Are you interested in supporting ethical business by investing as little as £10 and becoming a shareholder?
If the answer to either, or both, of these questions is YES then please read on and learn about CrowdMission. Then, tell everyone else about it.
Set up by Karen Darby MBE, CrowdMission’s over-riding impetus formed around the concept of investing to make the world a better place. Formally, it is the world’s first equity crowd funding platform for businesses with a social mission. Colloquially, Karen calls it “ethical investment meets the crowd”.
Karen is a successful social entrepreneur who has raised finance and subsequently launched a number of businesses in a career spanning three decades. Previously she founded SimplySwitch, the price comparison service, in one of the UK’s most deprived areas. Employing over 100 staff, SimplySwitch raised £500k for charity and helped thousands of consumers save over £20m on their household bills. In August 2006, Karen sold the business to the Daily Mail for £22 million, producing a 22-fold return for investors and proving that equity investment can generate both financial and social returns. Karen believes firmly that investors and entrepreneurs with shared values can make money and make a difference.
I have known Karen for several years and she has always been energetic, supportive, funny and refreshingly opinionated. Talking to her today about CrowdMission and hearing her passionate commitment to it brought all those characteristics to the fore in spades. I asked Karen what inspired her to set up CrowdMission.
Karen Darby “Business, for me, has always been a way of making the world a better place. I have wanted to create jobs, sustain livelihoods, bring opportunity to socially deprived areas and create services that add real value to people’s lives. SimplySwitch is a perfect example of that and we proved you can bring business and ethics together and have a positive impact whilst creating profit. It’s profit with a purpose. I have always found it personally very satisfying helping other entrepreneurs with any support and advice I can give, so the idea for CrowdMission was perfect as it gives me the platform to help a whole generation of social entrepreneurs. Our target is to help 10,000 social entrepreneurs. From my own experience I know how hard it can be to access capital and I am well versed in the pros and cons of all kinds of financing – VCs, angels, banks, you name it. And it led me to think that there must be a real alternative for entrepreneurs that gives them access to capital without loads of strings attached. That’s crowdfunding.”
Clare Logie What is the best thing about it?
KD “I think from the investor’s point of view it’s the opportunity to do good as well as hoping for a return. That’s really positive, and it’s exciting. Lots of people make donations to charity and what we’re saying is, instead of making a donation, make an investment in a company that owns the IP (Intellectual Property). Yes, it’s high risk, as is all start up business but you can invest as little as £10, so it’s not too much of a gamble. And you own part of that business and you can see exactly where your money has gone. Many people are more than happy to give to charity but they don’t know where their money goes; here, the next big discovery could be funded by the crowd. We’re democratising finance. The people choose, not the banks.”
CL What has been the most challenging thing about getting it off the ground?
KD “I like to pioneer, to do really new things. But that’s bl***y hard work because essentially you have to educate the market about something they’ve never seen before; there is uncertainty about how it could work. And particularly in this industry because it’s so heavily regulated; for example, I’ve had to spend a small fortune on lawyers just to ensure that I don’t spend five years in prison!”
CL How long has it taken to get it from concept to launch?
KD “Two years, because there have been some setbacks. But then, life gets in the way as well and I’ve had a whole bunch of personal issues to deal with at the same time. It hasn’t been easy. You have to ensure that your health and your relationships are in good shape so you can cope with everything that’s thrown at you. I’ve always been lucky in having very supportive relationships throughout my life, because you really do need a support structure in place.”
CL How did you select your team?
KD “Well, one of them selected me. Razz (Dr Ragini Ghosh) wanted to help fund scientific projects and she came to talk to me about various ways of doing it and I pulled her towards the CrowdMission concept. I like to work with people who share my vision and passion. I would say you should always work with people you like and trust. And avoid the others as much as you possibly can. And of course, you have to build a team that complements your skill set and ensure they are good at the things you are bad at. The other thing about my team is that they’re all working for equity only – no pay. So there is so much trust, commitment and belief that this will work and will make them money. I always say if you work for someone else you’ll have to work till the day you die. If you create something with value you can cash it in some day and head off to the beach and enjoy life.”
CL So are you planning on ever doing that?
KD “Ha ha. Well, I do a bit. I’m better these days. I do take holidays – I’m having a few this year. It’s important to appreciate life and smell the roses. I’m very aware of mortality and appreciating every day that I have and every thing that I have. No one on their death bed ever wished they had worked MORE. I enjoy work when it feels like fun and I know that sometimes the tedious bits of work will dominate, but you can get through that if you know it’s going to be fun again.”
CL What frustrates you, generally, in business these days?
KD “There’s a lot of hurdles around financial investment. The FCA approach is very complicated. I can understand why they need to protect investors from unscrupulous businesses, but they don’t need to protect investors from themselves. There is no legislation for new things because, of course, you can only legislate for what is already there. So it’s difficult when you come up with a new idea because no one is quite sure what they think you can and can’t do. It’s the case for any ‘disruptive business’ – if it doesn’t fit the existing paradigm there’s a lot of faffing around from the powers that be whilst they decide whether you’re going to be allowed to get on with it. That’s frustrating.”
