East Fife Draw On Power Of The Crowd
Wed 11th Dec 2013 | Money & Finance
The first club in the UK to use crowdfunding as a means of raising revenue to improve facilities at its ground and grow its fan base has generated £10,000 in the first week.
Scottish League One club, East Fife is using a novel form of investment that seeks to attract small sums from a large number of people to raise, up to £100,000 to fund the development of a new club shop, a bar/café and a 750 seater-stand.
Under the scheme fans and members of the community will be asked to invest in one or more of the three individual development projects.
In return they will receive one ordinary share in the club along with a range of benefits including season tickets, hospitality packages with access to players and the directors’ box and club merchandise.
The scheme is devised and managed by Squareknot, a Glasgow-based crowdfunding company owned by a group of entrepreneurial investors. They hope that successful implementation at East Fife will encourage other clubs across the UK to adopt it.
Investment targets will be set for the three projects agreed between the club’s management and fans’ representative. Raising £25,000 will see the club shop built; £50,000 will ensure development of the bar/café while £100,000 will result in all three facilities completed.
Crowdfunding has already been used by two lower league clubs south of the border, Darlington and Kettering Town, to stave off bankruptcy. The model used by East Fife is different in that it is designed to help financially stable clubs to improve facilities and attract new fans.
Lee Murray, a local businessman who took over chairmanship of the club last June, said Squareknot’s crowdfunding model would allow the club to develop commercially without exposing it to debt.
“The club is operating within a tightly controlled financial budget, and does not utilise any bank overdraft or loan facilities,” he said.
“Although the club is operating within its financial means, there is little scope within the budget for capital spends on stadium enhancements and the directors do not believe that incurring significant levels of debt to fund capital projects is the correct approach for the club to take.
“The model of crowdfunding offered by Squareknot allows us to improve the quality of our facilities and the fan’s experience without exposing the club to unnecessary risk.”
Derek Bond, managing director of Squareknot, said: “This is a novel approach to football finance which gives clubs and fans the best of both worlds, first class facilities and financial stability.
“It is designed specifically to allow fans to invest in individual projects rather than in the club as a whole. As well as giving them an opportunity improve facilities and their own match experience, it also gives them a say in how their club is run and other tangible benefits including tickets, hospitality and signed kit.
“This method of revenue raising is ideally suited to football clubs which, generally, do not operate conventional business models. We are already in discussion with other clubs about running similar schemes and we expect to see interest from a lot more.”
The first project is to replace the East Fife club shop, currently operating from a portable building, to improve sales of merchandise while extending the public bar in the main stand to create a café/restaurant that can be used on non- match days is seen as another way of increasing revenues.
The third project, to build a 750-capacity stand behind the harbour end goal, would generate additional revenue for the club from matches where the demand for match tickets exceeds the current capacity, including local derbies and cup matches against higher league sides.
“Funding pledges towards the three targets are invited not only from supporters of the club, but from members of the local community in Fife, and from anyone who has an interest in helping secure the future financial stability of one of the oldest football clubs in Scotland,” said Bond, a Chartered Accountant and former finance director.
The Ordinary Share gifted to those who pledge money to the funding projects will entitle the shareholder to attend and vote at the club’s Annual General Meeting. The share will not be viewed as a tangible investment either in terms of its resale value or the entitlement of the shareholder to receive dividends.
Posted by: Aaron Gourley
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