CROWD2FUND

Despite the challenges we’ve all faced together over the last two years, we’re very happy to share that Crowd2Fund is doing well, and so are our dedicated and impressive team members, board members and partners.(2)

By navigating the unprecedented circumstances of recent years with agility and astute decision-making, we’ve ensured that our business and the entrepreneurs we empower maintain momentum, while consistently serving the long-term interests of our investors.

Backing entrepreneurs and SMEs is more important now than ever – we believe this is our path to economic growth. As mainstream sources of capital become more restricted, and inflation takes hold, we think this presents our platform with a good opportunity to further scale up while potentially providing higher tax-free returns.

This year we’ve been preparing the platform for growth, through comprehensive due diligence, implementation of a formal board and hiring of additional executive talent.

KEY MILESTONES OF 2022

Our platform not only provides capital but allows strong entrepreneur-investor relationships to develop.

In total, our community has raised £44m directly in private capital so far. Since we started re-listing businesses on the platform in January 2021 after a period of implementing operational enhancements, the platform has been growing steadily with an uplift of 169% in approved applications compared to last year.

Other achievements during 2022 include:

• Revenue is up 3.58x from 2021/22 to 2022/23
• Number of deals up 169% from 2021
• Relaunch of the Small Business Exchange
• New governance framework in preparation to scale
• New highly qualified and experienced executive director
• New experienced board of directors
• Comprehensive review of IFISAs policies and procedures
• Development of bank account and debit card capability
• Reduced default rate from enhanced credit checks (3)
• £6.7m in new deals listed so far since Jan 2021
• Re-proven equity crowdfunding method
• £6m repaid back to investors in interest
• There have been 130 new loans issued in the last 24 months

This year we also saw 2,018 new investors on the platform, and so far 250 of them have become active. We have funded 74 new deals from the beginning of 2022.

PROVEN BUSINESS MODEL

Our business model is proven and ready to scale with clearly measured metrics that back up our financials. Our customer acquisition and retention variables are:

i) Finding 1 new entrepreneur seeking £100,000 costs £2,800 but generates £6,000 revenue for Crowd2Fund

ii) Finding 1 new investor costs £206 and an estimated £4,129 is invested per new active investor per year

iii) About 23% of entrepreneurs raise repeat rounds, at £0 cost of acquisition thus demonstrating the feasibility of exponential growth.

These important variables form the basis of our financial model. For example, we invested £44k in new investor advertising during 2021, and this generated £1.6m in new deposits. This capital is recycled within the system, which theoretically creates a lower cost and abundant source of capital – especially through the UK Government Innovative Finance ISA (IFISA) scheme where earnings for high net-worth investors are tax-free. (4)

Currently, loans are underfunding because we’ve not been advertising enough to attract new capital to expand our loan book. Existing investors need more communications and more deals. When we spend £206 on advertising, we receive 1 active investor who adds an estimated £4,129 per year to their Crowd2Fund account. From September 2021 to January 2022 £1,558,903.99 in new deposits were made from new investors which cost £65,204.89 to onboard.

INSTITUTIONAL CAPITAL

We know we can fund more deals, and to achieve this quickly, we are seeking to introduce a unique hybrid funding model. After an analysis of our business model and competitors, it is clear there are two main challenges to solve - one being the speed of funding and the second being able to guarantee the required funding amount for entrepreneurs.

We have decided that the best way to solve these challenges is to broaden the sources of capital by developing a hybrid model with institutional capital. This allows us to guarantee target funding amounts within just 7 days whilst enabling our community of investors to invest alongside the financial institutions.

The new model also allows us to reassure clients that they will get the funds they need quickly whilst not diluting our core proposition of high-quality capital and access to a community of investors to support businesses.

This is a unique model within the marketplace and further differentiates us.

EVOLVING MARKET

“Conscious Capitalism”

The past two years have reinforced how important relationships are. Between businesses and communities. Between one nation and another. Between people. There’s also been more time to think about change and what is truly important.

A world of enforced contemplation has compounded the rise of a global consciousness that demands sustainable and accessible ways of living and succeeding at scale. This new market also demands knowledge. People want to feel informed, making decisions on which brands to support based on how these businesses align with their own interests and ideals — and how they build the positive social capital that comes with being a ‘conscious capitalist’. The uncertainty of the last few years has also created a desire to regain ‘control’. People are becoming more engaged in choosing how to direct their lives. And the more informed the choice, the lower the perceived risk. The lower the risk, the more control we have, the safer we feel. Crowd2Fund has always been dedicated to building relationships and empowered decision making.

A MATURING BRAND

“For Entrepreneurs, By Entrepreneurs”

Our business was born from the idea of relationships, of community. Of giving people the power to choose exactly where and who to invest in while disrupting the outdated and inaccessible traditional lending models. Companies with a strong identity and purpose create long-lasting relationships with their users.

Knowing who we are, knowing how we can best serve them, and combining our marketing and comms activities with a cohesive user experience is key to maintaining and growing our presence in the UK market. Now we need to continue building on our strengths, remember why we do what we do, and listen to what the world — and what our investors and entrepreneurs — need from us.

With a focussed mission and vision that aligns with our product and operations, we set ourselves up for confident investment and success at scale — at home and across the globe.