CL Is there a single piece of legislation or policy that would improve the opportunities for CrowdMission to grow?
KD “ There is, actually. The FCA has created a consultation paper on crowdfunding with a view to regulating it by 1/4/14. Our model is currently exempt from FCA regulation because we’re essentially a membership; anyone who invests becomes part of our single legal entity. Currently the FCA recognises only a few ‘types’ of investor – High Net Worth, Sophisticated, IFA-advised or those who can only invest 10% maximum of a net portfolio. And now there’s the crowd to add to that mix. It’s a nonsense. Most people don’t have a significant ‘portfolio’ and who are the FCA to tell people they can’t invest more than 10% of what they have? Why, essentially, should they decide who can and can’t invest? I see this as a breach of civil liberties and that’s what we’ve put in our response to the consultation. It’s technically a breach of the Equality Act because it’s excluding people on a socio-economic basis, but ironically the FCA as an organisation is not bound by the Equality Act. In our response to them we have suggested that they need to focus on the honesty, ethics and transparency of the platform, not on the definition of who can invest and how much they can invest. That’s surely up to investors themselves? After all, people can invest as little as £10, but if they want to invest £100,000 why not? It’s not up to the FCA to prevent them from doing that by saying they’re protecting them – essentially from themselves! I’m the only person in the crowdfunding world that is digging her heels in on this because I believe it’s fundamentally wrong and a breach of civil liberty.
So, come 1/4/14 we will have a difficult decision to make as to whether or not we want to be regulated by the FCA. Currently we are not, which isn’t ideal for lots of reasons but I will only be regulated on my terms not on theirs!
It’s difficult taking this stance as we are alienating ourselves in our own industry, but we really believe this is an important social issue and we don’t want to be compromised. I’d rather die on my feet than live on my knees. I don’t want to be dictated to by nonsense.”
CL Do you have a long term vision for CrowdMission or is it about organic growth?
KD “ I’m a start up junkie. I set something up, the way I want to do it and then I set it free. I have deliberately brought in a team that is much younger than me so they can take it forward. I have a limited attention span and I couldn’t be in the same job for years on end. I love a blank sheet of paper so I can create, so I can make the rules. Businesses change as they get bigger; I started my first business when I was 22 and after seven years it had 200 staff and I hated the bureaucracy and petty politics. I hear people say ‘well, the time comes to be a grown up company’ and I think ‘oh, I don’t want to do that. Where’s the fun in that?’ I want to do what I like – if I want to sit in the boardroom dressed in a chicken costume I don’t want somebody telling me I can’t.”
CL Tell us a little about the businesses you are currently raising funds for – are there any key characteristics?
KD “We have some great businesses and we want to get a pitch to target fast. One of them is called Big Blue Cuddle. It’s an online store for children’s clothes which supports children’s charities and introduces new brands to the UK market. The store provides a platform for original children’s fashion and a destination for people interested in buying individual children’s clothes, but also supports children’s charities by donating a significant share of the product sales. Thanks to the discounts it receives from suppliers, it is able to achieve a gross product margin of 65% which, in turn, enables it to donate 15 to 50% of what customers spend to charities.
It’s a perfect win/win/win situation, where:
1. Customers discover new brands, buy great clothes which are truly different and have the satisfaction of having donated to charity without spending anything extra.
2. Charities receive funds that can make a big difference and raise awareness about their causes among their target audience.
3. Brands are introduced to the UK and build a reputation with the public as a ‘good’ brand.
Big Blue Cuddle has been trading on a tiny budget since November 2010 and now collaborates with 30 childrenswear brands. The amazing positive reaction to its unique concept from customers, charities, suppliers, journalists, business experts and investors along with market research, indicates that, with the right investment, there is huge scope for growth for Big Blue Cuddle.
We’re 17% funded on this one, so we are seeking new investors to get it to 100% asap.
CL How can women around the country get involved? Who should they get in touch with and how, if they want to invest, or put a business forward for funding?
KD “Via the You can website create your own pitch on the site; we give a lot of support to entrepreneurs to help them put a pitch together, so you can just contact us.
The message I want to get out there is that this is a whole new genre of available funding. If you’re an entrepreneur with the ability to create a financial return AND a social impact, we want to talk to you. As long as you are a limited company, or about to be, you can raise from as little as £10k through this mechanism.
Or, if you’re not an entrepreneur, then back someone who is! We need a big call to action. We want to get a pitch to target as soon as possible so we can gain traction and start helping more and more businesses. Have a flutter – you can invest as little as £10 and become part of a success story.
We can’t rely on the banks, we can’t rely on the government, we can’t rely on the people who currently have the power – we’ve got to take it for ourselves!”