In our latest CEO Q&A, Chris Burge, CEO of Spark Crowdfunding, speaks to Business & Finance about connecting investors with new opportunities.
Chris Burge, CEO, Spark Crowdfunding.
We founded Spark Crowdfunding with the objective of delivering a new service to two categories of clients, namely private investors and start-up companies. Start-up companies have a huge requirement for funding to help them grow their business. In many cases they are willing to sell shares in their business to raise these funds, in much the same way as they would on Dragons’ Den. Investors in Ireland may be interested in buying shares in these companies but may not always be aware of these investment opportunities. It is my role, as CEO of Spark Crowdfunding, to make Irish investors aware of these opportunities by connecting them with exciting new investment opportunities in Irish start-ups. These investment opportunities are presented as crowdfunding campaigns on our platform, where the minimum investment is €100. My goal is to democratise investment in early stage companies by making it easy for small- to medium-sized investors to acquire stakes in these companies. The challenges that I face vary greatly from day to day, but the main one is to manage the growth of the business. As we are an early-stage company ourselves, we are all multi-tasking, although things are now getting more streamlined with a few recent appointments. But like most CEO’s my biggest challenges revolve around identifying and engaging with the right type of clients and perfecting the customer experience. Nothing succeeds like success! The successful completion of an equity crowdfunding campaign is, in itself, a huge motivator for the team and this, in turn, immediately creates the desire to repeat the process. The gradual increase in the amount invested in a campaign is both exciting and encouraging for all staff and when we get within striking distance of the final campaign target, there is never any difficulty in motivating staff to get it over the line. Our ultimate objective is to create opportunities for both private investors and entrepreneurs. The job satisfaction from doing this successfully is a huge motivator for all staff. Crowdfunding is a relatively new service here in Ireland and like any new service, it takes time for people to become familiar with it. However, it is extremely well established in the UK and the US because of how easy it makes raising funds for early stage companies. Therefore, the first challenge facing the industry is education. Another challenge facing the industry here in Ireland is the lack of regulation. We’re hopeful that at some point the service will become regulated in Ireland. We observed after our first six months that private investors like to take guidance from other private investors like themselves. It can be difficult for small investors to properly evaluate investment opportunities in private companies, so investors are resorting more and more to ‘collective thinking’. In response to this we have brought small groups of investors together to exchanges information with each other and critique new investment opportunities in a private forum. Companies raising funds can use these Investor Clubs as a sounding board before actually launching their campaigns on the site. The feedback for these start-ups in relation to the proposed pre-money valuation is invaluable. We have built our own platform using in-house IT people, having been through the heart-ache of using an external provider who ripped us off for every minor back-end change. We had a bit of difficulty finding the right people in Ireland to do this but we’re pleased we now have the right technical team on board. What we now need are good marketing people, particularly on the digital side, and also individuals who have good relationships with investors in early stage companies. Anyone with experience in these areas is welcome to contact us. The banking crisis led to a situation where banks just pulled down the shutters and stopped lending to early-stage businesses. The related economic crisis pushed interest rates down to zero which led investors to seek alternative ways to get a return on their funds. Both of these developments highlighted the need for an equity crowdfunding service in Ireland and were catalysts for the launch of Spark Crowdfunding. Businesses had to find an alternative source of finance and investors were looking for higher returns. Our focus for the moment is entirely on the Irish market and we see plenty of room for growth here. We do believe that Brexit will force more companies to use Ireland as their base and that can only be a positive for ourselves and the wider Irish business landscape. On a day-to-day basis, success for Spark Crowdfunding is the completion of a fundraising campaign that a new company runs on our site. Ultimately, this leads to the success of the organisation as a whole. Longer term, success for us would be expansion of the platform into other territories and a flotation or trade sale of the company. Business is all about ‘getting out there’ and meeting new clients, partners, employees or other companies whose ideas and innovations we can learn from. So, the best advice I would give is, ‘Always be hustling’, but in a good way. One great way to do this in a structured environment is by engaging with relevant business networks. IIBN (Irish International Business Network) is the best business network in Ireland and Spark Crowdfunding is a sponsor of this. The key highlights for me were the successful launch of our proprietary trading platform and the completion of our first equity crowdfunding campaign. Having set a campaign target of €250,000, our first campaign on the site achieved a final figure of €384,000, which was a great endorsement of equity crowdfunding as a service in Ireland. More recently, we ran a campaign for a plastics recycling company called Trifol and this campaign reached its target of €300,000 within the first 24 hours. Having successfully navigated through our first year in business with some great campaign successes, our plan for the next 12 months is to remain focused on the basics. In short, this means attracting new start-ups and new investors to the site and bringing the two of these distinct groups together. Our ideal client is a start-up that has already secured funding from Enterprise Ireland and is looking to take their business to the next level by bringing in a new portfolio of investors at an attractive valuation. An added bonus for investors is if the company is EIIS approved, which means the investor will receive a tax rebate of 40% of the amount they invest. Our growth plan for 2019 is focused on identifying these types of companies and demonstrating to them the benefits of equity crowdfunding. We already have strong brand presence in Dublin, but we need to do a lot more to promote the brand and the product in other counties in Ireland. In overall terms, we’d like to double the size of our database of investors within the next 12 months and increase the average size of our campaigns from €250,000 to €500,000. In his budget last year, the Minister of Finance announced that regulation would be introduced for the crowdfunding sector in Ireland. This will be a very much welcomed development for the sector. At a more general level, we believe strongly that the Entrepreneur Relief, introduced some years ago, needs to be improved. The relief allows entrepreneurs selling a business to avail of a lower rate of 10% capital gains tax (CGT) once certain criteria are met. However, the €1m limit is tiny when compared to other countries. The limit in the UK is £10m, for example. A much higher relief would act as a great inventive to entrepreneurs to build new businesses here in Ireland. As it’s a lifetime relief, this change would encourage serial entrepreneurs to start up a business, sell it, use the profits from that and start another, and so on—€1 million is really not enough to encourage that sort of activity. It is a highly targeted measure that would stimulate activity amongst those that actually create indigenous employment. One other change that we would like to see in the sector would be an overhaul of the EIIS scheme. The EIIS is a mechanism that allows investors in SMEs to avail of a 40% tax relief on the amount of their investment. The difficulties lie in the detail of the scheme. Family and friends, for example, who are normally the first source of funds for many entrepreneurs, are effectively excluded from relief on investment. The scheme needs to change to include these investors. Q. What are your main priorities and goals in your role?
Q. What are your biggest challenges as CEO?
Q. How do you keep your team/staff motivated?
Q. What are the challenges facing the industry going forward?
Q. What new trends are emerging in your industry?
Q. As an employer are you finding any skill gaps in the market?
Q. How did your strategy develop in the context of the banking crisis and economic crisis?
Q. How will Brexit affect you, or have you started to feel the effects already?
Q. How do you define success and what drives you to succeed?
Q. What’s the best advice you’ve been given, or would give, in business?
Q. What have been your highlights in business over the past year?
Q. What’s next for your company?
Q. What opportunities or plans for growth do you see in 2019?
Q. Where do you want your business/brand to be this time next year?
Q. Are there any major changes you would like to see in your sector?
Our ideal client is a start-up that has already secured funding from Enterprise Ireland and is looking to take their business to the next level.
