The real way social media is helping business by @GuyClapperton
Writing about social media is exciting – it’s a bit like writing about the emergence of the Web in the mid-1990s, which I did. A brand new medium, very exciting but very quickly people take it as read that we’re all webbed up, or ‘social’ now. Understandably they want to know what they can do with it next.
One of the panels I moderated at March’s #SMWF in London was about precisely that. The idea of social shopping has been with us for some time. Arguably every shopping interaction is ‘social’ in a way; I have neither room, skill nor money to go and buy and care for a cow, but if enough of us get together we can get pints of milk without needing the rest. That’s the power of a mass market. Creating this sort of critical mass electronically makes it even easier. Whole businesses exist that couldn’t otherwise.
At #SMWF we heard from Groupon, LivingSocial, Wowcher, DiscountVouchers and BuyaPower, all of which take some sort of view on a daily deal which can only happen if enough people buy into it. BuyaPower goes further and brings the price of its goods down depending on how many people sign up – an evolution of owner Gideon Lask’s earlier businesses.
Nonetheless, the question on a load of small business’ minds is: where can we get funding with the banks not offering any credit any more? (I know, I know, the Government’s applying pressure and the banks say they’re lending again – I know, a porcine aviation specialist told me he had a loan). Will social media help, they ask – and the answer, believe it or not, is that it’s already helping a load of people.
This works more or less in two ways – or two ways I’ve seen (and for more detail you’re going to have to check my book, “This Is Social Commerce” – sorry, quick plug there). The first is that you go and ask people directly for funds. The second is that you do it indirectly.
Take author and former Monty Python star Terry Jones. He’s written a book called “Evil Machines”, but he didn’t know whether there was going to be a good enough market for it. So he wrote a couple of chapters for publisher Unbound, which then put it out to the public. The public – and here’s the clever bit – are invited to support the idea if they want to see the rest of the book. They ‘donate’ £10-£25 and are rewarded with books and other bits and pieces. People are starting to look at funding films in the same way. The publicity, the links, the gathering of followers, is mostly done through Facebook, Twitter, LinkedIn – other networks like Google+ may join that roster as they grow in importance.
A refinement of this – and something in which I’ve certainly dabbled with my own money – is actually funding small businesses. One example from the book is the Equity for Punks scheme from the Brewdog Brewery in Scotland. The idea was very simple. The brewery was ready to expand and needed £300,000. So it issued some shares and offered them through its website and through the social networks to people who liked the beer and wanted to take part. Benefits included first some discounts on beer and merchandise but more importantly an actual shareholding. I bought a few shares – not even four figures worth but some – and will be able to sell these in 2013. If I don’t feel like doing so then I can wait until 2015 when, if all goes according to plan, the company will go for a listing.
The indirect approach
It was only a matter of time before someone else picked the idea up and acted as an aggregator for this sort of crowd funding. There was already a music site on which people could invest in artists and share in their profits, but a couple of entrepreneurs realized they could take that model and make it bigger. So they founded CrowdCube, a site on which entrepreneurs can set out their stalls and sell a percentage of their business to armchair mini-dragons – or even micro-dragons – like me.
The first successful investment happened through this site last year. Recently CrowdCube itself sold off some shares to fund growth (I ought to confess at this stage that I bought a few, so although I’m not authorized to write on behalf of the company do bear in mind I have a small vested interest in drawing them to your attention). Other companies succeeding in gaining funds through this company have included a group that helps ex-servicepeople find employment, a London distillery that plans to make the first London single malt in years, a liqueur manufacturer – they’re getting tens and in some cases hundreds of thousands in funding.
As in any other business area, social media isn’t a substitute for a business plan. You need, if CrowdCube and similar companies are going to accept you, solid figures and a plan for publicizing your shareholding (this will inevitably involve social media and indeed you can encourage new shareholders to tell everyone that they’ve invested, in order to spread the word). You’ll need a business with the potential to pay its investors back handsomely and a plan as to how that’s going to happen. Your investors, meanwhile, shouldn’t put any money in that they can’t afford to lose.
But in answer to the big question, yes, social media is helping businesses in very real ways. Seed or development capital is only one of these; it’s helping in recruitment, product development and customer service, and in most cases lowers the cost as well. OK, you get it – social media’s out there and everyone’s doing it by now. The trick is to see what it can actually do for you, and how to do it well.
Guy Clapperton is the author of This Is Social Commerce which has a chapter on crowd funding, another on recruitment, product development and a lot else, and This Is Social Media. Both books are available from Amazon.co.uk and all good bookshops.