Crowdfunding is an ideal way to prove demand for your business. There's nothing more compelling than people putting their money where their mouth is and committing to invest in your vision. You also get the bonus of raising capital and a fanbase at the same time - so it's no wonder that more startups are choosing to go down this route.
(Did you know we run a crowdfunding accelerator for entrepreneurs looking to scale? Check out CrowdBoost from Virgin StartUp)
MBJ London are an innovative agency offering Website as a Service (WaaS) - an approach to website build and management that makes it accessible to all, even small- and medium-sized businesses. After receiving funding from Virgin StartUp they raised a hugely impressive £715,000 through crowdfunding. Chris Nobbs, Director of Strategic Partnerships, talks about what led to them making that decision.
How else have you validated your business idea?
The primary way that we validated our business idea for WaaS (Website as a Service) was through the acquisition of new clients. For WaaS, we had to re-pivot MBJ to a subscription-based business model. Initially, we did not expect more than 10-15% of clients to sign on for the maximum length contract of two years. However, after just a few months, more than 40% of new clients have now signed up for the two year option. This has been a great indicator as to how the market is reacting to WaaS.
What led up to the crowdfunding campaign and made you decide to go for this, above other ways of raising finance?
Many people within our extended networks had been asking us if they could invest somehow into MBJ and be part of our successful journey so far. So that inspired us to begin exploring ways to offer them an opportunity in a thoughtful and structured way. We also wanted to see how the general public would react to the opportunity to invest in MBJ and the WaaS concept.
Crowdfunding is a great way to gain exposure and, if successful, can be a wonderful marketing tool for early-to-mid stage startups. By running a crowdfunding campaign, we were able to offer our networks the opportunity to buy shares in MBJ and gain exposure to our services. We were rewarded with a vast network of over 300 individuals who now have a vested interested in the success of MBJ.
Due to the fact that WaaS offers a low-cost solution for small- to medium-sized businesses, it’s a type of service where many people will know someone who could benefit from it. For MBJ, crowdfunding therefore presented a great form of lead generation.
How did you prepare for the crowdfunding campaign?
To be honest, we had very little time to prepare for the campaign. We took the decision to go down the crowdfunding route less than two months before we were due to open an office and move some of our operations to Berlin. In the end we only had three weeks to prepare for the one-month campaign.
We began by ensuring that all the finances were neatly in order, and that we were in a position to comfortably pass the prerequisites for being listed on Crowdcube.
We then set about reaching out to people that we thought would be interested in giving us some form exposure and writing about WaaS and MBJ. We also began to contact all the people that had previously requested to be a part of MBJ’s journey. From there we just launched the campaign, and the rest is history!
What are you hoping to get out of the campaign (beyond equity)?
We wanted the funding, of course, in order to help us scale the business and expand our operations. It was also important for us to build a network of supporters with a vested interest who can help us build the business along the way. Many of our investors are angel investors who want to wait for a return on their investment, which is absolutely fine. However, there is also a percentage who are very keen to get involved and help us out wherever they can.
Have you used feedback to develop your product throughout the process and if so, how?
To be honest we have not changed the product much, as it is proving so successful. That being said, we are constantly listening and taking feedback from our clients. In fact we just ran a client feedback campaign in which we requested suggestions for any improvements that we could make to our services. These are things that we do constantly, rather than part of the crowdfunding campaign.
What do you think is the most important part of a crowdfunding campaign?
There are a number of very important parts and milestones in a crowdfunding campaign. If I had to name one, it would be ensuring that you have done your research and preparation beforehand. It is really bad when you see companies that are nearly at the end of their campaign, and have only raised a small percentage of their target. You can’t rely solely on the crowd to pick up and fund your company - you have to understand the demand and make informed decisions accordingly.