How to raise money for your equity Crowdfunding campaign
Great ideas come in all shapes and sizes. It’s pretty hard to get funding for them though. As most entrepreneurs will tell you, an idea is not enough; you need to put in the work and turn your passion into your work. Only then can you pitch to your peers.
Most of what people know about pitching for investors comes from TV shows like Shark Tank or Dragon’s Den. And I agree - you can learn a lot about selling an idea from those shows. Mostly that you can be wearing flip-flops and still make $1 million!
But there’s a big difference between crowdfunding your company and trying to persuade Mark Cuban to invest in it for a 10% share. First and foremost, that’s entertainment. This is your life. Your work. Your dream. You need to put in a lot of work. But, the good news is - we’re here to help. Turn off the TV and follow these 10 tips on how to write a killer pitch for your equity crowdfunding campaign.
1. Keep it simple
Remember, you’re not pitching to seasoned investors, you’re trying to get everyday people to invest their hard-earned cash in your product. Put the numbers aside and focus on what matters to them: what your company does, what your goals are and how this will impact them, their loved ones or a cause they care about. Show them the value your company can bring into their life. Keep your message simple and clear. A pitch allows you to sell the idea, don’t try to push the whole business plan. You can get down to the nitty-gritty later.
2. Do your research
This is one of the most important, yet often overlooked, aspects of crowdfunding. People often tell themselves that some initial research will suffice and they will learn and discover more along the way. However, spending more time in your initial research phase allows you to focus on growing your business the right way. We have seen Project Creators come through the door boasting about a brilliant product that for some reason is not selling as they expected, only to find out that the product already exists in a similar form. Or there is no actual need for the product. Or the target audience is too small to have a real impact on sales. No one wants to hear there is no real market for their product after they worked three years on it. All these problems could have been avoided with more research done at the beginning.
3. Start out on your own
Don’t try to launch an equity crowdfunding campaign by pitching a project idea. You might have 100 investors but they’re still taking a risk with you. A risk that will be perceived as very high if you can’t show any data of your company’s growth or any economic or social proof that your product is well received in its market. You need to support your success claims with sales. If you only have a project idea, start out with rewards-based crowdfunding. It’s the perfect way to test the market, get feedback from your customers early on in product development and get the initial funding needed to launch your company. Take it as far as you can and only then take on equity crowdfunding.
4. Highlight your achievements
Don’t be shy about what you have accomplished so far. Be proud and be bold about it. These achievements will be the basis of your much-needed social proof. Just be careful that you highlight it and not brag about it. This is a key part in the pitch, but it shouldn’t be the focus point of it. A few key stats that emphasise the impact of your company in its market and showcase its growth potential is as much as you need. In a five minute video this part shouldn’t take more than 30 seconds. Remember, these stats are meant to highlight the value your company brings to the market not overshadow it.
5. Where does the opportunity lie?
It doesn’t matter if someone invests £10, £100 or £1000 in your company, they all want to know one thing – what the value of your company is and what’s the opportunity for growth. Talk about the current state of the market, what’s missing and how your company can accommodate any issues. This is the main reason why the most successfully crowdfunded projects are in the tech industry. People know there is a lot of potential in new technology and even though the risks are high, the payoff is well worth it. But people need to be educated about the opportunities that lie everywhere in the business world. Is your company in the healthcare business? Talk about why the NHS is struggling at the moment and how your company will help everyone in need of healthcare. Are you opening a niche restaurant? Talk about how the market for organic food is growing because people are tired of eating pre-packaged food every day. You are the expert in your market, in your niche, so it’s your responsibility to educate your potential investors about what opportunities your company offers.
6. Know your own value
This is the tricky part. You have to put all emotions aside and look at your company with critical eyes. Be realistic about its value because it will be the basis for assessing your shares. Do you expect £10k for a 1% share? Is your company really worth £1 million? If you need specialised guidance for this part, go for it. Overvaluing your company is just as big a mistake as undervaluing it. Your company might be your life’s work which makes it priceless to you but a price must be put on it either way. Scrutinize your company as any detached investor would and don’t be afraid to stick with your assessment.
7. Explain your growth strategy
Now that you have highlighted how valuable your company is for the market and backed up your claims with the sales data you have accumulated so far, it’s time to let people know what you are planning to do with the funds you are raising and how you are planning to grow the company. Talk about short-term and long-term goals. Emphasise all aspects of your plan – if people see that you did your research and are basing your estimations on data and hard evidence rather than wishes and dreams, they will be more likely to invest. A clear vision of where you’re heading inspires trust from your peers and confidence in your expertise.
8. Practice makes perfect
You probably have an idea for your pitch already. A rough draft of why people should invest in your company. Excellent! Write it down and work on it for a few days. Adjust your tone, your words, your focus points. Then go show it to your most trusted advisor. Have them give you feedback and make notes. Then show it to your life partner. Show it to your friends. Show it to your co-workers. Show it to anyone whose opinion matters to you. And show it to anyone who is willing to lend you an ear and give you constructive criticism.
The bad part about working so hard on a pitch or really any writing project is that sometimes one loses sight of the important details. Especially if it’s about your pet project. Everything becomes important. Letting others have an input into your pitch will make you reassess what people actually want you to talk about. In the end you are pitching your company to a broad audience, not yourself. Be open to constructive criticism.
9. Promote, promote, promote
You have your pitch ready, your campaign is set up and ready to go. So, start promoting. Matter of fact, start promoting your company when you first launch. Even before. Getting your name, your product and company in front of an audience is crucial to your success in business. Working on building an engaged, interested and responsive audience will make it easier to grow in the long run. And when you are ready to launch an equity crowdfunding campaign, make sure you promote it to your audience. You might have the best pitch in the world but it is worthless if no one knows they can buy a share of your company.
10. Be aware that you will have to put in a lot of work
Crowdfunding by definition involves a large group of people. Unfortunately, you can’t reach these people by creating your campaign and expecting them to find you. Nor is it the responsibility of the crowdfunding platform you choose for the campaign. They can help, they can give you advice and assist until a certain point, but most of the workload is up to you. Yes, it will be time-consuming. Yes, you will have to do a lot of work. But it’s your company, your product, your idea. You can buy a consultancy package which will offer some assistance and there are several companies that will handle this for you. Just make sure you are aware of the work involved before you jump into it.
As a final thought, I would add that funding your company through equity crowdfunding is an important business decision and should be treated as such. Over the past years, this new way of raising money has become very popular but that’s not a default reason for you to do the same. What works for other companies might not be the right path for yours. There are other funding options and if you have any questions or you’re not sure which one would suit your business best, feel free to contact us and we will answer any queries you have.