First of all, congratulations to Sue Acton at Bubble & Balm. Sue has successfully raised her full £75k target through Crowdcube. It is a brilliant achievement.
To quote Crowdcube founder, Darren Westlake:
“In the current climate with banks being risk averse, we are thrilled that Bubble & Balm has succeeded in getting vital growth investment.”
Furthermore, Darren believes that this marks a
“significant moment in the history of small business finance in Britain”.
So a massive achievement for both Bubble & Balm and Crowdcube.
Or is it?
I’ve taken a moment to extract some numbers from the Crowdcube website and, to be honest, they don’t make pretty reading:
On the day that I ran the numbers – 24th July 2011 – there were nineteen pitches on the Crowdcube website. Of these, I would only consider two of them to be a success. The first being Bubble & Balm and the second being the Personal Development Bureau who have so far raised 43% of their target.
Looking at the remaining seventeen pitches, the average investment target is £86,765 and the average investment raised so far is £635 – 0.7% of the target – from an average of 9 investors – that is £57 from each investor.
Now, each company that attempts to raise money through Crowdcube has 180 days to reach its target. The average age of the seventeen pitches is 123 days. So, they have taken 68% of the allowed time to raise 0.7% of the target funding.
Going into more detail; twelve of the seventeen have not even reached 1% yet. Furthermore, the five oldest of the seventeen – all of which are more than 90% of the way through their allotted time – have raised a total of £6,920 out of a combined target of 280k, which is an achievement of 2.5%
Of the five oldest – who have raised £6,920 – one pitch has raised £4,570 and another has reached £1,450. So out of the seventeen, fifteen have not yet achieved £1,000 in funding.
So what does this tell us?
Is this saying that crowdfunding doesn’t work?
Or is it saying that nine-out-of-ten start-ups are based on ideas and business models that just don’t stack up?
Do start-ups need more financial support or do they need more reality checks?