The first question I’m usually asked is where it all began for Ethique.
I started Ethique (which was called Sorbet back then) out of frustration for the abhorrent amount of waste created by the cosmetics industry, and in particular, the amount of plastic and waste created by our bathroom essentials.
Up to 95% of your bottle of conditioner is made up of water - which is ridiculous considering you have water in your bathroom! I set about learning cosmetic chemistry (I was completing my Bachelor of Science at the time) and looked to formulate a solid shampoo. I figured that switching to a solid product would be the answer not only to the water waste issue, but also plastic waste.
I used to create small, 1kg batches of shampoo with the help of my Mum, Janette, selling them online on a website I built myself, and surprisingly, there was huge demand!
Why we crowdfunded and how we did it
I started Ethique with little to no money, in my kitchen, as a poor university student. I reinvested all sales back into more ingredients, packaging and eventually a little bit of marketing. But to start a business properly, you need a lot more money than initial sales will generate.
I entered a university competition and was paired with two wonder business mentors to write a business plan. One of those mentors subsequently offered me investment at the end of the competition, and then became one of my business partners. But we needed more money to take the brand to how it looks now.
And so, in 2015, we turned to crowdfunding with PledgeMe. Equity crowdfunding, that is, actually selling shares in the company, not offering product rewards, had just been legalised, and the Pledgeme crew were some of the earliest to offer it.
In our first equity crowdfunding raise on PledgeMe in 2015, we raised $200,000 from 152 people around New Zealand in just under 10 days. It’s stressful going out publicly and asking people to support your dream, but it’s also amazing because sometimes you get an email saying Joe Bloggs has just pledged $30,000. I mean, try beating that for an email!
The first round of crowdfunding facilitated a rebrand and a move into a cramped unit that served as our lab, warehouse and office. It was heaven on earth. At that point we had four team members, and we were making at most around 100 bars a day. It may not sound romantic, but it was an important step in our growth that we were able to achievethanks to our new investors.
Fast-forward to 2017 and we’d set up in our new fancy lab, having quickly outgrown the unit. With our sights on expanding further in New Zealand, Australia and the United States, improving our e-commerce platform and expanding our range of products, we entered into another round of equity crowdfunding through PledgeMe.
Prospective shareholders were able to pre-register for the second round of equity crowdfunding – this meant we hit the ground running with 1,300 pledges, which equated to 350 shareholders all told. It was my dream for their investment in Ethique to pay off their mortgages one day!
What worked, what didn’t, why it was so successful
The first round generated 152 shareholders in Ethique, from every walk of life. We had chemists, economists, beauty editors, builders, CEOs and even some travellers. We quickly involved them in some big decisions, and they proved how useful it is to have people from different backgrounds who shared our vision.
The 2017 round was split 50/50 between PledgeMe and wholesale investors. We targeted specific wholesale investors who had expressed interest and came with substantial knowledge and experience. With this strategy, we hoped to be able to learn from them and then share our learnings.
When you’re appealing to people to invest in your dream, what you present is so important. Things that absolutely must be clear: your goal, how you will achieve it, what the money will go towards, and how much money you actually need to achieve that thing. Story is so important too – who are the people behind the brand and what do they do that makes them great for this project?
People buy or invest in people, not ideas, so they need to know you, the passion you have, and what your story is. Include pictures and videos: of the ‘thing’, your objective, where you currently are, what the end result will look like, and again, people. Photos and videos create empathy and connection.
I will usually advocate for equity crowdfunding over project campaigns. If you want people to offer you money to grow your business, you should offer them shares. It's only fair if they back you, you should hopefully reward them in future. Not to mention, shares are typically more of an incentive than products or gifts.
Finally, and maybe most importantly, get people from outside your business to read your plan. Yes, they might not be fully clued-up on all the business jargon, but ultimately a crowdfunding campaign is trying to appeal to as many people as possible.
Can you compel someone with no prior knowledge of your business to invest? The answer to this question will be integral to the success of your campaign.