Synopsis: If you want to learn how to start crowdfunding, you need to know the steps that lie ahead. This article lays out an exact roadmap to follow, to raise money through equity crowdfunding for your startup!
The Exact Steps How To Start Crowdfunding
It’s normal to feel overwhelmed by the prospect of equity crowdfunding. Doing it successfully involves a ton of hard work, outreach and sacrifice – and that’s before the campaign goes live!
To make things even more challenging, there’s not really any way to get hands-on practice.
Why is this a problem?
Cast your mind back to your very first attempt at a common day-to-day business task – say, making your first sales call. You probably recall that you were not perfect… you may even laugh at the memory of how embarrassingly bad you were. But that’s OK, because even if you fell flat on your face the first time, you got to try again the next day. Each sales call doesn’t take very long, failure is feedback, and improvement can be rapid over a short period. Learning sales has a fast learning loop.
By contrast, equity crowdfunding takes much longer.
How much longer?
Imagine if your first-ever sales call was something you spent months preparing for.
Then imagine the pressure of finally dialing that number… knowing that if you failed to make the sale, then you would never get to try again.
Equity crowdfunding is like that. Offers take months to execute. And companies that experience equity crowdfunding failure do not get a second chance. In the years I’ve been observing the market, I have never seen a company try equity crowdfunding, fail, and later launch again and raise money successfully.
So, I’ve put together this comprehensive guide on how to start crowdfunding for equity. These are the necessary steps to get it right, first time.
1. Set Your Objective
The first step before embarking on any undertaking is to ask a question which may seem overly simplistic at first: what do you want? Yes, it’s a small question, but an amazingly powerful one. Having absolute clarity over your objective makes everything else so much easier. Whenever you find yourself facing competing priorities and demands for your time (i.e. always), you should return to this question to make sure you remain on course.
Once you have made your first try at determining what you want, examine it and take it back to ever-more basic levels… until it is no longer possible.
Let’s say you want to raise $500,000 from investors.
Why do you want to raise $500,000?
It might be to grow your business and double its profit.
Why do you want to double your business’s profit?
Because it will allow you to buy a more spacious house for your family.
OK, that seems like a good objective. Keep this objective in mind to stay motivated when you’re facing the hard work, the late nights, and the inevitable setbacks that will come. Write it on a post-it note and pin it to your bathroom window if it helps to remember why you decided to ask how to start crowdfunding in the first place.
2. Take Stock Of Your Situation
Once you have solidified your objective, it’s time to engage that vision with reality. Just because you want (or need) to raise $500,000 doesn’t mean that it is necessarily going to be possible.
Before setting off to conquer Mount Everest, you need to make sure you’ve packed some mountain-climbing equipment. When deciding how to start crowdfunding (or any kind of product launch), it is just the same.
Look at the resources at your disposal. You need to either have a large base of raving fans who can give your campaign irresitable momentum, OR some large “cornerstone” investors lined up already who want to come on board (as social proof to others). (Preferably both).
If you’re mostly looking for lots of small investments, here are a few questions to be asking.
- How big is your crowd?
- Do they want to invest in you? (If you don’t know – ask them!)
- If not, why is that? Can what would change their mind?
Once you know your objective, and what you’ve got to work with, you’ll be much better positioned to know whether equity crowdfunding is going to be the best way to achieve that goal.
3. Survey The Platform Choices
Making the right choice about which equity crowdfunding platform to choose is critical.
Unfortunately, when it comes to equity crowdfunding, the choice isn’t as simple as in rewards crowdfunding, where it usually comes down to a choice between Kickstarter and Indiegogo. The choices that will be open to you will probably be based on where your company is based. If you’re in the UK, you can use a UK equity crowdfunding platform… but you probably can’t use a USA equity crowdfunding platform.
If you don’t know what the platform choices in your country are, there is one surefire way that helps when you are looking for anything: Google. Type in “equity crowdfunding” and your country, and look through the first 20 search results.
Another great source of lists of potential equity crowdfunding choices are industry bodies, such as the European Crowdfunding Network. There, they list their members. If you’re outside of Europe, there are other industry bodies elsewhere too.
You should make sure to get clear about what each platform can bring to the table. In particular, how big is their investor base, and will they have interest in investing in a company like yours? You want to use an equity crowdfunding platform with its own investor base – new investors, beyond those that you bring yourself. The smaller platforms cannot offer this, meaning you’ll effectively have to do most of the work yourself.
4. Get Your “True Fans” Primed
Even if you take away nothing else from this article about how to start crowdfunding, then remember this: An equity crowdfunding launch needs to have momentum if it’s going to succeed.
The best way to ensure you’ll have momentum is to build a launch team of your true fans. Your “true fans” are a subset of your crowd – your biggest advocates, your repeat customers, the ones where the relationship goes a lot deeper than usual.
They’re the ones you’re going to be counting on when your equity crowdfunding launch comes along, so it’s essential to warm them up, well in advance of your actual launch.
If you contact people and tell them that you’re launching the very next week, it will be difficult to get their buy-in. They might be away, or busy, or just feel like you’ve approached them last-minute.
Instead, involve them earlier in the project and they will feel ownership of the project.
If you contact them several months in advance, they’re much more likely to agree. If it’s far enough in the future, people will commit to a lot more… because it seems so far away. Then, when the time comes, they will remember that they agreed to do it, and follow-through with what they’ve already agreed to.
5. Surround-Sound Effect
The key to making a big splash with an equity crowdfunding launch is to make it visible across multiple different channels – what I call the “surround-sound effect“. People who see your company mentioned just once will probably ignore it, but the more times they see it, the more curious they become. They’ll start to recognize your company, and eventually, want to know what it’s all about.
It’s the same reason why big brands employ a multi-channel marketing strategy. They don’t just put all their resources into advertising in one place – they make sure to appear on TV, in newspapers, subway billboards, sponsor elite athletes, and so on. It all helps to build recognition.
Some of those types of channels that multinational companies use are likely out of your reach, but the same concept applies. You don’t want to rely entirely on Facebook advertising – you want to use your email list, in-person outreach, appear at events, and other places too.
That’s how to start crowdfunding for equity.