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How a Nominee Structure Benefits ...

A key feature of the Spark CrowdFunding model is the nominee structure. This is a process whereby the start-ups’ shares are held and managed on behalf of the investors after an investment has been made.

A nominee structure is crucial for any equity crowdfunding campaign as it protects investors’ interests and provides direct communication for the start-ups to their investors. We will explain the process in greater detail below.

 

What is a nominee?

A nominee is a person or company that holds assets such as shares on behalf of another, enabling the nominee to handle complicated administrative matters.

 

How does the nominee structure work?

Instead of the shares being issued directly to the investor, they are instead issued to a nominee company. In Spark CrowdFunding’s case, this company is Pearse Trust. The nominee is named in the company’s register of shareholders and will be the legal holder of the shares.

Pearse Trust (the nominee company) will hold the shares on trust for the investor (the beneficial owner) and Pearse Trust will administer the holding on the terms set out in the Investor Terms to safeguard the investors’ rights and entitlements.

 

Benefits for Investors

If you were to crowdfund without a nominee structure in place, investors would be left managing the administration of their investments on their own, which becomes very cumbersome, especially if they have made multiple investments.

By employing a nominee structure, Spark CrowdFunding removes the administrative hassle for investors by taking care of all the technical shareholder work allowing them to just focus on their investments directly through the Spark platform.

 

Benefits for Start-ups/Companies

Without a nominee structure in place, companies would have to communicate with each investor who pledges with them, which would be time-consuming and difficult to track and manage.

However, a nominee structure vastly improves the communication process as the start-up only needs to communicate with one legal shareholder (the Nominee).

 

If you are interested in signing up as an investor with Spark or would like to know more about raising funds for your business, please click on either of the buttons below: 

        

12 Steps to Crowdfunding Success

Crowdfunding continues to grow in popularity, with many startups and SME’s now considering it to raise funds and help their business grow. It has the potential to be extremely successful, allowing more people to be involved in your company’s success, creating a sense of community amongst customers.

Here are Spark CrowdFunding’s 12 steps to improving the performance of your crowdfunding campaign:

 

1. Tell a compelling story

People are more likely to invest in a project or business that appeals to them, something that plays on their passion and interests. Make sure your audience knows why you are passionate about making your project a reality. Allowing people to put a face with the project and showing them what your business will look like, will be extremely beneficial.

 

2. Use your connections to encourage early investment

Getting your family and friends to promote your campaign can give you an initial boost. Your investors could be anyone from your friends and family to university colleges or past employees. Try and let everyone know about your ideas and plans. When your campaign goes live and your connections invest, you can secure 20-30% of your investment target in a short space of time. Securing a significant portion of investment early in the campaign will likely encourage more investors to sign up, as they will see there is great demand in the company.

 

3. Embrace social media

Simply promoting your campaign on a crowdfunding platform is not enough. You need to engage with potential investors across multiple online channels, to promote your business as much as possible. Social media to is a great way of spreading the word. Something as simple as a tweet with relevant hashtags or a blogpost containing keywords can reach thousands of potential investors.

 

4. Be clear and transparent

Be clear on what you are trying to achieve and what the money you are raising will be used for. Communicating clearly to potential funders about what your campaign is trying to achieve is very important. It will help give your business a sense of identity too and help stand out from the crowd.

 

5. Be realistic

Being realistic is vital. You need to have a clear plan of how much money you require to commence your startup or need to continue your business growth. You need to have a realistic budget in place. Ensure that you cover all potential barriers to investment and discuss the risks. Before going live with your campaign, you should have clear goals. If your target is unrealistic the crowd will most likely not engage with your project.

 

6. Keep communicating and engaging

Tell investors your story and keep them updated with your plans and how your campaign is going. This could range from simply thanking backers for their investment or replying to comments and answering questions. By actively engaging with your supporters, you can create a loyal group of company advocates that can help promote your brand moving forward.

 

7. Talk to the experts

Many crowdfunding services will offer you the opportunity to discuss your campaign with them. Take them up on it! They can answer any questions you have and also offer advice and feedback on your campaign. If you are new to the crowdfunding experience or even a seasoned veteran of it, getting advice from the experts could be the difference between a successful and failed campaign.

 

8. Have a strong business plan in place

No matter what channel you choose to pursue to raise funds, you will always need a clear and professional business plan in place, and crowdfunding is no different. In order to get your campaign to go live, you will need to show a solid business plan that potential investors can review, so they understand the type of company they would be potentially investing in.

 

9. Create an engaging video to promote brand

Numerous studies show that people, including your potential investors, are increasingly preferring short, quality videos over long forms of text. It is a great opportunity to get creative, be informative and cut through the noise. Create an engaging video for your crowdfunding campaign that showcases why your business is worth investing in.

