Investment opportunities on Crowdcube are classed by the FCA (the UK financial regulator) as a “Financial Promotion”. Consequently, they must be reviewed and approved by Crowdcube before they can launch. We are required to ensure that all investment opportunities are “fair, clear, and not misleading” in accordance with the guidelines published by the FCA, which we recommend that you read here.
Why is this important?
If you aren't compliant, we can't launch your pitch and you can't raise money! The penalties for not ensuring your campaign is fair, clear and not misleading are significant so we take it very seriously. Taking the time to understand how to stay compliant will pay off massively in the long run.
What does this mean for my pitch?
In practical terms, this means that you can't draft your pitch content in the same way that you might draft conventional marketing content. You will need to meet some important standards:
- You need to ensure that any statements you make about your business (“claims”) can be substantiated using evidence from a reputable source, often independent, which can be easily shown to Crowdcube.
- You must avoid the use of subjective language or hyperbole that is misleading, unclear or cannot be proven in your pitch content and promotional materials
- You must ensure all advertising and promotion related to your pitch adheres to the financial promotion rules regarding investment opportunities
An example of claims
To illustrate, let’s take a fictional example of a description that might be drafted by a business raising money:
"Richards Dwight manufacture and sell luxury tailored shirts for professional gentlemen. Founded in 2014, our product line is manufactured entirely in the UK and sold online. With YoY revenue growth of 70%, Richards Dwight was listed as one of the 10 fastest growing menswear brands in 2016. We intend to use the funds raised to increase production, open two stores in London, and invest in digital marketing."
Our team would find that there are 6 claims in this paragraph which you would need to prove by providing the evidence shown below.
|Example of evidence|
|"Richards Dwight manufacture and sell luxury tailored shirts for professional gentlemen."||Proof of recent and relevant trading history|
"Founded in 2014"
|The certificate of company incorporation|
|"our product line is manufactured entirely in the UK"||Appropriate records from suppliers and manufacturers showing UK residency|
|"sold online"||Functioning eCommerce website|
|"With YoY revenue growth of 70%"||Signed accounts, approved by accountants, demonstrating 70% revenue growth in the last year|
|"listed as one of the 10 fastest growing menswear brands in 2016."||Relevant website or email records from a third party showing the ranking|
It's extremely important to communicate clearly and concisely to investors, who want to analyse your business and can find overly sales-like content off-putting. Superlatives and hyperbole are almost always problematic in pitch content because they imply claims that cannot be substantiated. To be compliant:
- Avoid using subjective language that can not be proven, such as "our incredible product solution is revolutionary!"
- If you have one, speak clearly about your entrepreneurial history. Experience is good but be clear where past businesses have succeeded or struggled.
- Never promise returns. You can't guarantee them and implying reduced risk will not pass our verification.
- Steer clear from giving tax advice, which is complicated and personal to each individual investor.
Advertising and social media
It's hugely important to promote your pitch to your network - customers, fans, suppliers, known angel investors, friends, family and more. However, any advertising material should meet FCA standards, including:
- Being fair, clear and not misleading in what is being promoted
- Including an appropriate risk warning, such as "Capital at Risk", in all promotions including tweets
- Being 'standalone compliant' and not reliant on risk warnings in other places which may not be seen by investors
- Avoiding the use of images - especially those that contain text - that do not have relevant risk warnings
- Carefully managing how promotions from other sources can be rebroadcast, for example retweeting
...now take the Compliance Quiz!
Test your knowledge by taking the Compliance Quiz. If you still have questions, ask your Campaign Manager!