ECf pitches and campaigns vary enormously. Having studied many hundreds since 2011, we know what makes for a good campaign and what will end in tears.
Here are our 7 essentials to a successful Equity Crowdfunding Campaign –
Make sure you have a group behind you ready to invest before you launch – an initial hit to take you as close to 33% funded as possible has been shown to be key. Be sure that you have prepared yourself and anyone helping for 2 months of hard and often frustrating work – taking you away from your day to day business routines. Ensure your accounts are up to date and that you have filed with CH early if this is possible.
Ensure the explanation of the business model is clear and easy to understand. Have a viable marketing plan and workable budget – you need to thoroughly understand how these will work to deliver future revenues. Do not have fantastic growth figures you can only back up with ‘hope so’. Platforms may try to persuade you to up your ambitions – only do this if you are comfortable with them. Traction should be real ie dont use Groupon or similar to inflate customer numbers. There is no point in taking peoples money if you never had a chance of delivering what you promised.
your business so that investors feel they are getting a bargain – this should be based on a value today plus an uplift for the potential. Dont use DCF or NPV formulas – they are simply not relevant for early stage or start up businesses. Remember you want people to risk their cash so do not be greedy. 50% of something is worth a lot more than 90% of nothing.
Answer all forum questions promptly, politely, professionally and honestly – however irritating and stupid they maybe. Arrogant answers where entrepreneurs assume they know best are disastrous. Investors like to feel they know what they are talking about, so help them out. Check the forum is working properly at least once a day. It is possible to persuade people to invest and likewise the wrong approach will put them off. Update forums with important news about the business but dont flood them.
Arrange for some friendly investors to put their money in in stages as opposed to one lump – this will keep you high on the list of pitches and make the pitch look active. Ensure you arrange an Investors Meeting to take place about half way through your pitch, dont leave it till the end. Be well prepared with a well thought through presentation.
The pitch will hit a brick wall at some stage – get your list of contacts and work them to restart it. Dont give up. If people say they would consider investing at a lower valuation then look seriously at this option. Be prepared to over fund as this will get you on average another 20% in capital and its easier to get the funding now than to have to go again later.
If you can, be generous with your rewards – look at the long term benefits no the sort term hit. Smaller investors are often happy to take a punt on the rewards alone if they are enticing. Imagine you are just pre selling products/services at a discount.
More in depth advice on running a successful ECf campaign is available free of charge by contacting us using the contact page on this blog.