Crowdfunding for startups is a valid method to raise initial capital; however, in order to attract investors, it’s necessary to develop an accurate crowdfunding campaign strategy.
In this blog post, we will talk about the basics on how to build a successful crowdfunding campaign. There are many other resources available on this topic and we encourage every ‘crowdfunder’ to do the required research before embarking on such a journey. The crowdfunding industry is still in its infancy stage and there will be numerous changes in the future. Keeping up with the recent research on the crowdfunding do’s and don’ts for a successful campaign is pivotal.
Each crowdfunding campaign needs to be optimised and carefully planned in order to take off; timeline and planning are two of the key factors in determining the level of preparation of the crowdfunding offer. We had a look at past successful campaigns to identify some of the factors and crowdfunding secrets that will help you to be ready when meeting potential investors.
The first element when preparing for a crowdfunding campaign is setting up a business plan.
“The most important ingredient in your business plan is making sure to plan for the plan not going according to plan.” - David Feldman
What is a business plan? A complete and concise business plan includes several equally important sections.
This is what investors first read. It is crucial to convey your message in this section as clearly as possible as most investors do not get past this point. In other words: How would you describe your business in a small paragraph in plain English?
Describe your market size, the target market, the geographic market, the demographics of the local population, the market density (crowded or fragmented) and key competitors.
Marketing and Sales complement each other and they are at the core of business operations. You should be able to answer questions such as what market needs is the business going to satisfy? What is unique about your product/service? How is it different than your competitors?
Include stages of development, key business events and milestones achieved to date.
Here is where you describe different risks that can affect the business negatively. As a matter of fact, this is your insurance policy against future claims by angry investors.
Financial information is definitely important for an investor who is thinking of whether to invest in startups or not. This section should cover information and discussion regarding the business liquidity, capital resources, revenues and expenses including:
Use of Funds and Valuation
State the intended use of the raised funds through the crowdfunding sites as specifically as possible. This will help investors to understand the forward vision of the company in the near future. Other information should include the target offering amount, the deadline of the campaign, share price, equity offered, the minimum number of shares offered and the type of shares.
The valuation determines the share price. Here is where inflated valuation can have a negative impact on the business. Try to limit the funds raised to a minimum or to what you need. Investors must feel comfortable with your valuation and financial projections.
COMMUNICATING WITH YOUR INVESTORS
“The most important item on any prospective fundraiser’s list is to start building relationships with new people that could potentially fund them some day.” Joy Schoffler
What has been detailed above is just the tip of the iceberg. When preparing your crowdfunding campaign, you can include as much information as you want. However, it is not about the quantity rather it is the quality that matters. Clear and concise information will help to deliver the message intended effectively. Most importantly, do not forget to thank the investors and keep a good relationship with them.