People might have laughed when twin brothers Alan and Gerry Keery first said they needed to raise £60,000 to open a café that would only offer breakfast cereals, but thanks to the widespread publicity they garnered from their appeal on the crowdfunding site, Indiegogo, they were able to raise the funds they needed. Although the funds didn’t come from the Indiegogo platform, the news of the Keery’s plan did attract the interest of outside investors who found it hugely palatable. That meant the brothers were then able to open the first Cereal Killer Café. It has since become one of the most popular cafes in East London. The brothers are now offering international licensing on their website as well as their own recipe book. A second café has opened in North London, and a third is planned for Dubai.
Crowdfunding has become a recognized source of funding for some heavyweight SMBs, and it’s worth a look to see if and how strategic alternative funding could help your business. Take Cruise Automation, a producer of autonomous vehicle technology, as an example. Itt became the first equity crowdfunded company to achieve a $1 billion exit having been acquired by General Motors. Before the GM acquisition, the San Francisco-based company had raised about $18 million in venture capital, but its Series A and Series B funding each included $100,000 from syndicates put together via crowdfunding platform AngelList, according to Dan Primack of ‘Fortune’ magazine.
3 Types of Crowdfunding
There are three common types of crowdfunding: peer to peer, equity, and rewards crowdfunding.
• Peer to Peer Lending. The people pledging funds lend you or your company money with the understanding it’ll be repaid with interest.
• Equity Crowdfunding. You sell a stake in your business to a number of investors in return for investment.
• Rewards-based crowdfunding. People donate to a project or business with the understanding at a later stage they’ll receive a non-financial reward such as goods or services in exchange for their contribution.
The Cereal Killer Café is far from being the oddest idea for crowdfunding. That honor might belong to the amateur scientists known as ‘3 Stags’ who wanted to celebrate the 50th anniversary of the British sci-fi TV series ‘Dr Who’ by launching a Tardis satellite. (To the uninitiated, the Tardis is a telephone box-shaped time machine and spacecraft in which the lead character travels through time and space.) The project apparently captured the imagination of the people on the crowdfunding Kickstarter platform because they pledged a staggering $88,880—way above the 3 Stags’ original goal of $33,000. Incidentally, it’s important to know that many crowdfunding platforms operate an all-or-nothing funding model. In other words, if you reach your goal, you get the money, and if you don’t hit the target, everybody gets their money back.
Explore Your Funding Strategies
As oddball as the Tardis satellite story is, don’t be fooled: raising money to finance projects and businesses from a large number of people via online platforms is becoming increasingly mainstream.
Crowdfunding is just one of many ways to provide your company with the growth or working capital you need. (If you’d like to explore all the non-traditional or alternative funding options, you can download a free report by clicking here)
Funding is often the catalyst for taking your business to the next level. Provided you find the right partner, the funding can make a huge difference to your business.
If you’re like most business owners, getting the funds is more important than the detail of how to get hold of them! That’s fine if your company has a full-time Chief Financial Officer CFO or FD (Finance Director) since he or she will normally manage the process on your behalf to ensure you get the right funding for your immediate and long-term needs. But as an SMB, you probably don’t have a full-time Chief Financial Officer. So what can you do? You can try to manage the entire process on your own. Or, you can make it easy on yourself by hiring a part-time CFO to manage the entire process for you. To discover your alternative funding options, click here to book your free one-to-one call with one of our funding specialists.