Luke Lang: The Crowdcube founder ready to take on the Stock Exchange

Underneath all that is a plethora of complex wiring: marketing tech which keeps investors engaged in looking at all the new prospects that might interest them and programs that help get fundraisers’ pitches up on the site fast.

The idea came to the duo while the global financial crisis was breaking. Lang was running marketing for an internet start-up his brother had founded and sold to a bigger telco, Kingston Communications. Westlake worked there, too (as did Luke’s now-partner and mother of his eight-month-old baby). The dead hand of big business was starting to take the fun out of the work. “It wasn’t the same exhilarating start-up environment as before,” says Lang. “And when Darren came in one morning with this idea, we both just went for it and quit our quite well-paying jobs.”

In recessionary 2010, many weren’t convinced it was a good plan, to put it mildly. “They’d say, ‘Are you effing crazy?’ ” Lang recalls. “Businesses were going bust left, right and centre. Not just start-up businesses but High Street names who’d been around for a hundred years, so to some it seemed counter-intuitive to set up a business like Crowdcube.”

Lang and Westlake felt strongly the opposite. “When you go through a period of instability and recession, that’s when a lot of great ideas start, people leave their jobs with a pot of redundancy money and go and set up the thing they’ve been dreaming of.”

All these budding new entrepreneurs, the duo figured, would welcome funding from a business like Crowdcube, particularly as banks at that time were barely lending to anyone.

“It wasn’t just banks,” Lang says. Government grants for enterprise had been scrapped too, and many of the multi-millionaire traditional “angel investors” were feeling the squeeze and holding back their money. At the same time, fewer firms were floating on the stock market, meaning venture capital firms had been stepping in to invest in them instead — using their funds to buy up slightly later stage businesses rather than those at the very start of their life. There was a funding gap their project could fill.

The hunch proved right: “From very early on, we got a lot of traction. The first business we funded was £75,000, the second £180,000 and the fifth raised £1 million.” That was in 2010. It has since funded 630 pitches and last year, its members invested £95 million.

They ploughed their cash into companies ranging from tiny ones you’ll never have heard of to the likes of challenger bank Monzo and the restaurant River Cottage, which you have. Of that lot, 33 deals last year raised £1 million or more — triple the number being done by the venture capital firms that compete in its market. It is a stat Lang is clearly chuffed with; he mentions it at least 10 times.

Success stories over the years have included BrewDog beer, Revolut digital bank and Camden Town Brewery, which sold to AB Inbev seven months after raising £2.75 million on the site.That last one was an extremely lucky break, though. Investors should expect most of these investments to last for more than five years before the companies are sold and the backers get their profit (a process known in the game as an “exit”). Only seven exits have happened in the firms’s eight-year life, of which only three were full disposals.

They’re risky, too: many start-ups fail. Crowdcube has come under fire over the years for not carrying out enough due diligence checks on its companies. One that went bust, Rebus, became a cause célèbre when it emerged a key manager had previously been struck off by the Financial Conduct Authority.

In response, Lang says that, since Rebus, the company has made it clearer what checks it does and doesn’t do. But for investors, there will always be a large dose of “buyer beware” in such angel investing.

You can say similar for many of the companies that list on the Stock Exchange’s junior market, AIM. But there, you should be able to find a purchaser for your shares if you want to sell. Not so with crowdfunding.

That’s a major disadvantage, but one that Lang’s team is trying to rectify.

It is currently testing ways of creating a “secondary” market in which investors will be able to trade in and out of their shares to other investors. “That will create an interesting dynamic,” he says. “If you start to create secondary liquidity through a crowdfunding platform, you beg the question: what is the point of Aim?”

He has a similar feeling towards venture capital firms. The more established crowdfunding becomes, the less willing entrepreneurs will be to use them, goes the theory. “If VCs are not worried, they probably should be.” One VC pooh-poohs that suggestion but does acknowledge that crowdfunding is useful for companies wanting to build a closer relationship with their customers (who wouldn’t buy the beer they own a stake in?). VCs will often collaborate with crowdfunding platforms for that reason.

Lang has a deceptively mild manner, speaking quietly and slowly with a buttery burr that gives away his Exeter roots, but he’s not short of an opinion or two.

He’s particularly angry about how the remaining state-sponsored enterprise funds have not started using crowdfunding platforms yet. He singles out the British Business Bank (BBB) — set up by the Government to fund small businesses after the financial crisis — and the European Investment Bank.

“They don’t recognise the impact crowdfunding and Crowdcube is having. We’ve funded nearly 150 businesses last year but the BBB money just continues to get channelled into the VC community. So they’re missing out on all the companies we’ve supported, in green tech, education tech, food, drink, retail. I think that’s outrageous.”

He’s competitive. Rather than hitting the beach this summer for this 40th birthday, he’ll be doing a stage of the Tour de France. A friend from childhood, Steve Kingdon, tells of how they did a fun run together a decade ago. Kingdon — himself no sportsman — won. For Lang, it acted as a spur to shape up but not, like most of us, with a Fitbit and occasional jog: within two years he was doing triathlons.

His entrepreneurialism and devilish work ethic seem to stem from his parents. His father was a carpenter and builder who had a business renovating old churches and listed buildings. His mother, who died 10 years ago, worked in education and set up a big local apprenticeship scheme. Something clearly rubbed off: three of their four children set up their own businesses.

This year, Lang and Westlake want to extend overseas, starting from their existing small bases in Berlin, Spain and Amsterdam. To pay for it all, Crowdcube will probably need more money itself next year. Now that would be a crowdfund worth backing.