By Lisa Walls-Hester on 25th April 2016
Recently we saw the first crowdfunded bank, Mondo, break another record and become the fastest crowdfunding campaign to date. Was this an unbelievably good deal for investors or just a cleverly managed marketing campaign? Whatever conclusions we draw, one thing is certain, the speedy raise will be scrutinized, rinsed and repeated by countless other businesses in future.
The campaign had all the hallmarks of an end-of-season sale and while it might have made Mondo very happy, this style of investing is not a welcome phenomenon for investors. One investor on the p2pindependentforum.com makes the point well: “The more a platform seems to encourage feeding frenzies, the less I trust them.”
Image source: Mondo
Mondo funded £1,000,000 in less than two minutes but how did it happen?
Potential investors could review the pitch two weeks before the launch. Prior to the launch, Crowdcube distributed an email inviting investors to ‘pre-register’ for exclusive access to the Mondo investment. Mondo allocated fifty percent of its total raise, £500,000, for ‘pre-registered’ supporters.
The pre-registered crowd was given early access to the campaign on a first come basis.
When the campaign launched on the morning of the 29th February, Crowdcube announced its servers had ‘failed’.
It said the level of demand to participate in Mondo’s crowdfunding had overwhelmed its servers
Mondo said, “We’ve taken the decision to temporarily pause the campaign. Once we’re happy that the servers are prepared to handle the load, we will restart the campaign and email you a private link, before it goes live to the public.”
To apologise for the issues faced by potential investors, Mondo increased the allocation for pre-registered investors and allowed them access to the full £1 million equity round.
Investors were invited to be ready to receive an email on Thursday at 1pm. The email contained a link so investors could subscribe and was accessible only while there was still space left on the £1 million investment.
And as we now know, as the clock ticked 01.02 the allocated £1 million was fully subscribed.
The Mondo campaign established an ‘exclusive’ crowd and limited its shares and the time in which the crowd could buy them. It primed the psychological triggers that cause a sense of urgency and initiate buying.
It may well end up being a great deal for investors, it piqued my interest because it offered the crowd investors the same voting rights and valuation as its venture capital partner, Passion Capital and it has fostered a collaborative approach for its development from the get-go. It said it had no real need to crowdfund but wanted to give its existing stakeholders the opportunity to own equity. While most fundraisers declare the same thing, I believe that Mondo did already have a syndicate of supporters in its customers and developers from its well-attended hackathons.
After the successful raise, Crowdcube tweeted: If you were able to purchase shares of Mondo Bank on Crowdcube – Congratulations. But, if you blinked and did not register at exactly 1PM GMT sorry. You are out of luck.
Does this mark a new era of a grab-bag style investing? Should we start to scrutinize not only the investment but the way it is being offered?
Fundraisers need their pitch to stand out from the rest and catch the eye of the investor and this is attracting marketing and creative agencies into the industry. Marketeers are making campaigns slicker and start-ups increasingly have their brand identity, tone of voice and key message package perfect from the outset. Ultimately, campaigns that encourage a critical mass of investors to hurry headlong into a deal will end up eroding confidence in the investment, the platforms and the industry at large.
AltFi is returning to Amsterdam for its second annual Summit in the city. The inaugural event last year was a roaring success, with key figures from across Continental Europe's alternative finance and digital banking sectors highlighted. These included Jeroen Broekema, managing director of Funding Circle Netherlands, and Mieke van Engelen, head of innovative partnerships at ABN AMRO's standalone lending platform, New10.