Synopsis: Sometimes a nudge in the right direction is all it takes to make the difference between success and failure. These 10 equity crowdfunding tips are based on observations of successful equity crowdfunding campaigns from all over the world – read on to find out the secrets to success.
The Top Equity Crowdfunding Tips
1. Start Off With A Crowd
One of the toughest things about building a startup is getting initial traction. Going from “Zero To One”, in the words of Peter Thiel. As I wrote about in my article on crowdbuilding, you have to build your crowd before you crowdfund. This is the most challenging of the equity crowdfunding tips, but it cannot be skipped.
Don’t expect people to invest in your company if you haven’t built a strong relationship with them first.
How do you build a crowd? It can be boiled down to these key concepts.
- Start by knowing what your company is all about – your mission statement.
- Then you identify what sort of person will fall in love with this mission – these are your loyal followers.
- Then go where they are to be found – whether through online communities, in-person, or elsewhere.
- Then you must get their attention and tell them about your company and its mission.
- Then to build their loyalty, you must engage with them as real human beings.
What exactly each of those steps looks like is different in every specific case – but follow those basic principles and you’ll be in terrific shape.
Equity crowdfunding requires substantial trust. Building this trust requires strong engagement and meeting (and exceeding!) their expectations over a long period of time. The lesson for equity crowdfunding is: start building trust with your crowd well in advance of asking them for money.
2. Get Your Story Straight
There needs to be a solid reason for your company to be doing equity crowdfunding in the first place. Each funding method has its plusses and minuses. A strong basis for crowdfunding will immeasurably help your case with gaining the approval of the crowdfunding platform to go live, and giving the investors confidence to back you, once you do.
- Why is it that your company needs outside capital in order to reach the next level of its development?
- Why have you decided that equity crowdfunding is the ideal means to achieve that?
3. Call In The Experts
Professional help can make all the difference to your chances of equity crowdfunding success.
The fact that the author of this article is a provider of such services, doesn’t make this point any less true. If you don’t have internal expertise in the equity crowdfunding essentials, do yourself a favor and get help.
Don’t let your efforts be derailed through a poor-quality video, copywriting which doesn’t convert, a marketing outreach plan which won’t succeed, choosing the wrong crowdfunding platform, or having an unreasonable company valuation.
Remember, equity crowdfunding is a one-time shot. You don’t get a second chance – it needs to be done right, first time. The best of the equity crowdfunding tips might be to realize what you’re good at, and what you’re not.
Also remember that you are going to be spending weeks and months of time on preparation, and there is likely hundreds of thousands (or millions) of dollars at stake. It’s worth paying for the best possible advice.
4. Take The Time To Choose The Right Platform
Whether they decide themselves, or get outside advice, startups must make the right decision over which equity crowdfunding platform to choose. It’s probably the most critical thing to get right.
Unlike Kickstarter (for rewards crowdfunding), there is not any global equity crowdfunding platform which is open to everyone. Which options are open to a specific company is typically based on where that company is incorporated. The majority of the time, only American startups can use American equity crowdfunding platforms, and only New Zealand startups can use New Zealand equity crowdfunding platforms… and so on.
Startups need to ask the hard questions about what each platform can do for them. The crowdfunding platform is taking a fee from all money successfully raised, so it definitely pays to make sure to get value for this. One of the key questions is: how large is their audience, and is it a good match for your type of company?
The real value-add of an equity crowdfunding platform is their ability to bring new investors to your company – beyond those that you bring yourself. Get clarity over how big the platform’s investor audience is, and what access you will have to it.
5. Plan Ahead
Failing to plan is planning to fail. Equity crowdfunding cannot be done effectively “on the fly”. You need to have a strategy, a timeline, and the ability to stick to it.
This is one of those equity crowdfunding tips which is much easier to say than to do – there will always be modifications to your timeline – but lay out your path, and you’ll be much more capable of hitting deadlines.
