Crowdfunding is becoming an increasingly popular way of financing businesses. Nowadays, the world of crowdfunding offers entrepreneurs multiple options with unique pros and cons. Today we will dive into equity crowdfunding, where the crowd invests in a company in exchange for shares. In other words, the investors become shareholders of the company. Although the newspapers are full of successful crowdfunding campaigns, there are many entrepreneurs who don’t manage to complete their funding round. We took a look at some recently completed equity funding rounds and gathered these 5 tips for you to stand out from the crowd.
Engage your network
When your crowdfunding campaign kicks off and you start engaging your network, you are too late. It’s important to gather support from the people in your network beforehand, so you already have a solid base of supporters when your campaign launches. Often, 20%- 30% of your capital will come from your own network. By supporting your campaign, your investors send out a message to their network and the rest of the crowd: “I have confidence in this company, and you should too!” Social media channels are a perfect vehicle for this communication. Through them you reach a big part of your network and your backers can share their support with only one click.
Your campaign is your #1 priority
Running a crowdfunding campaign is hard, nobody will refute this. There is no way you can tackle this as a side project; it is a full time job for your whole team. Once you’ve launched your campaign, the actual ‘field work’ starts. You have to be available at all times to answer questions (click here to learn how to prepare questions about your valuation). Moreover, it is important to provide your backers with regular updates along the campaign: share milestones, clear up commonly asked questions and announce adjustments to your campaign. Perceiving your campaign as a side project might give investors the impression you’re not putting in the necessary effort to reach your funding goal. If you’re not investing all your time, why would they invest their money?
How much is your business worth?
When raising funds in the form of equity, the value of your company is one of the most important aspects investors consider as it determines the share an investor will get in the company in return for his investment. For example: if your company is valued at €500.000, an investor has to invest €25.000 to receive 5% of the shares, but when your company is valued at €750.000, he needs to invest €37.000 to get the same share in your company. An educated guess of your company’s value is therefore not enough; an investor wants to have a thorough understanding of your company’s financial situation. The Equidam valuation report answers the most important questions for investors: what is the business worth and where is this number coming from?
Create a marketing action plan
How are you going to reach your crowd? Which online channels will work best for your campaign, and which events are you going to attend to reach investors offline? These are questions you must carefully address before starting your campaign. Often, your campaign platform can support you with determining how to proceed. Bas Janssen, co-founder of Declaree: “Before we started our financing round on Symbid, we already thought about our marketing and communication strategy we needed while running the campaign. We decided that when we raised, let’s say, 10K we would communicate this to our backers and on social media. This engages your audience, and shows you’re on top of things. Planning these things upfront saves you time and stress and gives you the chance to execute fast.”
What’s in it for them?
Your company pitch can make or break your campaign, so carefully think about a compelling way to present your company and idea. What makes your idea so unique? Which real problem is your product/ service solving? Essentially, what’s in it for them, the crowd? Of course, provide a detailed description of your product and your company, but most of your pitch should be about the customer, the potential investor. An engaging and passionate story will help convince investors you will take good care of their investment once the funding round is closed.
The keywords here are preparation and dedication. Only when you are completely prepared before your campaign launch and when you are willing to give your all to the cause, you have a chance of becoming the new success story featured in the papers!