Start up Blogs

One Huge Question For A Start-Up ...

Sometimes the product is not the problem. I just finished a 100 day no-alcohol challenge. I thought I’d be giddy at the end but, to be honest, it was a bit of an anti-climax. Don’t get me wrong, all the healthy boxes were ticked but questions from friends at the end provided a deeper reveal. 

Sure, there was a degree of curiosity about the chosen first favoured drink – the category, the brand, the strength, the volume etc. And yet, the product, the drink, was almost irrelevant. The key question was not ‘what’ but actually ‘who’ or ‘when’. The land of NPHET, no events, no venues and no gatherings were the craic-killing answers to those queries but also triggered a coincidental thought in my working world.

I was recently asked to put together a framework of operational metrics to measure the progress of a portfolio of start-up companies. The portfolio companies operate in different sectors and are at different stages in development so the metrics had to be broad enough to capture meaningful information/data from each company. A little bit of research and 25 years of writing and reading investment documents pointed me towards SEVEN key measures of operational performance. It is by no means a complete list but it is an analytically robust starting point and suffices to make ONE very big point. First, look at the seven operational metrics:

  • Revenue Growth
  • Cash burn
  • Headcount
  • User/Customer account numbers
  • Customer Acquisition costs(CAC)
  • Pricing of product/service
  • Marketing spend

Now, try to find any reference to a product or service. Nada, nothing. Of course, the product or service is critical to what the customer wants and what generates sales. But take another look at the list of metrics above. At least five of the seven metrics are closely connected with how a business engages with its customers.  That’s more than 70% of a company’s key operational metrics focused on the customer. But start-up founders are often wrong-footed when meeting investors. Giddy expectations of a successful meeting pitching the beauty and brilliance of a product or service can go off the rails badly if a start-up cannot outline a clear strategy to win customers.   

To take that view to extremes, experienced entrepreneurs will sometimes think through a customer win before even thinking about the product or service specifics. In other words, they find a problem important enough for a customer to PAY to deliver the solution. As a sad contrast, history tells us there is no shortage of great product, technology or service stories which have failed due to not-so-great customer acquisition plans. 

So, do not be shocked when meeting a VC or investor groups that there will be a lot of questions about customer acquisition. But really it’s one huge question – have you thought through your customer as deeply as you have thought through your product or service?  How you demonstrate that strategic thinking will be determined by the detail you can provide around the following:

  • Your access/edge into targeted customer channels
  • Use of re-sellers, intermediaries
  • Digital content, engagement strategy
  • Community building – customer loyalty strategy
  • Pricing, incentives
  • Customer acquisition costs (CAC)
  • Customer lifetime value (LTV)
  • Customer work/discussion/news channels eg Slack, Ghost, Substack, Reddit 

The bridge from start-up to sustainable business is the customer. Hence, this is why fundamental/operational metrics for a BUSINESS skew heavily to customer engagement. So, don’t plough your brain power and enthusiasm exclusively into the product or service you have built. Build a strong customer story and you will significantly increase your chances of making VCs giddy and giving you champagne moments….  

 

Written by Gary McCarthy: Gary has worked in financial markets in Dublin and London for the past 25 years.  During that time he was a stockbroker with a number of leading firms and successfully managed the flotation of Irish companies on the London and Irish Stock Exchanges.  His expertise also extends into the areas of research and data analytics.  Gary is a principal at SilverBack Connects which is a recruitment business focused on the financial technology sector.  Silverback provides direct in-house assistance on the distribution and marketing/packaging of innovative data analytics and market platforms to its institutional network in the UK, Ireland, Japan, Hong Kong and the US.

Five Funding Pitch Tips For Start...

I must confess to a bout of envy as I wallowed in the dark early morning waters of the Forty Foot this week. What exactly was there in the 2022 Budget for me? Media headlines touting “something for nearly everyone in the audience” were about to add to my sense of missing out when I spotted another headline – Global Startups Raise $158 billion in Q3, All-Time Record. Can you imagine being a founder of a startup right now, failing to get a single dollar of that $158 billion wall of money and still looking for funds?  Slightly dispiriting, but most definitely not a cue to give up. 