6. Do Marketing To Your Own Crowd First
The easiest, and best, targets for your equity crowdfunding efforts are those who you already know, and who already know you. Get your core supporters primed and ready to go, by telling them of your intention to crowdfund before you make it known to anyone else.
Your biggest fans should be reachable through your email list (best) or social media. Tell them you are looking at launching a crowdfunding campaign, and ask them whether they would be interested in supporting you. This way, you can get valuable feedback about your crowd’s potential to support your equity crowdfunding, before you actually need to commit to going through with it.
7. Start With Your Target & Work Backwards
You need to set a minimum amount of money to raise. This amount needs to be determined with regards to your objectives, a budget you set to reach those objectives, and a pathway to sustainability (if your company is not yet already profitable). Putting together a financial model is the best way to do this.
Once you know that target, look at all the various marketing channels you could access, and estimate:
- Reach (number of people you can get your campaign in front of)
- Conversion (% of people who see your message, who go on to actually invest)
- Value Per Investor (You can get an estimate of this by looking at past similar crowdfunding campaigns).
As a simple example, you might estimate:
- Email List – reach: 5,000, conversion: 10%, value per investor: $200 = $100,000
- Pay Per Click Advertising – reach: 15,000, conversion: 4%, value per investor: $50 = $30,000
- Direct Outreach To Large Investors – reach: 20, conversion 10%, value per investor: $20,000 = $40,000
It’s true that the actual numbers will differ from your forecasts, but the point is to give it some thought. In the above example, the company thinks it can raise $170,000 using their best assumptions. If they were hoping to raise, say $1 million, then it tells them that they’ve got to do more channels, or increase their reach with their existing ones.
8. Launch With Momentum
Through the previous equity crowdfunding tips, you will already be a long way to launching with momentum. I’ve previously written about equity crowdfunding momentum here.
The key takeaway is: investors follow each other. This makes the first few days of your campaign absolutely vital. Make it look like your campaign is sure to succeed, and other investors will follow. But if your campaign is “stuck”, you’ll face a massive uphill battle to get anyone interested.
So much hinges on the launch. Make sure you nail it.
9. Give Your Campaign Your Full Focus
Equity crowdfunding is intensive, and you’ll definitely want to devote as much of your focus to it as you possibly can. Other startups have described equity crowdfunding as being more than a full-time job – and it’s easy to see why, given all the preparation required in advance, the questions asked by would-be investors, and the ongoing promotional activities which continue during the entire life of the campaign.
While it’s admittedly hard to put everything else on hold – your other business activities and customers won’t wait on the sidelines – do not attempt to run your equity crowdfunding efforts when you are already stretched for time, such as an intensive period of staff growth, or a major new product launch.
You’ll only serve to burn yourself out if you try to do everything at once.
Plus, if your equity crowdfunding campaign doesn’t have your full focus, you won’t be able to do a proper job of it.
10. Afterwards, Do A Post-Mortem
Whatever the outcome of your campaign, one of the very best equity crowdfunding tips is to make a record of the experience. Equity crowdfunding is intensive and, there are surely many lessons to be learned – but only if you take the time to commit them to writing. Otherwise, you will be bound to forget them.
This post-mortem doesn’t need to take a long time, but it should be done as soon as possible after the campaign is over and the dust has settled. In particular, jot down the answers to the following questions.
- What worked?
- What didn’t work?
- What surprised you?
- What would you do differently next time?
- What would you do the same next time?
Equity crowdfunding may be something you do again someday – and you will wish you had access to these brief notes when the time comes. Even if you never do equity crowdfunding ever again, the lessons may be just as applicable for a future product launch.
One of the best equity crowdfunding tips (post-campaign) is to also ask your advisors and the crowdfunding platform for their input into this post-mortem too. What did they notice about your campaign, which was different to the other campaigns they have seen? These insights will help you get a complete picture of how your campaign went, to get the maximum learning from the experience.