Andy Baker explains how turning to crowdfunding is transforming opportunities for a growing rugby company
IN THE complex world of sports development, sustainable funding is a key ingredient for success. In this Rugby World Cup year, this is why we looked to crowdfunding to secure a £150,000 investment in Trys Rugby. We are an adult rugby participation company looking to grow via a series of touch and tag rugby leagues, being set up in the rugby hotspot of the west of England in Bath, Bristol, Gloucester, Exeter and Worcester.
Because we’re commercial, governing bodies and agencies weren’t interested in funding us. In turn, this didn’t sit well with the banks. So in 2012, we started to look at crowdfunding. But this wasn’t an easy process for us either. In business, they say it’s important to be first to market so as to maximise your brand. Quite a few of the crowdfunding platforms require you to put your entire business plan and model online for all to see. This is understandable if you’re thinking about would-be investors, but the terms “crown jewels” and “eggs in one basket” come to mind if you’re the business.
So after a year of testing the concept – doing consultancy work with professional and amateur rugby clubs, refining the product, and undertaking market research into what the future held for “rugby leisure” (or non-contact rugby programmes such as touch and tag rugby) – we decided to go for it and embark on a crowdfunding campaign. We were accepted by Seedrs, an innovative platform with a network of several thousand potential investors.
Seedrs makes it possible for people to invest as much or as little as they like in the startups that they choose, through a simple, online process. Due diligence was tough, and lasted several months. In fact, it was so rigorous that we lost out on securing a 2003 Rugby World Cup winner who wanted to get involved.
Trys Rugby went on Seedrs in December 2014 looking for £150,000 for a 30 per cent equity stake. We quickly realised that we were on at the wrong time of year, but still raised £45,000, and we relisted in March with a revised £85,000 target. We were fortunate to get a high net worth who wanted to invest, but who wanted to do so away from crowdfunding, as he didn’t need the tax relief.
Trys is Seed Enterprise Investment Scheme (SEIS) efficient, so investors can get up to 86.5 per cent of their investment back through tax allowances if the business fails. Although this makes sense in terms of risk, it’s not a great pitch to investors. You never pitch a business to fail, and try to de-risk it by the quality of the proposition, the sector and the partners. If the business succeeds, our investors get back 64 per cent of their investment and their shares will gain in value as the business grows.
Now, with 23 days to go, and as we approach the end of the tax year, we have raised £30,000 out of £85,000. We continue to use social media to spread the crowdfunding word – particularly vital, as more regulation is coming into the sector.
To add to this, we’ve engaged with many well-known innovators in rugby and other rugby people, including clubs, chief executives, rugby journalists, commentators and experts in community rugby. We asked the governing body of the sport for a “summit” regarding the way the game is changing and how they can grow it in 2016 and onwards, irrespective of the Rugby World Cup 2015.
When we launched Trys Rugby, we knew it would take a few years to develop as an industry rather than a lifestyle industry (touch rugby leagues in London have been playing for over 30 years).
Going through crowdfunding lets a new audience in on this investment opportunity. It’s very similar to football in the late 70s – five-a--side football is now bigger than 11-a-side football, and is mainly played on small 3G Astroturf pitches. Goals and Powerleagues turn over £80m between them from 100 sites – pretty impressive, considering that the FA failed to return their calls for 15 years. Maybe the current England rugby team should play more five-a-side football.
Andy Baker is managing director of Trys Rugby.
City A.M. has partnered with Crowdnetic for the launch of its suite of UK crowd finance data. It features real-time information on private, UK-based companies publicly raising capital online through securities-based crowdfunding portals.