On the contrary, having been involved over the years with thousands of investor relations presentations, secondary share offers, IPOs, bond issues and start-up funding rounds the critical constant is to keep telling your story.  However, in this fast and furious funding environment your story needs some weaponry to fight for the attention of investors. Here are five tips which are very relevant to current trends in the funding world:

Writing: You may know that Stripe is possibly the most valuable private company in the world. But… did you also know it has earned a reputation as the best writing company on the planet? For a company which focuses on numbers, Stripe has built a phenomenal writing culture. The company doesn’t really do slide decks but shares ideas with carefully crafted memos. I look at funding pitches every week and it is striking how often the core value proposition is presented in different and potentially confusing ways across various investment documents and slide decks. It may sound tedious but it is really worth spending serious time writing and re-writing the narrative around the core problem your company is solving and why your customer will use your solution. This attention to writing should extend to emails dealing with investor queries. The clearer your writing, the clearer your message will be. After all, investors need to be confident a founder can communicate and lead internally and externally. 

Social Media: If writing is not your natural strength there is no better way to build proficiency than by writing more frequently. Social media is for many companies a critical business development tool. I can’t help noticing that the more successful funding rounds tend to be accompanied by a promoter’s/founder’s deliberate use of social media on a frequent basis to communicate the company’s core message. More specifically, the messaging will be consistent across all platforms – LinkedIn, Twitter, Facebook, Instagram etc – and require very few words. A thoughtfully worded introductory paragraph with relevant images, graphics, data or video can be hugely effective and build confidence in your own writing and communication skills. Also, investors are fully aware that a business using social media effectively is likely to scale more quickly than those that don’t.  

Data/Measurement: We have deliberately avoided the use of financial ‘jargon’ in this piece but you may have heard of KPIs – Key Performance Indicators. Let’s just call it measurement. In any competitive environment the road to improvement and success needs regular monitoring and review. It is no accident that we referenced data and graphics in the previous tip. However, in too many investment pitches there are very few references to the key metrics which management will use to monitor the progress of the business. Investors are more likely to engage if there is a visual presentation of metrics which matter to management and potential shareholders. 

Valuation: Of course, valuations in certain pockets of the startup world are raising eyebrows. We have previously written about various valuation methodologies and we don’t plan to debate or sanity check any current markers. However, it is worth thinking about time for a moment. The world, particularly technology, is accelerating rapidly. Businesses are scaling to $100 million revenue levels in super-quick time. As an illustration, Slack which was recently acquired by Salesforce.com went from $1 million to $100 million of revenues in less than 3 years. So, let’s assume the future is going to develop a lot faster for your business and its revenue forecasts. However, they are just projections and for the purposes of valuation this speed is a double-edged sword. The risk which investors are acutely aware of is that your business could be replaced by a much faster growing competitor (or competitors) which might not even exist today.  Do not under-estimate the time spent building databases, pilot products, winning partnership/distribution deals etc. Also, consider the funds needed to get to this point, and even inflate to current market rates. This investment of time and money has a value and could be a barrier to swift entry from competitors. Therefore, it is important to provide a good narrative and quantification of what was required to build the business to this stage. Call it the “replacement value” of the “assets” of the business. This can be a helpful metric in valuation discussions with investors and is worth re-iterating given investment pitches these days can be overly weighted to “guesstimates” of future revenues.

Alignment of Interests: We have already placed an emphasis on the consistency of message across all communications but there is one other area where I have noticed some slippage recently. Lots of investment pitches these days default to the “journey” story. That’s fine but investors need to feel that all stakeholders are on approximately the same journey of uncertainty and risk. What can jar with investors is a promoter team earning a “return” much earlier than the providers of investment capital. Be careful to strike the right tone with starting salary levels. It has been noticeable in recent months to see some business plans with very ambitious promoter salary plans. A more effective message is to tie salary uplifts to future progress made in the forecasts of the business plan.  Then all stakeholders feel their interests are aligned… to the business plan and growth. 

The tip list above is not an exhaustive one but is predicated on one particular aspect of the current investing environment; the sheer pace of activity. We have recently written about one venture capital fund, Tiger Global, which is closing 1.5 investment deals…. per day. Yep, that’s more than a deal a day. It would seem that investor attention spans are shrinking rapidly. A promoter’s or founder’s critical task is to save an investor time when communicating either at a pitch meeting or on email. Writing matters. Make it count and don’t give up. Better still, get some help. 

