowdfunding over other methods of raising money?
There are many ways to raise money to finance a start-up, but crowdfunding has a very strong appeal to early-stage businesses and for good reason, most importantly the fact that it is quite straightforward. It also works as a way of getting external validation or marketing your business to a whole new audience and, when potential investors ask questions on your pitch, it’s a useful way of getting feedback on points you may not have considered. Given that crowdfunding campaign costs are based on a successful raise, it can be an inexpensive way to raise funds, and relatively low-risk to do too. As long as you’ve got the skills, the upfront costs for producing your video and writing your pitch can be kept to a minimum.
What are the pitfalls of crowdfunding?
The biggest downside is that if you don’t hit your target, you don’t get any of the funds raised, and you’ve done a lot of work for no reward. This means it is a high stress, high energy process that takes several months to prepare for and then carry out with no guarantee of success. Plus, you have to be prepared for questions and a lot of constructive criticism, as you’re opening your business up to scrutiny from not only your nearest and dearest but a whole host of seasoned investors.
What made your campaign for equity crowdfunding successful?
There isn’t a single factor that made our campaign a success but there are four critical points which ensured we hit our target:
- Traction - as an existing business we could show what we had done to date: what worked, what didn't, and where our clients came from. In essence, we had proof of concept before going out to the crowd. This isn’t always the case and doesn’t mean that without traction you can’t raise successfully but it helped us to clarify our pitch and put it across succinctly to investors.
- Preparation - be prepared to answer lots of questions (and the same ones over and over again). We created a crib sheet so that when the same questions came through we could copy and paste answers that we knew were well thought through, rather than rush a response because we felt time-pressured. It also helped to keep our messaging consistent and on-brand.
- Raising privately - we raised 39% from our private network before going live to the public network. You can go publicly live at 20% on Crowdcube but you’ve got a much higher chance of success if you raise as much as you can from your own network first, which means family, friends, your business network, and existing guests/clients.
- Social media - we really hammered this. We posted on every channel available to us, including our personal accounts, for the duration of the private and public raise. LinkedIn is a great tool here - use it to your advantage and start making people aware of the opportunity as early as possible. We learned quickly that people take a long time to make decisions when it comes to parting with money.
What made your campaign for equity crowdfunding successful?
Social media was our main channel but we also sent our regular updates through our own newsletter and via the Crowdcube platform. I spent a lot of time emailing anyone who’d shown interest in the campaign and followed up with them regularly. We also had a dedicated landing page on our website to make sure we reached as many people as possible. We decided not to spend money on paid advertising on Facebook or Google Ads, as we’d heard that the return on investment is low and we didn’t have a big marketing budget.
Who can help prepare my Crowdcube pitch?
We opted to use Drop Studio and signed up to their crowdfunding accelerator as well as getting them to produce our pitch video. This basically gave us a marketing team for the duration of the raise and we couldn't have managed without them. There are lots of companies offering a similar service, so do your research and find someone who fits your needs and budget.
What are SEIS & EIS?
SEIS allow an eligible investor to claim 50% on investments up to £100,000 per tax year in qualifying shares issued on or after 6 April 2012 .
EIS is aimed at the wealthier, more sophisticated investors. People can invest up to £1,000,000 in any tax year and receive 30% tax relief. However, they are locked into the scheme for a minimum of three years.
They are great tools to help persuade investors to part with their money by effectively reducing their financial risk.
It is dependent on each individual and there are certain criteria for the business in order to get advanced assurance so it’s worth getting some advice on this. Additionally it takes around six weeks to get advanced assurance so apply early!
What’s next for My Friend Charlie?
It’s all go! We’ve just launched our own events and CRM platform. We’ve built it from scratch based on the pain points we’ve encountered over the last two years and it’s looking great, and we’ve got native apps to follow which are based off the same tech. We opened in Bristol last month (which was incidentally the day after our second birthday!) and we’ve got three more cities in the pipeline (Manchester, Birmingham and Edinburgh). It all started with our crowdfunding pitch and look at us now!