Throughout the history of fundraising, no matter who invests in you or how you come by your shareholders, you’ve always needed a middleman. Until now.
As I see it, 2019 technology offers a solution: digital is allowing start-ups and scaleups to take the reins, with the ability to fundraise through a fully personalised platform – within an FCA regulated space. With the entrepreneur in charge everything changes.
Let me share the four trends transforming how we fundraise:
1 ‘Always On’
Traditional fundraising rounds usually last 30 – 60 days. The new breed of owned funding platforms enables scaleups to stay open to capital throughout their entire growth cycle, from seed to exit.
This allows a company to take advantage of any unexpected successes – a significant hiring, a valuable contract, … anything that creates a ‘buzz’ is attractive to new investors. Zap&Go provide a perfect example: They got great publicity when BBC Click aired a feature about their superfast charging technology. Through their funding platform, Envestry for Scaleups, they were able to capitalise on this by extending their funding round, subsequently raising £500,000.
2 Investor relations
Investors dislike being treated like ATMs. However, if the fundraising mindset is always on, the investor relations (IR) mindset is always on, meaning that your investors are kept warm and ready to invest in your future rounds. To maintain this, CMOs will need to be experts in investor relations; digital tools can help. By simply having a dedicated system to post regular shareholder updates– whether the news is good, bad or atrocious – creates a sense of community going far beyond driving sales and making money.
In particular, crowdfunded investors may well have given you their money (including pledges as low as £10) because they strongly identify with your brand and vision. These people are your biggest cheerleaders (think Brewdog’s ‘Equity for Punks’ success); look after them, and this can benefit everybody.
3 The multi-market investor
According to statistics released by Beauhurst, in 2017 UK scaleups received £6bn in overseas funding, with 396 deals featuring at least one foreign investor. Trends indicate that this figure will continue to rise, with the biggest increase coming from Indian investors (up 321% from 2016).
Gone are the days of exhausting trips and pitch video conferencing as the sole means to attract foreign investment: digital platforms make it easy for entrepreneurs to fundraise beyond their own borders. Diverse investors from a wide range of economies, spreads – and therefore reduces – the risks.
4 The secondary market
Even in 2019, the investment landscape is still lacking in secondary market opportunities for early stage companies. The primary market – companies selling directly to investors – means that an investor must have sufficient capital to lock their money in a company’s shares for however long it takes for the business to exit – an average of at least six years – before they see any returns.
The secondary market enables a shareholder to sell directly to another private party and although a few companies have started to offer this, it’s a concept still in its infancy. However, it’s naturally very attractive to investors and digital provides the necessary tools to make it mainstream: a controlled, secure portal of reporting, agreements and accounting will allow stakeholders to communicate with each other, in turn leading to opportunities to buy and sell their shares. I predict that this will soon become the norm.
As I’ve said we’re in a new era of fundraising in which digital allows control to be returned to the entrepreneur. How will you make the most of the opportunities this offers?
By Scott Haughton
Scott Haughton is COO of Envestors, a fintech company that connects investors and scale-up companies. With its fundraising platform Envestry for Scale-ups, companies get a personalised site to promote deals, raise finance and engage with their investors 24 hours a day, 365 days a year.
Envestry has raised £100m+ for over 200 companies through its own private investor network.
Founded in 2004, Envestors is regulated by the FCA and has offices in the UK, the Channel Islands, the UAE and strategic partners across China.
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