 

10. Branding is key

The branding of your company is vital as it clearly identifies who you are and what you stand for. Communicating an unclear message across your channels or using poor quality graphics will show a level of unprofessionalism that will deter individuals from investing. Ensure your campaign has a consistent tone throughout its communications, has a clear identifiable logo and a professional looking website.

 

11. Create a pitch deck

Every company, no matter it’s size, started with a pitch deck. Even Facebook and Google used pitch decks at some point! If you want to raise capital or convince business partners to work with you, a pitch deck is essential. It gives any potential investor an insight into your business. It is crucial that your pitch deck is clear, professional and highlights exactly what your business does and wishes to achieve.

 

12. Set out a clear campaign strategy

A clear campaign is strategy is crucial to the successful running of your crowdfunding campaign as it gives clear guidance on what needs to be done and ensures everyone involved knows what they need to do. It also reassures investors that their investment will be used to fund specific goals. Without a clear strategy in place, investors are unlikely to get involved as they won’t invest without knowing what will happen to their money.
 

Following these 12 simple steps can help you grow quickly and get the investment you need. When executed well, crowdfunding can be an extremely rewarding channel for raising funds. However, it can be a tricky task to manage on your own. That’s why Spark CrowdFunding are here to help. We are happy to answer any questions you may have around equity crowdfunding in Ireland so please get in touch.

        

How 5 Irish Start-ups Raised Fund...

Raising funds from private investors is difficult at the best of times.  Even if you have a world-beating product with a unique selling point, investors will want to review your strategy and make an educated guess as to whether you can increase the value of the business so that they get a sufficiently attractive return on their investment. 

It is even more difficult for start-ups where investors have to take into account factors such as the pedigree of the founders and their ability to successfully execute the strategy, the size of the market, the ability to capture enough market share and the current valuation of the business. 

There is a well-known adage in investing which says, “Manage the downside and the upside will look after itself”.  What this is basically saying is that if you try to minimise the amount you can lose (i.e. the downside risk) you don’t need to worry about how much profit (i.e. the upside) you will make. 

One of the difficulties with investing in early stage companies is that it often difficult to manage the ‘downside risk’.  Very often this downside risk can also be described as ‘losing the full investment’ because start-ups frequently go out of business with investors losing everything in the process.

Every investor makes an investment expecting to make a return on it, but similarly, no investor gets it right all the time.  In those circumstances where you, as an investor, made a bad decision and lost the full amount of your investment in a start-up, wouldn’t it be nice to be able to recover some of your lost investment through a tax break? 

This is precisely what the Employee and Investment Incentive Scheme (EIIS) achieves.  If you invest €1,000 in an EIIS qualifying company in Ireland, you are immediately entitled to a 40% tax rebate on your investment of €1,000, regardless of how the company performs.  In other words, if your investment doubles in value, you still receive a tax refund of €400, or if your investment is a complete write-off you also receive a tax refund of €400 (in the year you made the investment). 

Over the last 12 months, a number of EIIS qualified companies raised funds on the Spark Crowdfunding website.  A contributory factor to the success of these crowdfunding campaigns was the EIIS scheme.

  • In December 2018, the car-sharing app, Fleet, raised €384,550 from 132 investors.  The campaign ran for 45 days.  Fleet had originally set a target of €275,000, exceeding this goal by 40%.
  • In January 2019, the B2C campsite platform, Campsited, raised €284,482 from 70 investors.  The campaign ran for 46 days. Campsited had originally set a target of €275,000 and eventually reached 114% of this funding goal.
  • In February 2019, Wellola, a med-tech company, raised €180,500 from 63 investors, having originally been looking for €100,000, exceeding this target by 81%. The campaign ran for 41 days.
  • In July 2019, Trifol, a company who produce the first wax to be made from 100% recovered plastics, reached an incredible 175% funding for their campaign. Having originally set a funding goal of €300,000, they eventually reached €525,598 through 135 investors. The campaign ran for 45 days. 
  • In September 2019, FireBuilder, a patented protected Eco Firelighter, raised €211,175 from 55 investors. Running for 40 days, the campaign reached 106% funding, having originally been targeting €200,000.

 

Most of the companies that raise funds on Spark Crowdfunding are EIIS approved companies.  To receive regular notifications of EIIS investment opportunities straight to your inbox please register on the Spark Crowdfunding site for free by clicking below.

        

 

Beginners Guide to the EIIS Schem...

EIIS stands for Employee and Investment Incentive Scheme.  The purpose of the scheme is to encourage private individuals in Ireland to invest in Irish private companies in order to help these companies grow and create new jobs.

The way in which the EIIS incentivises Irish investors to invest in these companies is by offering the investor a tax refund of 40% of the amount of their investment, on the basis that the investor leaves the investment in the company for a minimum of 4 years. 

Therefore, if you, as an Investor, invest €10,000 in company ABC, you can reclaim €4,000 of this €10,000 from the Irish Revenue Commissioners when you make your tax returns for the year in which you make the investment. 