 

Written by Gary McCarthy: Gary has worked in financial markets in Dublin and London for the past 25 years.  During that time he was a stockbroker with a number of leading firms and successfully managed the flotation of Irish companies on the London and Irish Stock Exchanges.  His expertise also extends into the areas of research and data analytics.  Gary is a principal at SilverBack Connects which is a recruitment business focused on the financial technology sector.  Silverback provides direct in-house assistance on the distribution and marketing/packaging of innovative data analytics and market platforms to its institutional network in the UK, Ireland, Japan, Hong Kong and the US.

EIIS – The Basics for Founders ...

Tags: EIIS

Overview and current landscape 

 

EIIS is a tax relief for Irish investors in certain eligible companies.  Individuals can receive an income tax refund of up to 40% of their investment.  Money is locked in for at least 4 years.  

The objective of EIIS is to provide Startups and SMEs with alternative source of funding (especially in early stages).  However, the conditions to be eligible are cumbersome; the law is EU derived so hence lots of terms.  Ensuring compliance though is crucial as the tax relief can be clawed back as a liability on the Company – thus the Company will be taking on risk when facilitating the relief.  

There is much lobbying and discussion as to how EIIS can be made more workable/practical and the Irish government are engaged in a consultation process here.  So there may be a simplification in October’s Budget … probably effective from 1 January 2022. 

In the meantime, if you are fundraising and marketing now to Irish individual investors then EIIS (however cumbersome) should still be considered as it clearly makes an investment proposal more attractive for them.  The Irish Revenue have a detailed c.100 page guide but here are the basics for Founders:  

 

The EIIS process

In practical terms, this is the process for a Company wishing to raise EIIS eligible funds: 

  1. Check no showstoppers – see key conditions below, read Revenue guide (ideally), preliminary call with tax adviser to discuss.  If ok then….
  2. Work with tax adviser to finalize investment plan, ensure other conditions are managed such as Business Plan, tax clearance etc.  Confirm EIIS should be available.  So proceed with the raise
  3. Raise money and reach certain % spend threshold ????
  4. File EIIS return with Irish Revenue (RICT return) – this is a simple form.   Note – the admin requirements for EIIS, though crucial, are not difficult.  It is ensuring that all conditions are met which can be tricky.
  5. Send confirm forms to every investor, to enable them to claim relief – again, a simple form to each
  6. For completeness….the Company needs to be mindful of EIIS until exit (4 plus years).  In an ideal world no further considerations, but there may be quirks which need to be managed.

 

Initial feasibility check – the headlines
For company on first share fundraise stage: 

  1. Company needs to carrying out relevant trading activities.  This is broad and includes most trades apart from those on an ‘excluded’ list.  Some excluded trades are: financing activities (can include fintech), professional services (though engineering/R&D is ok), dealing or developing land, certain hotel/tourist accommodation etc [for full list see page 35 Revenue guide] 
  2. *Set up within the last 3 years …If more than 3 years, the Company should not be an Undertaking in Difficulty e.g. have negative reserves. Even if it is so regarded, this may still be rectified or managed
  3. *Must be within 7 years of first commercial sale – if not, then may still qualify as long as Company is expanding into new product or geographical market and new funding is higher than 50% of average turnover in the last 5 years.
  4. WATCH! For family or other connected investors – there are further restrictions and in essence, a variant of the relief called SCI may be available for these individuals. 

Other detailed conditions apply – some straightforward like requirements to be an SME* & unlisted but other conditions needing a bit more thought/work such as Business Plan requirement.

 

*These tests must be satisfied by reference to the company and its linked & partner enterprises combined (known as an RICT group).  For example, if a Founder has other business interests, these may need to be included as part of the RICT group. 

 

This is very broad summary only to assist Founders in exploring eligibility.

 

Written by Maura Ginty

For more information, contact Gintax tax advisers maura@gintax.ie  for a consult.

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.

        

 

5 Common Misconceptions about Equ...

As the number of startups now using equity crowdfunding continues to rise, a number of misconceptions have developed around the process. We have highlighted the 5 most common ones, to help give you a better understanding of how equity crowdfunding works.

1. Crowdfunding is all about getting money:

Whilst raising money is undoubtedly the primary purpose of many businesses crowdfunding, it is not the only benefit. 

Crowdfunding provides an invaluable opportunity for engaging the market. You can engage existing customers and expose the business to new ones. Crucially, and unique to equity crowdfunding, investors will own a stake in your business. As a result, they have a personal interest in your future success and will act as evangelists by spreading the word about the brand going forward. Crowdfunding also affords an opportunity for improved customer feedback, as investors might offer insight on how to improve the product or service and might even suggest future products or services down the line.

