Change brings opportunities. And there are plenty out there, as Memery Crystal’s market-shaking crowdfunding product proves…
There’s a huge amount of innovation going on in professional services right now, from Google-esque office makeovers to “disruptive” (the term everyone uses but few know – or admit to know – what it actually means or achieves) alternative business models that send a shiver down the spines of firms that fear change.
Businesses, entrepreneurs, sports clubs and charities are all evolving. Their respective business models, clients, customers, fans and supporters look at new ways of working, providing and receiving services. The digital revolution continues to change everyone’s behaviour in fundamental ways.
It might be causing sweaty palms, but this whirlwind of change is in fact creating more open goals than ever for firms with the nous to come up with inventive ideas that unlock new business. That’s not to say these goals are easy to spot, but they are out there. And at the BDLN, we believe that everyone – from new recruits to grizzled, cynical partners – should be challenging themselves to find them.
What new behaviours can be exploited?
How can the power of social media be harnessed? What new problems can be solved for clients?
For inspiration, look no further than Memery Crystal, a law firm that has innovated so effectively that it has opened up an entirely new market.
The innovation? Corporate Mini-Bonds is a prime example – a crowdfunding product that allows businesses to access funding from their followers or fans, thereby sidestepping the usual bank debt or equity release models.
Memery Crystal, corporate partner David Walker (who has asked to point out that he is not one of the “grizzled” partners referred to above), takes up the story:
“Back in 2009, we were approached by King of Shaves, who asked us whether they could reach out to their fan base (that’s customers to you and me) in order to raise not only money; but to improve brand awareness and strengthen the ties between King of Shaves and customers . That posed a number of interesting legal questions (we found them interesting anyway). Ultimately, we thought that this was a great idea but wondered why no one else was doing it.”
“Our immediate challenge was to work out if there were any legal barriers to this sensible and innovative idea. If you’ve developed a brand – and loyalty – you probably have an existing commercial relationship with a group of people; whether these people are retail consumers, sports fans…the list goes on. So why not reach out to them – involve them – and, ultimately raise money to further advance your business and brand?”
“We did the legal research, taking a cautious approach because we realised that this could be a new and exciting product. King of Shaves was not the only company with a fan base looking to raise finance and gain media exposure through non-traditional routes.
What David and the Memery Crystal team came up with was Corporate Mini Bonds – a crowdfunding product that allows businesses to harness the power of their customer databases to raise capital. And it’s been a huge success. For example, one of the latest businesses to issue Memery Crystal’s Corporate Mini-Bonds – Surrey County Cricket Club – raised £5 million in just over a week.
“We carefully created the legal documentation and it has evolved over the past seven years,” says David. “We ensure all the necessary information is presented in such a manner as to make sense to someone who perhaps isn’t a sophisticated investor, so we have written it in a slightly different way to a prospectus or AIM admission document.”
“Unlike some of the other movers and shakers in this new crowdfunding and alternative finance sector, we, as a law firm, decided to avoid the obvious bandwagon and, instead, concentrate on the responsible side of this new innovative sector. In a nutshell, if you’re going out to someone who doesn’t ordinarily make investment decisions and/or who wouldn’t necessarily be able to easily determine the profitability of a company and risks involved with, say, a start-up “disruptive” (yes, you’ve made me say that word) business, that potential investor needs to be provided with sufficient information in an easily digestible form to enable them to make an informed investment decision.”
The result is an investment opportunity presented to a brand’s consumers… fans, supporters, customers (whatever you want to call them) in a clear, easy-to-understand way – including, for example, a user-friendly FAQ section, and, crucially, clear and specific risk factors. The power of the Corporate Mini-Bonds innovation is clear: John Lewis raised £50 million using this method and the Jockey Club £25 million. Both were over-subscribed. Wellesley Finance has recently closed its Series 1 Wellesley Mini-Bond having issued all of the £25 million Corporate Mini-Bonds available for issue.
“One of the common questions we ask clients thinking of doing this is: ‘Who is your database?’” says David. “In other words, who is going to listen to your message and read the documentation? We have found Corporate Mini-Bonds work incredibly well if investors have an emotional or existing commercial connection to the business or club. A Corporate Mini-Bond enables this connection to grow and expand into new experiences. Even more so if they can visualise the change, project of goal (sports-pun intended) to which their investment will contribute.”
Other businesses that Memery Crystal has worked with to issue Corporate Mini Bonds include Hotel Chocolat, Golfbreaks, Lancashire County Cricket Club and Innis & Gunn. And David believes there are many other brands and sectors well placed to take advantage of this relatively new and constantly evolving innovation. The sports sector is proving to be a particular area of focus and interest by clubs.
“I believe we have established and developed and lead a concept that we call ‘responsible crowdfunding’,” says David. “We’re marrying and indentifying crowdfunding opportunities for our clients with responsible investment offerings. This has proven highly successful. It’s a cost-effective way to raise finance, and once key commercial terms have been decided, it normally takes just four to six weeks to launch.”
By listening to the market, sensing an opportunity and crafting a product to fit that opportunity, Memery Crystal has created a beautifully simple example of innovation. There are undoubtedly other products and services waiting to be born that will aim to meet the demands of the rapidly changing market we find ourselves in. The question is: who has the hunger to identify what they, who has the skills to market them, and ultimately, will they be further examples of responsible innovation.
David Walker is corporate partner at Memery Crystal.