The A-Z of crowdfunding
Crowdfunding is a way of raising money from a large number of people via online platforms. It's often used to supplement a lead investor and promote a product or service at the same time.
In the start-up space, crowdfunding can and is seen as a way to raise funding in a less traditional format, offering businesses the platform to market their product and provide social proof to would-be investors.
Why crowdfund?
Speaking to Joel Freeman, co-founder of Heights, he explained their reasons behind choosing to crowdfund through Seedrs. 'We wanted to build a community, a community of customers to invest in the business and it felt very symbiotic to do that. When you have over 1,000 people that care about the company or the product, that is very powerful.'
Joel further explained their experience and why they would recommend crowdfunding. 'We decided to go with Seedrs in the end, mostly because they started to get a lot of brands on their platform. But, Crowdcube is also very good to be honest, both of those platforms are and they both perform a role. Once we had done one round with Seedrs though, we decided to stay with them.
We were really fortunate in that our success was instant and so was the momentum with the campaign on Seedrs. The response was right there and so good. We filled the allocation right away, within a couple of days, having done the campaign work for the pre-registration. We had one main campaign in 2020, a pre-emption on a round in 2021, and then another one in 2022. And we surpassed our targets each time.
It's an amazing opportunity if you want to create a consumer brand and bring people into the fold of your mission. Never underestimate how powerful it is having something like a 1,000 people supporting your brand. My advice? It’s a campaign so treat it like that. If you don’t give it the love and attention it deserves, then it’s hard to get people to understand your story. Be sure to get creative and create assets to tell the narrative to a wider audience. The assumption that it will just 'work' won’t get you there.'
Hints and tips
Offering further insight into the process from start to finish, John Auckland, founder of Tribe First, a specialised agency that combines campaign management and communications strategy who have guided many businesses through crowdfunding, had this to say:
'Ultimately timing is everything, so plan ahead. There are a number of key things to consider and understand about undertaking a crowdfund campaign.
Before you start
- Allow two to three months for preparation and approximately one month running time.
- Both Seedrs and Crowdcube, the two most used crowdfund platforms in the UK, have pros and cons – do your research to see which one best suits the needs of your business.
- Find a lead investor - this lead/anchor investor is looking for things that are underpinned and that everything is true, so be transparent and organised. Have a list of anchor investors ready to connect with. Between 30-80% should have been raised through a lead investor ahead of a large crowdfund campaign.
- Split your pitch deck into two parts – 20 slides in the investor deck and then a presentation deck of 5 to 7 slides, allowing for 10 to 15 minutes to present.
- Be sure to create an executive summary as a stand-alone document; investors don’t always have the time to go through the full deck from the hundreds they see a year, so an impactful executive summary could be the difference between investment or not.
- Create a short video, around two minutes long, to run alongside an executive summary. Don’t make it from a consumer point of view, target your investor and tell them what they need to know and are keen to hear.
- Your campaign pre-registration page is vital – use marketing functions to direct your audience/customers to it to gain essential momentum before the campaign goes live.
During
- When you’re seeking investors, you should be looking at industry events as well as your clients and customers. Don’t be scared to go to your customers and ask for investment, use discounts or other offerings to sweeten the deal. In the tech and SaaS community, word of mouth is powerful so use that to your advantage to connect with potential investors.
- In most crowdfund campaigns, 50-70% of target are usually met by the end of day one.
- Once your campaign has gone live, you will be very busy for the first three to four days. Answer any queries you get from potential investors quickly. Investors may not stay engaged for very long so you want to catch them when you can.
- After those initial few days, the marketing outreach begins over the coming weeks. Demonstrate yourself as a thought-leader in your sector. Don’t market the crowdfund campaign directly but drive traffic to the website by offering valuable content that will lead potential investors to those articles to understand your product and brand that should then encourage them to invest.
Closing
- The last two days of the campaign you should see a 20-30% uplift. Be sure to go back to every single one of those who pre-registered and remind them of the upcoming closing date. Perhaps create a video of other investors who have already committed as a show of support and a demonstration of the brand’s value to share with those yet to commit.
- After the end of the campaign, know that closing will take longer than you think so be sure to allow for that. Give yourself plenty of cash runway as it can take a while before all the funds come in.'
Is crowdfunding for you?
A successful crowdfund campaign can give you the opportunity your business needs to scale and grow as long as you do your homework. Nurturing the campaign through preparation and pre-registration stages as well as the time that it is live is necessary to hit your target.
Taking all of that into account, could crowdfunding be the right solution to take your company to the next level of growth?
