Funnily enough, we’re big believers in listening to the crowd. So after talking with our entrepreneurs and investors, we’ve introduced some new functionality to the site.
The idea is simple: it allows potential, larger investors (£5,000 plus) who love the idea and want to be involved, but think that that particular business’ valuation isn’t quite right, to suggest an alternative valuation offer. At the same time, they also have to say how much they’d invest at the new valuation. The entrepreneur can then decide if they’re willing to accept the offer.
For investors this means that they have the opportunity to express their interest in a pitch and possibly get on board at a more attractive rate than the initial offer. For entrepreneurs, they have the opportunity to access motivated investors and adjust their offering based on direct feedback from the crowd.
Accessing the Alternative Offer tool is simple and straightforward – it’s right below invest button.
Here’s how it works…
Making an alternative offer is simple. All the investor needs to do is enter what they believe the business to be worth and how much they will invest if the valuation is accepted – the investment needs to be £5,000 or more. As the funding target can’t be changed, the entrepreneur will need to alter the equity they are offering to raise the funds and this is calculated automatically.
When the alternative valuation is entered, the equity required is recalculated automatically.
The entrepreneur is informed of the offer instantly and has three days to accept it. If no action is taken the offer is declined. If the offer is accepted the new valuation applies to everyone – including previous investors (we email them straightaway so they know they have a bigger share of the pie).
Want an example of how it could work? Here’s an extreme one (to keep the maths easy).
Original offer
Funding target = £100,000
Original business valuation = £1,000,000
Original equity offered = 10%
Alternative offer
Funding target = £100,000
Alternative valuation = £500,000
New equity required = 20%
Luke Lang, co-founder of Crowdcube said: “By introducing the Alternative Offer tool we’re further increasing the democratic and open nature of Crowdcube. We want to keep the crowd in crowdfunding so providing the crowd with a tool to put forward alternative valuations and offers is a natural extension to the world’s first equity crowdfunding platform.”
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