PORTFOLIO PERFORMANCE

Another important facet to our business is returns to investors. By collating and carefully analysing 8 years of reliable data, it can be concluded that our portfolio has not only survived, but continues to thrive due to comprehensive credit assessments and due diligence performed on all businesses prior to listing them. Our portfolio performance is also improving, and investor losses have been reduced over the years, with their earnings continuing to rise. The most exciting event last year was our first equity exit, further demonstrating the potential of our equity investing product.

POTENTIAL SERIES A DUE DILIGENCE

One of the significant workstreams this year has been a comprehensive review of our board structure, shareholder agreements, company accounting, group structure and executive team to prepare the platform to scale next year with a potential Series A. We have been working hard to restructure the firm and ensure that all aspects of the platform are regularised in preparation for scale-up. It could be the last opportunity for platform investors to take part in securing ownership of Crowd2Fund before we scale up – and we’d love you to be part of our long-term journey. Please note completing a Series A is obviously market dependent.

INVESTMENT OF FUNDS RAISED

The funds raised will allow us to continue to prepare the platform to scale through ongoing growth of the user base whilst continuing to fund deals. Our focus over the next 6 months are:

• Continued steady growth of new investors and funding of businesses to further inform our credit policy and increase revenue.

• Strengthening of the business through the board and executive team to give reassurance to any institutional partner when the time is right to approach them.

• Re-enforcement of our technology stack and delivery of new features to automate and optimise our operational processes.

• Development and protection of our core team to maintain focus as we prepare for 2023.

Thanks for taking the time to read our pitch and we really hope you come onboard for this exclusive EIS investment round. EIS offers generous tax relief of around 30% government tax rebate, additional loss relief and 0% capital gains tax on any earnings.

The early bird discount also provides an additional 25% discount if platform investors invest before January 5th 2022.

Thank you
The Crowd2Fund Team

VALUATION LOGIC

Crowd2Fund’s last EIS equity investment round was completed in December 2019 at a share price of £67.33. The share price has increased around 5.5% to £71.00 per share mainly due to the extensive investment into the platform since the last round. Since then, about £1.5m has been invested into the ongoing growth and development of the platform. The user base has expanded by 3,391 new registered investors and we have completed and additional 177 completed deals since the last round. The modest uplift represents the work completed and the target forecast valuation after scaling further we aim for the valuation to be much higher. The 25% discount is available for early bird investors if they invest during November 2022 via the generous EIS tax incentive. A full set of work done and analysis during the last 3 years is available upon request.

REFERENCES

(1) Approved deals are up 40% from 2021/22 to 2022/23. Revenue is up 3.58x from 2021/22 to 2022/23. There are 2,018 new investors, and so far, 250 of them have become active. The loan book has increased in size. There have been 130 new loans issued in the last 24 months.

(2) The firm is not in financial distress. Investment capital has just been put into the business. The business is receiving investment regularly. Capital that has not yet arrived has been pledged from major shareholders.

(3) Numbers since January 1st 2021: Total amount lent during this period: £7,668,848.41. Total write-offs: £197,560.53. Total defaults: £158,956.4. Total arrears: £229,057.29. Write-off rate 2.57% (4.17% all time). 2.07% default rate (6.59% all time).

(4) Currently, loans are underfunding because we’ve not been advertising enough to attract new capital to expand our loan book. Existing investors need more communications and more deals. When we spend £206 on advertising, we receive 1 active investor who adds an estimated £4,129 per year to their Crowd2Fund account. From September 2021 to January 2022 £1,558,903.99 in new deposits were made from new investors which cost £65,204.89 to onboard.



FINANCIAL COMMENTARY

The financials accounts show a loss as the company is working towards the growth of the business with shareholder funds of £359,782 as at April 2022. The platform needs to grow to become profitable, the aim is to convert the business into profitability in the next 2-3 years and the business can achieve this without a substantial increase in marketing spend if it secures an institutional credit line to help fund deals. Pivoting to a hybrid model of both institutional funds and private capital will be unique in the market. The revenue of the business has been recovering since the pandemic with an increase in revenue by 258% in the 2022 draft accounts from April 2021. There is an uplift in deals approved for listing of 169% compared with last year. Full accounts are available upon request. There are no unsatisfied CCJs for the business or directors.

Disclaimer: The pledges to date have come exclusively from existing shareholders during this year and investment terms may vary.

RISK WARNING

Past performance and forecasts are not reliable indicators of future results. Tax treatment of any of the investment offers will depend on the individual circumstances of each investor and may be subject to change in the future. If you are unsure about any aspect of the information provided by the company, you should seek advice from an independent financial adviser. Do not invest more than you can afford to lose. Investing in start-ups and early stage businesses involves risks, including illiquidity, lack of dividends, loss of investment and dilution, and it should be done only as part of a diversified portfolio. Investing in start-ups may expose the individual concerned to a significant risk of losing all of the money or other assets invested. Peer-to-business lending through Crowd2Fund is not the same as holding a bank or building society savings account. When making a peer-to-business loan, your capital lent to a borrower is not covered for compensation in the event of a loss by the Financial Services Compensation Scheme. It may prove impossible to recover all or part of the loan by calling in the business assets held as security on that loan. Reward and Donation funding types are not regulated by the Financial Conduct Authority Crowd2Fund Limited is authorised and regulated by the Financial Conduct Authority (FRN 623683). Crowd2Fund Limited is registered in England and Wales. Registered No. 08472687 Registered Address: 242 Acklam Road, London, W10 5JJ.