The effect of this is that the most you can lose on this €10,000 investment is €6,000, and even if your investment provides you with a big payback, you still keep the €4,000 tax rebate.  This makes a major difference to the risk-reward trade-off of the investment.   

It should be noted that the Irish Revenue Commissioners do not deem all companies eligible for EIIS status, so the tax rebate does not apply to companies in every sector. 

Investment Scenarios

Let’s take a look at a couple of investment scenarios, the first of which applies to a company that does not qualify for an EIIS tax refund and we then contrast the potential returns from this with a company that is an EIIS qualifying company.  In each scenario, the company could return either nothing to the investor (i.e. a write-off) or the company could double in value (i.e. a 100% increase in value).    

The difference between a return of 100% and 166% may not sound like an awful lot, as per the difference in investing in an EIIS qualified company and a non-EIIS qualified company in the examples above.

However, if you compound this over just 5 investments, a €10,000 investment in 5 non-EIIS companies delivers a return of €320,000, whereas an investment of €10,000 in 5 EIIS qualified companies delivers a return of €426,000, which highlights the advantages of investing in EIIS companies.   

 

Most of the companies that raise funds on Spark Crowdfunding are EIIS approved companies.  To receive regular notifications of EIIS investment opportunities straight to your inbox please register on the Spark Crowdfunding site for free by clicking below.

        

Leveling the playing field for Ir...

Imagine if Amazon had raised funds by doing an equity crowdfunding campaign shortly after they launched back in 1998 when their valuation was about €1m.  Anyone who had invested just €1 in Amazon back then would have an investment today worth about €871,000 today. 

The average investment amount in an equity crowdfunding campaign is €1,500, so an average investment in Amazon back in 1998 would be worth about €1.3 billion today! 

Unfortunately, the average investor, like you or I, couldn’t invest €1,500 in Amazon back in 1998 because crowdfunding platforms, like Spark Crowdfunding, did not exist.  Hence, it was only the Venture Capitalists who earned these massive returns on investments in startups like Amazon. 

Does that sound fair to you?  Is that a level playing field when it comes to investing in startups?

 

Democratising Finance

Equity crowdfunding platforms provide small and medium sized investors with access to exciting early stage companies, like Amazon.  Essentially, these platforms make it as easy for a small investor with €100 to invest in a startup as it is for a venture capitalist with €1m to invest.  This is what is known as ‘democratising’ finance and it partly explains why equity crowdfunding has become so popular over the last 6 years. 

Where Dragons’ Den enables just 5 investors to invest in a startup, equity crowdfunding opens it up to the wider investor community and allows thousands of investors to invest in an early stage business.  Equity crowdfunding is simply an online version of Dragons’ Den. 

 

The Importance of the Crowd

Assessing investment opportunities can be a challenge at the best of times.  How realistic is the company valuation, how good is the management team and how big is the demand for the product are just some of the questions an investor will ask.  It is very difficult for any one individual to take all of these factors into account and make an informed decision.  This is where the crowd can help.     

In his excellent book ‘The Wisdom of Crowds’, James Surowiecki provides may examples showing that “a diverse collection of independently deciding individuals is likely to make certain types of decisions and predictions better than individuals or even experts”.  Equity crowdfunding platforms provide the ideal vehicle for this, in two ways. 

Firstly, investors can engage directly with company promoters and ask questions about the history or plans of the company, with the answers to these questions on show for all members of the platform.  Second, and more importantly, investors can see exactly how much money other investors have pledged to invest in the crowdfunding campaign and use this information as a ‘signalling’ mechanism.  If no-one is investing in a campaign it is a good sign that you should ask more questions before making your own investment decision.  

 

Building a Portfolio of Small Investments

For every €1.3 billion investment opportunity like Amazon, discussed above, there are thousands of startups that go bust or return very little to the investors.  That’s the nature of startup investing.  Even Venture Capital firms get it wrong more times than they get it right.  But the reason many Venture Capitalists succeed is because they spread their investments across a wide portfolio of investments.  In general, for every 10 startup investments they make, six of them will be a write-off, another two will return the original investment and the last two will achieve the high multiples which will generate the required returns for the portfolio.  This is precisely the type of investment approach that small investors should adopt and equity crowdfunding platforms, like Spark Crowdfunding, now make this possible. 

Generous tax breaks from the EIIS Scheme for Irish taxpayers also reduce the risk by giving investors a 40% tax rebate on investments in Irish startups.  Please contact us for more information about this. 

 

Test the Water First

As with all types on investment, it is advisable to fully understand the risks before taking any action.  We would recommend that investors fully familiarise themselves with all of the features of equity crowdfunding and also investing in early stage business, and even then, test the water by starting with a very small amount of money.  

With the minimum investment amount of just €100 per campaign on the Spark Crowdfunding platform, a small investor can now build a portfolio of startup investments with as little as €1,000, and there are no hidden costs or fees for investors.

You don’t want to miss out on the next Amazon!!

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