2. An online crowdfunding campaign is all I need to raise the funds:

One of the most common crowdfunding misconceptions is that posting the campaign online will be sufficient in itself to raise the entirety of the capital. In other words, ‘the crowd’ is all that’s required.  Unfortunately, it’s not that easy.

Although it is possible to generate the majority of the funds through previously unknown investors, many campaigns are heavily dependent on friends and family in the early stages to get the ball rolling.  Ensure that these people know exactly when the campaign is going live so that they can support you from the outset. Be sure to contact pre-existing customers and business contacts also.

Now that your campaign has gained some initial traction it is much more likely to attract third-party investors.

3. The longer the campaign runs, the better:

This is inaccurate as a longer campaign window will only indicate to investors that you are less confident in your business’ ability to raise the required funds in a more normal time frame. It is greatly advised to raise a smaller amount of capital in a shorter amount of time, such as 30-40 days. 

4. Launching a successful campaign is easy

This misconception is one of the more dangerous. Although crowdfunding can be a more streamlined and accessible process of raising capital than other conventional methods, it still requires work. Success on the platform is all but guaranteed. Whilst the campaign is online, a business should concentrate the majority of its resources into trying to make it a success. Chasing up potential leads, maintaining a social media presence and updating investors who have already pledged all require time and resources. It would be a mistake to think that an effective campaign can be maintained in your spare time as a result.  

Moreover, research has indicated that businesses with more than one owner are more likely to succeed in crowdfunding as the burden can be shared. If you’re a sole proprietor, try to enlist someone else’s help to balance the ordinary course of business with successfully securing maintaining the online crowdfunding campaign.

5. Crowdfunding will put off VC’s and larger investors later on:

There has been no correlation between businesses that have successfully raised money through crowdfunding platforms and reluctance on the part of venture capitalists to invest later on. In reality, successful crowdfunding can fuel your business’ growth and put it on even better footing for subsequent negotiations with VC’s later on. Crowdfunding is indicative of your product or service’s popularity. A large number of people are buying into your brand, and this positive validation can be highly persuasive to subsequent large-scale investors.

 

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: 

        

 

Why Irish Companies should use Sp...

Tags: Irish

 

Equity crowdfunding is fast becoming the most popular way for Irish start-ups to raise new funds in return for selling shares in their company.

The advantages of this "Dragons' Den" type of fundraising include speed, ease of process and cost. Campaigns typically last 30-40 days, which contrasts with other types of early stage investing which can take up to nine months. The process is relatively easy, once the company has passed the due diligence requirements of running a campaign in the first place.

The costs are also very low as Spark Crowdfunding covers the legal and due diligence costs, meaning the company raising funds only pays the 6% fee on the total amount of funds raised. (Campaigns must achieve their full target in order to complete and no fees are charged if the campaign is not a success.)

But why should an Irish company use the Spark Crowdfunding platform to raise funds, as opposed to going to one of the UK or US crowdfunding platforms?
 

REASON 1 - Spark has the largest database of Irish Investors
We may not have the largest database of investors, but we definitely have the largest database of Irish investors. It stands to reason that Irish investors are likely to be more favourably disposed to investing in Irish companies. Meeting potential investors face-to-face is an important element of crowdfunding campaigns. Irish companies will not need to fly to the UK to meet potential investors.
 

REASON 2 - Spark doesn't require companies to have a minimum amount of investment committed
Many of the UK crowdfunding platforms require companies looking to raise funds to have a minimum amount of funding already raised prior to the campaign going live. In some cases, this can be as high as 40%, so if you're looking to raise €100,000, you will need to be able to demonstrate that you already have commitments of €40,000. Spark does not have this requirement, although we do recommend you have at least some commitment in order to generate early momentum for your campaign.
 

REASON 3 - Spark has local knowledge of the EIIS 'Tax Refund' Scheme for Irish Investors
For Irish taxpayers, the Employment and Investment Incentive Scheme (EIIS) allows individual investors to obtain income tax relief on investments made, in each tax year, into EII certified qualifying companies. It is an extremely attractive scheme for Irish taxpayers, who can reclaim 40% of the amount of their investment - 30% in year 1 and 10% in year 4. Therefore, if an Irish investor invests €1,000 in a EIIS qualifying company, the investor receives a tax rebate of €300 in the first year and €100 in the fourth year. The investment would need to fall by more than 40% before the investor would lose any money. We discuss this in a previous blog post.
 

