Crowdfunding is becoming more competitive and more exciting by the day. Campaign targets are increasing, the industry has matured significantly and the barrier to entry rises as platforms strive to put high quality and diverse opportunities in front of their investors.
Being ready for crowdfunding is the same as being ready to take any other form of investment. There are certain aspects that you should be able to do and demonstrate before you go out to the crowd. I’ll run through a couple of the things which I think are important in assessing if you are ready to crowdfund (before you apply).
What’s the opportunity for investors?
When launching on Crowdcube, you have 4,780 characters to showcase your opportunity. As well as showcasing your business success to date, your upcoming performance goals and your team, you must be able to clearly and concisely describe the opportunity. Why should people give you their money?
If you don’t have an idea of how investors might one day see a return on their investment, or you can’t yet clearly articulate this, then you aren’t ready for crowdfunding. Before you apply to take investment, you should be able to articulate how investors will in the future get their money back; and some. You must be clear and concise, making sure you have validated this thinking as much as you can with research and market data.
One of the biggest areas of weakness I see, even in very exciting, high growth potential companies, is not being able to communicate the end goal well enough. It’s unreasonable to expect an investor to buy into your future if you can’t articulate what success may look like for them. It’s also critical to communicate this in a way which is fair, clear and not misleading.
Harness the power of your own network
Every good crowdfunding campaign has a crowd, obviously, but a frequent misconception when considering crowdfunding, is that the crowd is entirely delivered to your campaign by the platform. This thinking will not get you far and can be extremely detrimental to crowdfunding success.
If you’re going to crowdfund you should understand that just like with other forms of investment you will work hard for the money. This means developing and mobilising your own network. Yes, Crowdcube has a very valuable and active investor base, but this is not to be relied upon as the sole method of reaching your target. You should prepare to validate your opportunity as much as possible with one (or a few) lead investors. This can be previous investors, known high net worth contacts, customers, suppliers, friends, family – the list is long and the ability to have a diverse investor base is the beauty of crowdfunding. If you are thinking of crowdfunding, please don’t let this put you off. Every successful campaign had to start somewhere and sometimes it’s just a case of knowing where to start.
Gaining your crowd’s interest doesn’t happen overnight. To make this happen, you need to be willing to build a h4, multi-channel plan of action to mobilise your crowd and generate that initial interest in your opportunity. If you’re thinking of starting your crowdfunding journey today (and you can articulate the opportunity for investors), you should be prepared for a couple of months of networking events, investor meetings, actively driving your social media accounts, good use of email and more. Interest from your own network is great validation for the investing public. In a room full of strangers, people are often nervous to be the first to the dance floor. Who can you rely on to get the party started?