Raising money for your company through crowdfunding can be a full time job. Here are the 3 P's you need to get it right.
There is no denying that crowdfunding has passed fad status and is now a mainstay in the way that entrepreneurs raise cash to fund their business.
However, crowdfunding remains a very hit or miss method of raising finance as estimates for crowdfunding campaign success range from 20-40 percent (not all platforms publish data).
Further to this, launching a crowdfunding campaign takes a lot of time and effort. Many entrepreneurs have described raising through crowdfunding as a full time job, which can distract key employees from doing their day job.
So, if you are considering going down the route of crowdfunding, here are a few key pointers you should adhere to.
Related Article: Does Crowdfunding for Startups Actually Work?
It’s amazing to think that a tool developed by a Swiss team can, within four hours of your campaign, predict with 76 percent accuracy if your campaign will be a success or a failure.
The tool takes into consideration, amongst other things, how many visitors your campaign page has had, how much has been pledged, and how much traffic is being driven to the site by outside sources.
Four hours does not give you much time to do much of anything so the name of the game is preparation and getting a fair amount of coverage, and commitment, lined up before your campaign goes live.
In fact, while there is a common belief that a campaign should have around 30 percent of the funding target already committed before it goes live, recent data from AltFi suggests that most successful campaigns have closer to 50 percent committed before launching.
Line up as much as you can, not just in terms of commitment to the funding target but in terms of potential PR/Social Media coverage. Get the word out that you are looking to do a raise and get people on board early.
"Data suggests that simply having a video as part of your pitch improves your chances of success to at least 50 percent. Having a great video pitch can improve that figure significantly."
The key to every great video pitch is telling your story in a concise manner. If you’ve not read Talk Like TED, I suggest at least listening to the audio format as there are some great insights into how to get your message across and really connect with the audience.
First and foremost, you should be vulnerable. Potential contributors want to feel like they know you and what you are aiming to achieve in addition to knowing how they will benefit from contributing to your campaign.
The crowd can sense when someone is not being honest so don’t try to be or do too much. Keep it simple so they can understand and relate and above all else, just be you.
Beyond the pitch video, the rewards levels you set are incredibly important to the success of your raise. The most common pledge amount on kickstarter is $25 so regardless of how much your actual product costs you need to develop rewards that are on or around this mark or you stand to miss out on a high number of contributors.
Related Article: Get In on the Action: The Best Videos Used in Crowdfunding
To perk the interest of those contributing larger amounts requires a touch of personalization (another P but not worthy of its own heading).
Early bird specials, customization to the product, introduction of the person as a character or naming of a particular version of the product can all entice larger contributions.
I’ll say it again, raising funds through crowdfunding is a full-time job. One can’t expect to put a campaign live and to sit back and watch the money flow in.
Further, one would be naive to expect good initial traction to carry on throughout the entire campaign. In fact, most successful crowdfunding raises follow a similar path to the one the AXIOM Beta campaign went through.
All of the preparation should pay off with your hard work leading up to the launch leads to strong initial traction in the campaign (see point #1).
Unfortunately, the hard work before the round only goes so far and after a few days of your network spreading the word, things begin to cool down.
This period, dubbed the crowdfunding valley of death, can last for half of the raise or more (see the slow growth at point #2). The best thing to do when you hit this slow patch is to dig your heels in and double down the effort.
Chase all of the journalists (starting with the local ones) who said they may cover your company or raise, chase all of your contacts of contacts of contacts and ask them for even a small contribution or just a share, and then do it again a few days later.
Related Article: Inside Equity Crowdfunding: The Quire Difference
As you approach the end of the round things should slowly pick up again (see point #3) as the audience realizes they may miss out on the chance to be an early adopter of what you are doing.
Often times entrepreneurs will offer special rewards at this stage to try and entice early contributors to up their contribution.
Ultimately, you may hit your target with a few days to space and at this point (see point iv) all of those waiting for a sign that this is a good idea will jump on board.
It’s a jungle out there. Don’t lose your cool. And if you are interested in chatting more specifically about equity crowdfunding, leave a comment, check out SyndicateRoom, and we can talk.