Winning at crowdfunding
Content-powered investing
Can you find the fun in funding? Finding investors can be a tough, time consuming journey that usually starts with convincing friends, family (and fools) to help you kick-start your venture. But a fast-growing trend to help you scale your fundraising is equity crowdfunding.
Crowdfunding is content-powered investing. It combines the utility of fintech platforms, content marketing, social media and tax-efficient incentives to generate excitement around your business and fundraising opportunities. Ultimately, it’s about harnessing the passion of your customers and reach of your network to build powerful connections with potential investors.
Crowdfunding is hard work , but it can also pay off big time, enabling businesses to drive investment from smaller investors they would normally find it hard to reach. When new ventures use crowdfunding to connect with their local and online networks, they’re drawing on the potential of communities to amplify their message.
Our start-up partner, women’s cycling brand Casquette has created a worldwide network through high-quality content that resonates with customers who love cycling. Casquette has built on this – we’re now raising funds and gaining investment from that passionate audience to develop it further into a global lifestyle brand.
High-quality content reigns supreme
This is an example of how crowdfunding can help businesses to build on early momentum, allowing founders to scale their fundraising efforts and kickstart their venture. Fintech has enabled it in its current form, with platforms like Crowdcube and Seedrs being where investors congregate and pledge funds.
The growth of crowdfunding
Of course, equity crowdfunding has its critics and understandably so. There have been failures of crowdfunded start-ups with little or no funds returned to shareholders. A great website dedicated to keeping an eye on the market is: https://ect.buzz. It (of course) utilised crowdfunding to build its own publishing platform.
But crowdfunding shouldn’t be dismissed as dangerous or a fad. It’s certainly not new, with examples of campaigns found in past centuries and decades. In the late 19th century, the US Government was unable to deliver funding for a base for the Statue of Liberty. However, a campaign led by a newspaper generated donations from over 150,000 donors.
There’s power in a crowd…
One of the first modern examples of crowdfunding was launched in 1997, with an online campaign run by American fans of the rock band Marillion, which enabled it to tour the US. The band went on to use crowdfunding on the web to fund the production of its next three albums.
Fast forward to today and equity crowdfunding as a model is here to stay. And it will grow. Forbes is projecting that equity crowdfunding may well surpass standard venture capital models in volume very soon. Numbers backed up by the World Bank reckon it could hit over $28 billion worldwide by 2025. However, those projections turn out in future, crowdfunding is set to continue.
40:30:30 vision
For a successful crowdfunding campaign we advise you to aim for a phased fundraising process, with a 40:30:30 split.
Raise at least 40% of funds before starting the campaign to prime the pump and ensure a high level of success. This means that the loyal supporters and anchor investors from the early days of your business will always be important.
Then, aim for 30% or more funds to come from your existing customers, fans, advocates and others in your sector. This is where you can work to bring content to people who will be most interested in acting on it.
With over half of funds raised, this makes for enhanced credibility – by now you’ll look hot! This should bring in angel investors looking for interesting opportunities who could provide the final 30%.
The path to this goal can be further smoothed if your business has approval for funding through Enterprise Investment Schemes, seed or otherwise. The benefits offered by these tax-efficient vehicles will only increase your proposition’s appeal to potential investors.
Making it happen
We have a clear process for managing a successful crowdfunding campaign:
Campaign: Develop an exciting & engaging business plan and growth story. This can then feed into the planning of your crowdfunding campaign, helping to ensure it sells that vision.
Content: Create high-quality content for a suite of digital assets, with a campaign video being key. Using knowledge of your audience, build your tribe by distributing content on relevant social platforms.
Connect: Be ruthless with social targeting. It’s used in digital marketing as a highly effective method and new businesses need to make the most of it.
Close: Create scarcity, as a time-honoured advertising technique, by highlighting the campaign closing date. Many pledges are typically received in the final phase, with a groundswell of interest from larger investors and newer customers.
Tapping into the very basic fear of missing out can work, making all the difference to campaign efforts. It also gets to the heart of crowdfunding. A strong campaign, through its content and approach, will get people excited and engaged. That energy is what will help firms win at crowdfunding.
If you’re looking to raise money for your business, then talk to us about your crowdfunding ambitions. We’d be happy to discuss our approach – just get in touch at hello@vidamedia.co.uk.