If you are an entrepreneur looking for investment in your business the good news is there has never been a better time to go out and find funding.
We are living in an age of disruption and there are more sources for financing than ever before. Over the past few years, in particular, crowdfunding has generated a lot of interest and we have seen some incredible success stories smash their targets. But, how do you become the next Pebble or Oculus Rift?
Well, frankly, there is no magic formula. However, there are a number of key points you should consider if you want to achieve your goal. I call these the 5 Cs.
OFF3R’s 5 Cs
One of the biggest perceived risks of the whole crowdfunding process is the possibility of failure and the reputational damage that might cause.
As such, the pre-crowdfunding period of any campaign is arguably the most important of the whole process. It is absolutely vital to leverage your existing networks to spread the news about the business; the importance of ‘word-of-mouth referral’ cannot be understated.
Platforms actively advise capital-seeking businesses to have 30-40% of their target funds in place before the campaign goes live. A pre-launch marketing campaign will help to build up excitement around the launch and it will kick off any campaign with a high level of momentum.
A lot has been said around the speed of equity crowdfunding and there’s no doubt it’s quicker than traditional finance routes, but there is so much more to building interest in a campaign than you may think. You only have to take a look at the likes of Chilango and Sugru whose pre-crowdfunding efforts to bolster their networks significantly helped their record campaigns.
It is important to ensure that you spend a large proportion of time refining what it is that you want to say about your business and the specific campaign.
Research is key. Get familiar with the crowdfunding landscape and practices before launching a campaign. Analyse what has worked and what hasn’t for businesses in a similar industry to yours and make sure you learn from these lessons.
Create a plan for the full duration of your campaign. Ensure that this plan details the key marketing, communication and other activities and milestones so that you keep the campaign as impactful as possible.
Furthermore, different platforms attract different kinds of businesses.
Choose a platform that aligns with the feel of your company as this will make it easier for them to become a key ally to the success of the campaign. Ensure that you are well equipped to answer any questions that investors might throw at you; this will indicate to prospective investors that you are worth investing in. It will make you credible.
The most effective mechanism for discussing potential investment opportunities is always face to face or over the phone. It will really pay off for businesses to go that extra mile and talk directly with as many investors and as much of your networks as possible.
When it comes to crowdfunding, the sector has brought out a real altruistic side to the investment space – investors want to back campaigns that inspire them and show passion.
Present your campaign and project as an opportunity for mutual gain, with a view to creating long-lasting positive business relationships upon successful funding.
Ensure that everything in your pitch and the press that you put out is honest and genuine, and make a concerted effort to tell a story.
When it comes to shareholder structure, make sure your investors are fully aware of what shares they will receive for a certain level of investment and more specifically, what that means in the long term, ie. should your business achieve an exit or receive follow-on investment.
As more and more exits emerge for equity crowdfunded firms, investors will become increasingly savvy, and that means even greater scrutiny of business plans, pitches and shareholder rights. Be clear and concise about what you expect the future to entail.
Today’s crowd is made up of all sorts of investors, right from the excited graduate investing £10 here and there to the sophisticated high-net-worth individual who’s already invested in Facebook and Uber.
Be attuned to what each part of your possible investor demographic wants to see. Smaller investors may want to support an impassioned project spearheaded by an emotional desire to make a change in a certain industry or sector. And, while this will undoubtedly play a role in whether a sophisticated angel invests, they may look for a more formalised approach to business and will have motivations of a slightly more financial nature than others. Try to cover all the bases.
We are living in an era of entrepreneurialism and opportunism. Crowdfunding has resulted in an unprecedented pool of willing investors, who are ready to support innovative, game-changing startups.
But, it is not easy. The work that you will have to put in will be extensive and is not for the faint-hearted, but if you have the belief and determination to make your business a success, then you give yourself the best chance to make that happen.
So many investors will tell you that they invest more in the team behind an idea than the idea itself. If you have the confidence to follow through with your convictions, investors will be inclined to put their faith and money into your project.