Well, what do we have here? Angels Den, Bill Morrow’s old skool angel network, has jumped on the crowdfunding bandwagon.
That’s somewhat puzzling as Morrow is a well-known critic of the equity-based crowfunding model pioneered by the likes of Seedrs and Crowdcube in the UK. But, then again, the Angels Den business has always been about matching starry-eyed entrepreneurs with potential investors, charging a fee and taking a cut of any funding raised along the way, so perhaps it’s unsurprising if it’s been feeling the crowfunding heat. As they say, if you can’t beat ‘em, join ‘em.
In what’s being billed as “the world’s first integrated angel and crowdfunding platform” — whatever that means — Angels Den Crowdfunding actually combines three crowdfunding models: Crowdinvesting (i.e. equity-based crowd funding), crowdlending, and no-strings-attached or stretch goal-driven crowdfunding. It’s as if the site can’t decide what crowdfunding model to focus on. Or maybe this is how it plans to stand out from what is fast becoming a crowded space, not least in the UK where Crowdcube and Seedrs are clear market leaders, but also elsewhere in Europe and the U.S.
Morrow is also talking up the platform’s ability for it to tap into Angels Den’s claimed “6,000 strong angel community”, as part of its previous ventures, which its says has seen £16 million in funding raised over six years.
“Angels can invest money for a share of the business, lenders can offer a fixed term loan and donors can simply make it happen, no strings attached, in return for a reward,” says Morrow in a statement.
Interestingly, should startups opt to try to raise equity-based crowfunding on Angels Den, the model isn’t a million miles away from its existing offering, in terms of fees and commission charged. Or that of its crowdfunding competitors.
Under its old skool model, Angels Den charges £800 to pitch, which isn’t without criticism, and then takes a 5% cut of any subsequent investment. For that fee, it pushes selected startups to its angel network via an email newsletter and through “Speedfunding” and various other events. “There is no incentive for us to take people on who we believe are at risk of not getting funded, as the angels would unsubscribe,” says Morrow, in defence of charging to pitch. “They don’t have time to see muppets,’ he adds.
The primary difference with its crowdfunding option is there is no fee to list (the online equivalent to pitching), though if funding is raised through Angels Den Crowfunding, a retrospective fee of £1,600 is charged plus 5% commission. Angels Den also takes care of things like legal documentation and provides access to its platform to keep investors up-to-date with how their investment is doing.
In comparison, Crowdcube charges 5% of any successful fund-raise plus a £1,750 fee, and Seedrs charges a flat 7.5% commission, which sometimes works out as less and sometimes more than competitors depending on how much is raised. The latter also takes a cut of any exit — carry — if investors choose to use its nominee services in which the platform manages the investment on their behalf.
To that end, in a thinly-vieled dig at the likes of Seedrs, Morris says in a statement: “One of the problems I had with crowdfunding was how to be responsible to both sides of the deal, the investors and the entrepreneurs. I didn’t like the nomination structure on crowdfunding deals where the investor doesn’t have a say in the business after putting money in.”
Of course, one could look at it the other way around. Equity-based crowdfunding, to a certain degree, can be seen as encouraging what I call ‘armchair investors‘. It can also see a funded startup end up with multiple, possibly running into hundreds of shareholders. In this context, having the crowdfunding platform act on the behalf of investors as nominee (giving them the same rights as angels or VCs e.g. voting shares, full shareholders agreement, etc.) can make a lot of sense for both parties — see this discussion of the pros and cons of the nominee model.