Crowdfunding: A Catalyst for Change
What do a satchel company, an elevated urban garden, and a community-run bakery have in common? They’re all creative Liverpool companies using alternative, online finance, finds Nick Huber...
If you haven’t heard of crowdfunding, you should have: it’s one of the world’s fastest- growing types of online finance. It enables businesses and start-ups, to communities and individuals, to raise money for their projects from hundreds or thousands of interested well-wishers, rather than from traditional investment.
Last year, crowdfunding grew in popularity in the UK by 84%, and is worth an estimated £3.2 billion, according to the innovation charity Nesta. And it consists of three main strands: donation or “reward funding” (for example, Kickstarter, Indiegogo and JustGiving); peer-to-peer (online markets such as Funding Circle, which link lenders to borrowers) and equity (platforms such as Seedrs and Crowdcube, that let people invest in a business in return for a small amount of shares).
Keith Hanshaw, Managing Director of the Knowsley-based Leather Satchel Co., knows just how beneficial crowdfunding can be. They have just completed an enormously successful Kickstarter campaign, #MyBagMyWayMyStory, which raised over £78,000 – exceeding its original target of £50,000 – to develop software that enables customers to design their own bespoke bags.
Homebaked, too, has profited from the platform. A co-operative bakery and Community Land Trust (CLT), based opposite Liverpool Football Club in Anfield, it raised £19,000 in 2013 to buy an oven; enabling it to re-open the former family-owned bread and pastry shop to be run by and for local residents.
Another Liverpool-based social enterprise, We Make Places, raised £44,000 in 2014 for the Friends of the Flyover project; this time through Spacehive, which specialises in crowdfunding for the civic environment. The money will be used to save the Churchill Way flyover from demolition and turn it into an elevated urban garden; creating a new pathway for pedestrians and cyclists to connect to the heritage quarter of the city, and event spaces for small, independent businesses.
On the other side of Liverpool's city centre, the Baltic Triangle – a former industrial area that’s now home to a cluster of creative start-ups – has this month launched their own crowdfunding campaign, #BackBaltic, on Indiegogo. They hope to raise £40,000 over two months to provide better facilities for the design agencies, app developers, artists, musicians and more who work in the area.
Driven by demand
Intriguingly, equity-based crowdfunding is expanding in particular throughout the North of England, due to clusters of technology, gaming and music businesses in cities including Liverpool, Manchester and Leeds.
That’s one reason why the aforementioned Crowdcube, one of the largest equity crowdfunding platforms, recently opened a Northern office.
“The crowdfunding sector [in the Northth-West of England] is doing well”, says Luke Lang, Crowdcube Co-founder; “driven by demand in the region [that’s] particularly strong in technology and digital start-ups, but also media, the arts and social enterprise.
“There’s no substitute for having 'boots on the ground’ – people who are in touch with the local business buzz and can get involved with entrepreneurs face-to-face.”
Highs and lows
Crowdfunding is now so popular, it is almost a standard option to get a direct audience investment for start-ups, community ventures and also more established businesses. But as directors, like Hanshaw, will testify, convincing hundreds of people to invest in your idea can be time consuming and challenging.
“I completely underestimated the work involved to run a 'successful' campaign”, Hanshaw says. “After the first week we knew we weren't going to make it, unless we made some major changes.”
The family-run business ran A/B tests (a method for comparing two versions of a webpage or app to see which one performs better) on its campaign page and ended up changing some of the wording. It also committed to answering all online comments within 12 hours.
As with other types of business expansion, many will fail. Only 43% of Kickstarter campaigns succeed, according to Nesta.
However, crowdfunding can also work as a valuable evaluation and development tool. Feedback from investors can strengthen the business or community venture – for example, encouraging businesses to add new features to products in response to customer demand.
As crowdfunding grows and evolves, it’s creating a spin-off market in advisory services and technology. JUXDIT, an online market for successfully crowdfunded businesses based in the Baltic Triangle, is one of them; supplying a happy substitute to Amazon and eBay by promoting goods ranging from herb gardens and stationery to wearable tech. It also provides a consultancy service to those businesses needing help to create their own crowdfunding campaigns.
“It can be hard to market your product and generate sufficient sales [on large online marketplaces],” JUXDIT Founder Annie O’Toole tells me. “Products can struggle to get on the high street because they’re such young companies.”
Nick Huber is a freelance journalist and copywriter
Image courtesy The Leather Satchel Co.
Thinking of running your own crowdfunding campaign? Hear JUXDIT’s Do’s and Don’ts of Crowdfundingat Binary Gatherings (24 May, Baltic Creative Campus, Liverpool, 13:30 - 16:00), plus a Binary Keynote (25 May) from crowdfunding evangelist and Hardware Manager at Indiegogo, Kelly Angood
Binary Festival 2016 Blog: a special media partnership between The Double Negative arts magazine, Creative Tourist culture and travel site and Binary Blog. See the Festival on 24 and 25 May 2016 in Liverpool, UK
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