Synopsis: Crowdfunding failure sucks. No-one sets out to fail, but it can happen. If you’ve suffered from an equity crowdfunding failure you NEED to read this article. It will show you what you need to do next, in order to the whole experience into a positive and move forward.
Equity Crowdfunding Failure Can Happen To Anyone
If you follow the advice on this blog, I think you stand a great chance of running a successful campaign, but it would be foolish to discount the possibility that things won’t go smoothly, and that your offer is a crowdfunding failure.
What do you do if you craft a strong strategy, nail your pitch, go live on the platform of your choice, build a professional offer page, run your crowdfunding promotion, launch with good momentum and then … nothing?
Your offer doesn’t catch fire. Investors aren’t enthused by what they see. The progress bar remains stubbornly stuck well below your target amount, and no matter how many times you refresh the page, it stays there. You try everything to restart things, but nothing works. Your worst fear – crowdfunding failure – has become a reality.
Sometimes, it’s just not meant to be. Not every company will get funded. And the risk of public failure is one of the downsides you need to weigh when considering crowdfunding pros and cons.
“There will always be some campaigns that fail because the crowd, in its wisdom, reject them,” says Frank Webster of Seedrs. “That is the intelligence of the crowd, and failed offers are part of a well-functioning equity crowdfunding marketplace.”
The fact that ‘some offers need to fail’ will not make you feel any better, if you are in charge of one of them. No startup sets out to fail. The first reaction will likely be to blame yourself, or those around you. Yes, things could have gone differently, but what you really need now is a plan for what to do next.
Use Crowdfunding Failure As A Lesson, And Motivation
Whatever hurt you may be feeling, you must show a brave face to the world. People tend to respect and even admire those who try, fail, and face their failure with dignity. However, those who fail and point the finger at others may gain pity, but they are more likely to burn bridges and invite scorn. Your reputation will be best enhanced if you take the setback in your stride and press on regardless.
The ones that did back you should be thanked for being willing to support you. Many of these people will remain your customers even after your crowdfunding failure. Others may have ideas for what you should do next. Seeing your campaign fail, and your determination to carry on regardless, may even strengthen their loyalty to you.
Ask the crowdfunding platform for a post-mortem into what happened. Ask them to be brutally honest with you about why things went wrong. If they think you didn’t work hard enough, or overvalued your company, you need to hear it. Rather than take it personally, listen to what they are saying – it is some of the most honest, useful feedback you will ever hear.
Write down the lessons. A failed offer will also have taught you a great deal. You will have gone through an intensive process, with investors questioning your business model at every turn. You’ll have upped your game in promoting your company. You’ll have tried lots of things – some of which worked, and some of which didn’t. In the months and years to come, I guarantee you will wish you had made a record of the entire experience, and all the learnings. As they say, the shortest pencil is longer than the longest memory.
Maybe it wasn’t the fault of the platform, or your strategy, or the effort you put in – maybe your business just wasn’t worthy of investment at this time. Take the time to look at what milestones your business may need to reach to secure investment in the future and, indeed, reconsider whether you need investment at all.
The days after a crowdfunding failure is a great time for deep introspection to decide where to go from here. If you decide that you still need funding to progress, the process will have left you well-prepared to try through other means.
“My advice for any business that has failed to finance would be to go back to basics and consider what investors are looking for in an investment opportunity and, where possible, try and tick as many of those boxes as possible.” – Crowdcube Co-Founder, Luke Lang
Even if all other funding options are closed to you, you aren’t defeated. It may take you longer to get where you want to go, but building a business through bootstrapping is an entirely legitimate way to go about things.
Rather than hire an extra salesperson, you can be more targeted with the sales resources you already have. Rather than building a new physical factory, you can contract out the manufacturing. Rather than pay an advertising agency for promotions, you can find smart, inexpensive ways of using content marketing to drive traffic to your site. The constraint arising from a crowdfunding failure will surely build creativity.
Two Crowdfunding Campaigns – One Success, One Failure
Jasper Versteege has run two equity crowdfunding campaigns – one of which succeeded, and one of which failed. This makes him very well-placed to comment on both outcomes. In 2014, Winner Takes All raised €80,000 on FundedByMe. One and a half years later, they tried a second campaign, but were not able to repeat their success.
Jasper recalls: “The second time around, we had less preparation and focus. In our first campaign, the campaign was well-prepared and we took time to do a really good job. In our second campaign, the business was running out of money, and we were trying to launch a spin-off of our crowd lottery concept at the same time. This meant my full attention couldn’t be on the campaign, out of necessity.”
“We couldn’t delay the campaign because the need for money was urgent. We couldn’t delay the other stuff either. Everything had to happen within 3 months, or the business wouldn’t go on. The result was I couldn’t give the campaign the attention it needed.”
As a result of the crowdfunding failure, Jasper’s company ran out of money and went out of business. “I had to tell all the shareholders from the first offer that it was over, and that their money was gone. It was hard, but I was always clear about the risks. But I’m not done. I am already discussing with some people about reentering the market.”
Remember that crowdfunding failure is feedback. Maybe the timing isn’t right, or the presentation is off. But never give up on your dreams.