This is a guest post from Custard Factory, the creative and digital quarter in Digbeth, Birmingham.
Crowdfunding can be a superb way to get funding and create a buzz around your budding tech company. Since 2011, equity crowdfunding of tech businesses has taken off. According to Beauhurst, in 2011, just 8 UK companies attracted investment through crowdfunding, whereas in 2018 equity crowdfunders were the most active investor type after just Private Equity and Venture Capital, involved in 366 deals in UK tech.
This young form of alternative finance has no shortage of passionate backers online, eager to support fantastic ideas and products, but for business owners it can still be a somewhat daunting exercise, with a lot of things to consider.
That’s why we’ve asked some of crowdfunding’s big hitters for their top tips, to give your idea the best possible chance of succeeding…
1. “Momentum is king”
Tom Horbye, Head of Campaigns at Seedrs: “When running a crowdfunding campaign momentum is king! On Seedrs, we have seen that businesses that raise 60% of their target in their first week, have an 80%+ chance of successfully funding. Your business’ community, and your ability to reach them, are vital to the success of your campaign. They provide the early support and investment to your campaign that piques the interest of those investors that have not heard of your business before and helps drive momentum.”
2. “Activate your strongest supporters”
Sam Mitchell, Strategic Partnerships Manager at CSMInnovation: “One of the most important aspects of most crowdfunding campaigns is that the initial funding predominantly comes from people you already have a strong connection to – rather than the anonymous ‘crowd’. Furthermore, projects that don’t get off the mark quickly within their campaigns are much more likely to fail. To mitigate this, segment and map out who you think your prospective donors are; activate your strongest supporters and encourage them to give at the start of the campaign to prove momentum and remember to keep marketing to the different prospective donors throughout your campaign. If possible, have a few larger donors in reserve for the final push to get you to your target and ensure you secure the funding.”
3. “Build an all-star team”
Joel Hughes, Head of UK and Europe at Indiegogo: “Thorough preparation is crucial for a successful crowdfunding campaign, and it has two sides. Firstly, you must create a solid base of supporters ahead of launching your campaign. This should include friends, family, colleagues and anyone who is interested in the project. This will help generate 30% of your goal within the first two days – which is a good goal-post for ensuring your campaign has enough momentum.
“Secondly, it’s time to build an all-star team as this will enable you to be more efficient. Ensuring your team is built with people who have the skills needed – such as creating videography for pitch video, photography for product or brand images and marketing for campaigner communications or social media. We’ve found that campaigns run by a team can be up to three times more successful than campaigners who go solo.”
4. “Q&A responses”
Anthony Eskinazi, Founder and CEO at JustPark: “Prepare your Q&A responses before you go live. The forums on crowdfunding platforms are a fantastic way to engage with prospective investors but can also be a huge drain on your time. You want to avoid other participants responding on your behalf taking over the conversation.
“Have a look through other campaigns and read the questions that are being asked so you can prepare some template responses. It will allow you to respond quickly and with well thought through answers. Be personable, honest and if you get asked something technical (i.e. share class rights), make sure you give a factually correct response – don’t guess!”
5. “Good video”
Steven Williams, Founder at Drop Studio: “Crowdfunding videos can give your project the edge. A good video with an interesting story can help turn the tide of your campaign and help you be successful when crowdfunding. Before you start creating your video, make sure that you have a good script, one that is well produced and also ensure you spend enough time planning your positioning statement. By having a good script you can ensure that your video is engaging to the potential supporters of your campaign.”
Gareth Williams, Founder CEO at YellowDog: “Many say the video is critical. The wording that accompanies your campaign provides the logical reason for why people should invest. The video provides the emotion of the pitch and demonstrates the credibility of the team. Emotion and credibility are the real reasons why people invest in you.
Work your own network to pre-fund your campaign as much as you can. If you can start with 35% of your funding target already secured, then you start with fantastic momentum. We had 33% committed when we went live.
Prepare your digital marketing campaign up front. Pre-prepare what you can for your emails, tweets, and posts that you can send at important points once the campaign is live.
Create a version of your business plan that you don’t mind sending to people you’ve never met. You’ll be asked for it, by lots of people.
7. “Engage everyone who believes in you and your business”
Luke Lang, Co-founder and Chief Marketing Officer at Crowdcube: ‘The key to a successful crowdfunding campaign is about engaging everyone who believes in you and your business; from your customers and advocates to your personal and business networks. By doing this effectively, you’ll reap the broader benefits of crowdfunding, which go well beyond an injection of funds as you’ll be supported by a diverse crowd of your biggest advocates who have a vested interest in seeing your business succeed.
Megan Dunsby, former Projects Editor at Startups.co.uk: “Focus on your pre-campaign. Analysis shows that the majority of successful crowdfunding campaigns had at least 30% of their funding target committed before they went live on a platform. Therefore, you really need to work on sourcing investment and building a fan base for your startup before you go live – get the momentum going and other crowd investors will soon want to follow.”
Simon Deverell, Co-founder & Creative Director at Crowdfunder: “We’re seeing more and more startups using crowdfunding as a marketing and validation campaign just as much as a means to raise startup funding. It’s firmly at the top of any launch checklist as a way of getting your idea out into the market place, creating a stir across social networks and reaching out to build a new audience.”
10. “Don’t get tempted to overvalue”
Neil Garner, Founder & CEO at mobile tech and payments platform Thyngs:“Check out the competition – learn how the winners work and ensure you are clearly better/different to any competition fundraising at the same time. And don’t get tempted to overvalue the business. What a lay investor may be willing to pay today might be more than an experienced investor will pay at Series A; nothing like a down round to hack off previously supportive investors!”
So, what have we learned from our experts? Well, good old-fashioned prep and metaphorical elbow grease is the key for crowdfunding success. Ultimately, you’ll need to put in some serious leg work before a campaign is launched, but don’t lose sight of what will make the difference between whether people invest in you and your business or they don’t; your credibility, story and emotional integrity.