I have been deeply involved in the equity crowdfunding movement the last three years. First, as part of FundedByMe and since as founder of the crowd consultancy HeartReacher. During this time, equity crowdfunding has grown and matured from trend into an established form of investing.
The maturing of equity crowdfunding is evident through several independent incidents. Investment rounds led by crowdfunding platforms are now raising several million dollars and in some cases, venture funds and professional angels are co-investing with crowdinvestors, simply because the investment opportunity is interesting. E-car clubs recent exit to Europcar, 2 years after raising £ 100,000 from 63 crowdinvestors for 20% of the business through Crowdcube, is another example that is manifesting the potential of equity crowdfunding as an interesting investment vehicle for entrepreneurs and crowdinvestors.
I believe that we have only seen the top of the iceberg.
Equity crowdfunding, done right, has the power to democratize our economy and the way we build businesses. However, having worked closely together with several platforms, it struck me that something is missing to speed up development and unleash the full potential of equity crowdfunding which stretches way beyond venture finance.
Current platforms are competing on how many investors they can we get for a company within the shortest amount of time. Some, like Seedrs, are advising entrepreneurs to bring their own investors. The logic is that having secured investors before going on the platform, a company can showcase itself as an interesting investment opportunity, persuade the platforms investors to invest and ultimately close the funding round quicker and more efficient than traditional forms of investing. Enabling efficient funding of early stage companies is a great thing. However, something is missing. How does a company organise the investors it has to bring to the platform? In addition, how can early stage companies organise and inform the average of 110 investors in a crowdbacked company?
In order to grow equity crowdfunding to the next level, the focus should be on
“how convenient can we make it for a company to have many investors”instead of“how fast can we get as much funding as possible”.
This logic is the paradigm shift that should characterise equity crowdfunding and the modern way of building businesses: Crowdinvestors can be a huge asset to companies. They are the advocates and brand ambassadors that will make the business succeed. Done right, entrepreneurs can harness the social capital and services of crowdinvestors, which are much more valuable than the original venture investment.
At FundedByMe we observed that the companies who prioritised to nurture investor relationships have a much easier time to raise additional rounds of finance. While this seems like a logical conclusion. It has, in our experience, not been easy to convince founders to keep close investors relations. It is typically founders fear that a focus on investor relations will remove focus from operations. Unfortunately, thinking like this eliminates the opportunity for founders to unleash the full potential of having a crowd of investors. Managing and communicating with investors has to be convenient and efficient. Founder’s time spent on investor relations has to be remunerated with value creation in the form of sales, capital or saved timed. Scarce resources in all early stage companies.
Based on these thoughts, my partner, Casper Arbøll and I started researching and creating different ideas for a modern shareholder management tool targeted crowd backed companies. After intense discussions and late hours with our advisors, experienced early stage investors and investor relations professionals,we are ready to launch our beta version of Capdesk.
The first version of Capdesk, will help companies construct reliable electronic cap tables, create personalised investor rooms for all investors, while optimizing investor engagement and communication at minimum effort from founders.
I sincerely hope we can contribute to a more professionalized equity crowdfunding scene and inspire even more companies and investors to use this investment vehicle.
Rethinking shareholder management will be a long and challenging journey, and we are still far away from the perfect solution. HeartReacher will continue through the crowdfunding wizard Nikolaj Bak, while Casper and I will be only partly involved. Now I am looking forward dedicating all my time and resources for the next many years in creating an amazing shareholder management tool.
I look forward to the new adventure. If you want to hear more about Capdesk or want to join as beta testers, feel free to get in touch.