Mobile customer feedback platform Honestly is planning to raise a stunning €500,000 in crowdfunding as part of its ongoing funding round. The Karlsruhe-based startup, which won the pitch contest at the HackFwd event last June, is looking for a total of €750,000 in the round, which includes €150,000 from two angels and €100,000 in EU money.
But it is the scale of the crowdfund part which really grabs the eye – Honestly founder Mateo Freudenthal told Silicon Allee that they were unaware of any other equity-based crowdfunding campaign which was as large. And they have form, having raised the first €100,000 in just three hours last time out.
Honestly allows for private – and thus more accurate – feedback from customers to businesses via mobile devices. That makes it easier to improve how you run your business; for example, a restaurant can better react to problems over bad food or coupons if they are more aware of criticism.
The company was founded by Sven Blaese, Pascal Klein and Sebastian Wenzel alongside Mateo, and has been building its product for 18 months. It started acquiring paying customers a year ago and although they have surpassed their planned revenues, the Honestly team still felt the need for fresh capital to fund work on developing the API, online conversion and sales processes. But they didn’t want to go down the usual path of finding a VC.
“We believe in the benefits for all parties in crowdfunding,” Mateo says, “giving the opportunity to participate in tech success to people who can’t risk to lose €50,000, the normal angel investment in Germany, but [who] are willing to spread their risk through many small investments in the tech industry. Not even two years ago, these investors did not have any power about how their money is going to impact the business environment.”
With more than 2,000 customers, Honestly has benefitted having a very active community which helped in user tests and feedback loops, as well as being a valuable lead source. This outside interest in the product help persuade the founders to get German crowdfunding platform Seedmatch to put aside its usual €100,000 upper limit so the rest of the €500,000 target could be raised in one go.
And that knowledgable user core, Mateo adds, will help scotch the argument that crowdfunding only generates dumb money: “If people who made their money through hard work have to decide where to invest it, they examine the market very well and always consider their personal network benefits for the cause. That’s what’s helped us most.”
The seed round was split into two, with €250,000 being raised last year and €500,000 now, due to Honestly having to reach targets in revenue, growth and technology. The campaign to raise the remaining €400,000 will kick off this week at 12pm CET on Thursday, February 21 – and judging from the speed of the previous occasion, which was also on Seedmatch last August, interested parties may want to get in quickly.
Equity-based crowdfunding has been touted as the next big thing in fundraising with dedicated platforms like CircleUp and EarlyShares, even though there have been legal delays in the US. According to the New York Times, even President Obama was backing it, saying: “For the first time, ordinary Americans will be able to go online and invest in entrepreneurs that they believe in.”
But it will produce different results for startups from traditional, investor-based financing; a lack of expert advice, for example, and perhaps also lower accountability when faced with a larger number of smaller investors.