More and more start-ups are turning to crowdfunding to raise investment for new ideas, but a mobile tech entrepreneur has warned against naivety when using the funding route.
Adam Ward of Airtime Rewards has 15 years’ experience in the industry, and launched a campaign to raise £500k through Crowdcube in 2015.
His app rewards consumers with money off their phone bills, as they shop and engage with certain partner retailers.
Last week, BusinessCloud met up with Adam for a chat at his office, just off Deansgate in Manchester city centre. You can listen to the podcast below.
He explained the plan was to use investment to grow the team further, build up his user base and bring on board new retail partners. But the funding round was soon aborted.
Adam said: “I think crowdfunding works for people, but one of the big things is you need to have a brand out in the market already, and have people aware of what you do.
“Whereas we were a new business with no customers, with an idea and a product, and some really good people working with us.
“But we decided to pull out because it was our own investors we were bringing to the crowdfund. And it’s quite expensive.
“It’s a very strange experience because unless you go through the process I don’t think people realise what it actually involves.”
He added that there’s a general consensus you go onto a funding platform and “they bring the investors”.
“People on the crowdfunding sites won’t actually react until they see things happening,” he said.
“So we ended up with 90 per cent of our fund being raised by people we’d already brought and who we’d already had commitment from. And because of the fees it would have cost us about £50,000 to have completed on the crowdfunding site.”
BusinessCloud also chatted to Adam about his experience of the pros and cons of working in the Barclays Rise hub office, and other advice he would give to new businesses.
The app has already been embraced by a number of high street chains including Caffé Nero, H Samuel and Pizza Express.
Airtime Rewards will soon be working in partnership Telefonica, in its London office, and aims to target two million users by the end of 2017.