It seems to be the only thing on entrepreneurs’ minds at present – that familiar dilemma of sourcing business finance - that is more prevalent than ever in today’s economic climate. However, we’ve got some exciting news for all you budding business owners. A new funding model, launched this week, might be just what your business needs.
Crowdcube is a peer-to-peer equity finance website that uses crowd-funding to empower start-ups to raise finance from micro investors. This innovative new model is the brainchild of Darren Westlake and Luke Lang, who came up with the idea after they saw first-hand the difficulties of raising money.
Speaking to Startups, Darren recalled: “Having already started a few businesses in the past we knew only too well the problems with getting funding. I was watching Dragons’ Den one day and really wanted to invest a small amount in one of the businesses that I really believed in – that’s when I came up with the idea for a web-based platform through which small companies could access seed investment from the general public.”
Three years of rigorous development went into building the site and working out a practical business model. What’s unique about this new venture is that people can invest as much or as little as they want in exciting new companies – which Darren says will “democratise investment”. And that is the very essence of the project. With a typical investment expected to be around £50, this really is the beginning of an era of armchair dragons.
The model is such that businesses will pay Crowdcube 5% of any funds raised, but if they fail to reach their target amount the money is returned to each investor, while the entrepreneurs haven’t parted with a single penny.
What the service doesn’t offer is the expert advice that the regular angel brings to the table, which could be something of a deterrent to young businesses. Nevertheless, this is an interesting and imaginative idea that is sure to catch the eager eye of many aspiring entrepreneurs.
Why not check out the site for yourself: www.crowdcube.com
If you’re interested in raising finance using crowdfunding take a look at our crowdfunding platform. We’ve partnered with Crowdcube to offer businesses a new way to raise seed or growth capital.