How Caterham F1's firesale crowdfunding plea could save 200 British jobs
9 min read
11 November 2014
Formula 1 racing team Caterham have reached out to the public and professionals for their support in an attempt to speed its way out of administration, offering reward-based incentives to 'investors' rather than shares – so that employees get their wages and the team reaches the Abu Dhabi Grand Prix.
Blending investment with social media, crowdfunding is a fundraising method that has risen to the mainstream in recent years. It supports companies of all shapes and sizes, allowing them to sell shares, recover from debt or get new projects out of the door.
One business currently in the midst of such a crowdfunding campaign, perhaps somewhat surprisingly, is Oxfordshire-based Formula 1 car manufacturer Caterham Sport (referred to as Caterham), which fell into administration in October. Crowdcube, the digital investment platform Caterham is using, provides British businesses a channel through which they can secure funding from members of the public and full-time investors alike, whether they’re a bootstrapped startup or fast-growth business.
On Friday, it reached out to the masses with a #RefuelCaterhamF1 campaign, which according to the announcement initially looked to secure £1.5 million from investors to recover and seal its place in the Abu Dhabi Grand Prix. Although a visit to Crowdcube says that target has now shifted up a gear to £2.35mn.
The Crowdcube pitch is as follows:
You can help Caterham F1’s return to the grid by pledging from just £10. In exchange for your support will receive exclusive rewards, including a once in a lifetime opportunity to get your name on the Caterham F1 car competing in the Abu Dhabi Grand Prix.
Companies using Crowdcube will commonly offer shares of the business in order to secure funding from investors, though Caterham is selling its assets in order to raise the capital required to keep the company afloat.
The fundraising target must by reached by Friday November 14 if the company wants to reach Abu Dhabi for the finale on Sunday November 23. But with three days to go until the campaign closes, only 50 per cent of the target has been reached at present – with £1,118,000 banked.
Real Business spoke to Crowdcube co-founder, Luke Lang, who said: “We’re best known for equity and have helped to raise tens of millions of pounds. More recently we’ve supported debt for more established businesses and have worked with the likes of the Eden Project and River Cottage.”
Explaining where the decision to support a reward-based investment scheme came from, he continued: “This is the first time we’ve done a purely reward-based raise through Crowdcube and it was partly due to the fact we have a lot of motorsport enthusiasts in the team.
“There are some great rewards, real money can’t buy items such as the rear wing of cars – which I would think is a really exciting prospect for investors. When it comes to rewards, this is really a one-off for us. This was an opportunity we wanted to support, so our bread and butter is very much investment, whether it’s equity or debt. Our focus is raising finance for businesses, rather than projects.
Read more about Crowdcube:
- Crowdfunding isn’t just for startups
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Lang added that Crowdcube is “passionate” about helping Caterham, which he sees as an “iconic British brand”. The opportunity was too big to turn down, he said, not least because there’s 200 employees working for Caterham too. It would be good if it was a stepping stone, because following the campaign and awareness they’ve had interest from potential buyers, he added.
“We only found out about the opportunity on Wednesday [29 October]. Everyone has been working around the clock and we’ve had meetings running late into the evening and night, so it’s been a real team effort on both sides. There have been lots of discussions about the amount that we’re looking to raise and now £2.35 million is the amount required to get to Abu Dhabi. If we don’t raise enough to compete in Abu Dhabi, we’ll repay all of the donations back, unless there’s a real swell of opinions from people who still want to invest – in which case we’ll cross that bridge when we get to it. If we don’t, everyone gets their money back,” Lang revealed.
The unique partnership between Crowdcube and Caterham came by coincidence, as Smith & Williamson is the accountancy firm for the former and is handling the administration for the latter. Given the firm’s experience with crowdfunding, Smith & Williamson made the suggestion and connected the two businesses.
Real Business also spoke to the man responsible for overseeing the campaign, Finbarr O’Connell, Caterham Sports administrator, who explained where the inspiration for the project came from.
He said: “We [Smith & Williamson] were brought in to restructure the Caterham F1 team and we thought it was very important for a potential purchaser to see the team is still there and operational. So if we raced in Abu Dhabi, it would be a great way to showcase to buyers.
“We’re speaking to media globally. Al Jazeera had me on TV yesterday. We’re just trying to reach out to F1 fans, sports fans and those who are just interested in trying to help a cause.”
Read more about crowdfunding:
- UK alternative finance market set to hit £1.74bn by end of 2014
- English winery Chapel Down breaks crowdfunding record
On the subject of whether the target can be hit and why it’s of such high importance, O’Connell continued by saying: “We’re all busting a gut to do it and there’s still a lot to do. I’m pretty confident but you can never say for sure. We’ve had lots of support from companies like Renault who supply our engines and other key business partners. This company owes a lot of money to a lot of people, so they’re agreeing to a fee for the Abu Dhabi race rather than the arrears.
“Sadly if the target isn’t met, the employees haven’t been paid for October, and aren’t being paid at the moment, they have mortgages and families, so they will have to move on to other projects. So if there’s no employees there, that will be the demise of the team.”
Indicating how the administration came about, he said: “It’s a sport for extremely wealthy corporations, so you need to raise the money and sponsorship and fees for drivers. You need to have enough income or trim costs.
“If we succeed in what we’re doing. One wealthy purchaser will likely come through to buy all of the shares. Equity funding is regulated and can take six to eight weeks, but this is an emotional plea to the public to really assist the team, whether that’s buying a badge and or other rewards, all of which give cash into the cause.”