Crowdfunding Revealed – Post Funding 3/3
This is the final installment of our ‘behind the scenes of crowdfunding’ blog series. In the previous two blogs, I covered the preparation and the execution of a successful crowdfund. In this final blog, I’ll cover the post-funding processes. This will also encompass managing investors post-campaign, the lesser glamorous but equally as important part of crowdfunding.
So we’ve successfully completed the crowdfund, the money gets transferred into your business account and you can start investing in your brand, right? Wrong.
Investors get a 7-day cooling off period whereby they can consider their investment. Crowdcube’s investors simply make a pledge, for an amount, when investing, there’s no initial transfer of money. Investors have to agree, post-campaign, for the investment to take place. Investors also have to pass Anti-Money Laundering checks which usually involves ID checking. After this, investors have to accept the new articles of association that cover the funding round. With this process, we lost 3 investors for a total of £130 from the overall £187,000. Obviously, this can deviate wildly depending on individual investors. I believe Seedrs uses a combination of pledges and an escrow account so their processes run a little more smoothly.
There is then the 5 working days for Stripe, the payments processing company, to collect the investments. This processing service also costs between 0.5%-2.9% depending on where the investor is based in the World.
To give you an idea of the timings, our campaign closed on 15th February and we received the investment on 16th March.
Once the investment is received, then there is the administrative process of SEIS/EIS issuance. This involves a lot of form filling and checking before it can be sent off to HMRC. SEIS/EIS is one main reasons that investment in SMEs is so rife at the moment so, naturally, ‘when will I receive my SEIS/EIS certificate?’ is one of the most commonly asked questions by investors.
We now have over 260 individual investors. Manage these investors correctly and they will be the most effective brand ambassadors. Periodic updates will suffice in most cases but we try to involve our investor base as much as possible. If we are on the periphery of a listing in a retailer, our investors have the ability to convert into a full listing. We even encourage our investor base to spot new potential listings. Equally, each individual has their own network. Manage the individual investor and they have the ability to spread the brand messages much further, on a much more personal level, as such activating ‘Word of Mouth’ marketing.
Crowdfunding certainly was a journey for the Rejuvenation Water team and I. It took a lot of tenacity and determination to convert our modest pre-funding into a successful campaign but the investment, and exposure, we gained was invaluable for the business’s growth going forward.