REASON 4 - Spark has strong connections with Irish Media Channels
A key contributor to the success of an equity crowdfunding campaign is the amount of media exposure that can be generated for the campaign. If you speak to companies that have raised money on Spark, they will confirm that we have been able to assist them with media exposure. Good media exposure for campaigns is also good media exposure for Spark, so we have every incentive to assist Irish companies to maximise their media exposure.
 

REASON 5 - Spark uses Irish Solicitors
When a campaign finishes, the last thing an Irish company wants to be doing is engaging with a UK firm of solicitors. Spark is advised by Beauchamps, one of the leading law firms in Ireland. We also cover the cost of the legal fees, a significant saving over other forms of fundraising where legal fees can be particularly onerous.
 

REASON 6 - Spark assists with Digital Marketing and Social Media campaign promotion
A number of team at Spark are highly experienced and highly qualified (to Masters level) in the areas of digital marketing and social media marketing. We are very happy to share this expertise with companies looking to promote their equity crowdfunding campaigns using these new channels.
 

REASON 7 - WE'RE IRISH!!!
Spark Crowdfunding is an Irish company, located two minutes walk from Grafton Street on the fashionable South William Street. We are the first and only equity crowdfunding platform in Ireland. We want to assist ambitious Irish entrepreneurs and in turn hope these Irish entrepreneurs will, all else being equal, 'buy Irish'.

 

So, if you are a high growth Irish company, whether that's a start-up or a long-established business, and you're looking for a highly efficient way to raise new funds, come and talk to us at Spark Crowdfunding or click on the buttons below.

We're with you every step of the way!

 

        

12 Most Common Equity Crowdfundin...

Tags: Guide

At Spark Crowdfunding, we meet companies every day that are looking to raise new funds for growth.  Many of the same questions arise at these meetings. 

We therefore thought it would be a good idea to capture the answers to these questions in a single blog post and share it with our readers.  Feel free to ask any additional questions on our Contact Us page. 

 

1. How long do campaigns last?

Equity Crowdfunding campaigns typically last for 30 days, but it is at the discretion of the company raising funds as to how long a campaign will run.  There is no law or rule that states how long a campaign could last, so, in theory anyway, a campaign duration could be as short as one day, or as long as 12 months.  We would recommend something between 30 and 40 days.  

 

2. Can I extend my campaign if I don’t achieve my target?

Yes.  Campaigns can be extended any time during the campaign and for as long as the company raising the funds chooses.  It’s perfectly normal for a campaign to be extended if a promoter believes a higher amount could be achieved by extending the campaign.    

 

3. How much fees do I pay?

Investors pay no fees to invest in Campaigns.  The company raising the funds pays a flat fee of 7% (plus VAT) if the campaign succeeds in reaching its original target.  No fees are payable if the campaign does not achieve its target. 

 

4. Are there any other Costs that a company must pay?

The Company raising the funds is liable for the Credit Card Admin Costs associated with collecting the funds.  This is typically 1% of the amount raised.  Another cost that needs to be considered is the cost of setting up the Nominee Structure that manages the new shareholders who invest in the company.  Spark Crowdfunding can recommend a specialist Irish company that offers this service.  The company raising funds is also responsible for paying its own legal fees.  Please contact us for more information on the likely costs associated with each of the above.    

 

5. How do I deal with all of the new Shareholders that come through my campaign?

Under Irish Company Law, the maximum number of shareholders that a private limited company can have is 149.  Companies raising funds via equity crowdfunding often attract a large number of small to medium sized investors.  Rather than adding all of the individual shareholders to the Shareholder Register, instead a Nominee vehicle is used to hold the shareholders, so that only the name of the Nominee appears on the Shareholder Register and the Company’s Cap Table.  Therefore, if 300 investors invest in a crowdfunding campaign all of these investors will go into a Nominee structure and this Nominee will appear as one shareholder on the Shareholder Register and Cap Table.   

 

6. How do I decide on the pre-money valuation of my company?

Company valuations are subjective and depend on many factors, including Annual Revenues, Net Profit, Financial Projections, Achievements to date, Intellectual Property, Previous Valuations and, most importantly, the Track Record of the Management Team.  The company raising the funds makes the final decision about the pre-money valuation for a fundraising campaign.  Spark Crowdfunding has a number of small investor clubs who would be willing to offer a perspective on a proposed valuation prior to a campaign going live. 

