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David vs Goliath: How Crowdcube is disrupting the venture capital status quo with crowdfunding

Analysis: David takes the form of the thousands of ordinary people that are empowered to invest through crowdfunding while Goliath is represented by the venture capital firms.

By James Nunns

The crowdfunding market is one the liveliest areas of fintech and has become one of the best examples of how a different approach and technology can successfully disrupt an area of the financial services market.

Launched in 2011, Crowdcube, a UK fintech that helped pioneer online investing via its crowdfunding platform, is helping to raise business finance.

In May the business because the first equity platform to hit £100m in capital raised and since its inception the company has had 290 businesses secure investment on the platform.

The idea behind the company was to provide financing to businesses that couldn’t secure funding through traditional routes and to disrupt the angel investment market. The idea has helped the company gain a 52% share of the UK equity crowdfunding market, according to data released by Crowdsurfer, and it now boasts around 200,000 registered investors.

Typically investments are small but there has been an increase in size of deal with 12 companies last year raising over £1m such as Camden Town Brewery (£2.4m), and Sugru (£3.4m).

Originally the company was using just a generic email provider to handle interacts that they had with entrepreneurs but given the growth of the company it realised it needed to upgrade.

The company turned to Salesforce’s CRM solution so that it can better management deals and see what interactions have been taking place.

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Michael Wilkinson, Head of Equity Investment, Crowdcube told CBR that the business development team uses Salesforce One, Wilkinson’s team uses the Sales Cloud and they use the CRM system to manage entrepreneurs.

"What we have seen since we have moved our entrepreneurs to the Salesforce CRM is an increase in our speed through the funnel, increase in conversion rate from handover to launch and live, and a big spike in funded success rate.

"I’m not going to say that’s all down to Salesforce but it’s certainly played a part, said Wilkinson."

Michael Wilkinson Crowdcube

The company also uses a custom build content management system that it built and developed to handle the investor data.

One of the reasons why the FCA regulated company chose Salesforce was because of the necessity to protect key bits of information such as anti money laundering checks, client bank details, information around credit checks and home addresses.

"All of that needs to be protected and actually one of the reasons that we chose Salesforce was because they’ve got a sturdy compliance record, they’re a big company and have done it before for other financial services firms," he said.

Wilkinson was full of praise for the regulators, particularly the FCA, saying that the company owes a lot of thanks for it being "incredibly flexible and malleable." Initially when the company started out the FCA didn’t understand what they were doing but since then it has worked with the company to find the best way to balance fostering innovation and protecting retail investors.

Technology has been a key factor behind the company’s success and Wilkinson says this is also why the banks have struggled.

"The challenge I see that a lot of the banks have is that structurally from a technology point of view, everything is so widespread and across countries and regions, what they are doing with technology is trying to use it on top of what they are already to improve what they are doing already," he said.

Meanwhile, the challengers in the market are using technology to forget what was done before and simply provide services that meet the customer needs.

The next step is for the company to disrupt the venture capital market, something that Wilkinson thinks is already happening.

"We’ve done 24 deals over a million pounds so it’s not just £20 thousand to £50 thousand up to £100,000 investments, we go up to the prospectus limit. There is one on the site at the minute goHenry that’s done about £3.4m," said Wilkinson.


Wilkinson went on to say that those have always been VC deals but that they have started coming to crowdfunding platforms first so that they can aggregate all the various different types of investment.

He said: "It de-risks it for VC companies because they do not have to stack up as much cash as they previously use to."
Wilkinson said it also makes sense for the companies because they are getting a broad marketing affect from the near 300,000 investors on the site.

Continued disruption has been enabled by a backbone of technology for the company, giving it the tools to better implement its strategy for revolutionising the investment market.

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