 

7. What information do I need to provide before my campaign goes live?

Companies looking to launch a campaign on Spark must first complete our Campaign Application Form.  This is quite a lengthy document that sets out the progress the company has made to date, the profile of the promoters and the growth plans for the Company, together with financial projections.  This allows us to determine whether or not the Company is suitable for an equity crowdfunding campaign.  If the Company appears to have good prospects and is suitable for a Campaign we then request a range of Due Diligence documents, including a Tax Clearance Certificate, Memorandum and Articles of Association, Company Constitution, Cap Table, most recent Annual Audit and the promoter’s CVs. 

 

8. How do I promote my Equity Crowdfunding Campaign?

There are many ways in which a campaign may be promoted and we would be happy to assist entrepreneurs in preparing their strategy for this.  A good press release announcing the campaign is important.  The company’s own customers or users should also be invited to review the campaign and become a shareholder.  Email marketing is a low-cost way to approach this.  Social media marketing, using LinkedIn, Twitter and Facebook is also low-cost and easy to do.  Paid advertising on the social media channels and Google could also be considered.  In addition to the above, Spark holds regular investor evenings at which companies raising funds are given an opportunity to pitch.  Spark also arranges webinars where companies present their campaign to an online audience.    

 

9. What is the minimum an investor can invest?

This is at the discretion of the Company raising the funds, but we would recommend an amount of €100 as the minimum that an investor can invest in a campaign.

 

10. What is the difference between Equity Crowdfunding, Crowdlending and Rewards Crowdfunding?

Equity Crowdfunding involves selling part of your Company.  New shares are issued to outside investors based on the number of shares an investor purchases.  The disadvantage of equity crowdfunding is that the owners are selling part of their company, but the advantage is that the funds invested to not have to be repaid, nor does any interest need to be paid on the amount invested.  Crowdlending is where a group of lenders is assembled and these individuals lend money to the Company.  The funds need to be repaid, with interest, typically over 3-year period, but the company owners are not selling any shares in the business.  With Rewards Crowdfunding, the people who put money into the Campaign do not receive an equity shareholding in the company, nor are they making a loan that needs to be repaid.  Instead, they receive a reward, such as an early version of the product at a discounted price.  Spark Crowdfunding only offers equity crowdfunding and is the only company in Ireland to offer this service.   

 

11. Is Crowdfunding regulated in Ireland?

Crowdfunding is not yet a regulated service in Ireland.  It is our understanding that the Department of Finance is looking at the whole area of crowdfunding in Ireland and we believe a new regulatory framework will be introduced in the near future, a move that would be welcomed by Spark Crowdfunding and the crowdlending platforms in Ireland.  Spark Crowdfunding does not hold any funds on behalf of it clients, nor does it give any investment advice to its clients.  Additionally, Spark takes no trading risk and does not invest in any campaigns on its platform.     

 

12. How many investors does Spark Crowdfunding have?

New private investors are joining Spark every day and the company now has thousands of qualified investors on the database.   

 

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: 

        

Beginners' Guide to Equity CrowdF...

Tags: Guide

Equity crowdfunding is a simple, low cost way for entrepreneurs and companies to raise money from a wide pool of investors to fund their new ventures.

A company posts its Project on the crowdfunding website and specifies how much money it is looking to raise and for what percentage of the company.  Entrepreneurs should think of their pitch as if they were going onto "Dragons' Den", highlighting the key reasons why someone should invest in their company.

Once the campaign goes live on the Spark Crowdfunding website, investors are invited to subscribe for shares in the company and can invest anything from €100 to €1 million.  The higher the investment, the more shares the investor receives.  

So, let’s say Acme Enterprises was looking to raise €1m in return for 40% of the equity in their company.  If someone invested €500,000 they would get 20% of the company or if someone invested €250,000 they would get 10% of the company.  Therefore, if someone invested €25,000 they would get 1% of the company.

Put simply, equity crowdfunding is a way for companies to raise money from a wide range of small to medium sized investors.  Campaigns typically run for 30-45 days, depending on how much the company is looking to raise, although campaigns that are close to reaching their target can be extended, at the discretion of the company raising the funds.  

The company must achieve its full target before a campaign completes 'successfully', although a higher amount than the initial target can be invested in the company.  The company pays no fees unless the campaign is a success.  The company pays a fee of 6% on funds raised - the investor pays nothing.  

Contact Spark Crowdfunding today if you would like to discuss any aspect of equity crowdfunding in Ireland.

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: