Growing your business through crowdfunding
In recent years, ‘crowdfunding’, has become big news. It’s where people finance projects and ventures by raising contributions online. And there have been some notable success stories. A budding young entrepreneur started working on the Oculus Rift virtual reality headset in his parents’ garage. He then raised $2.4million on Kickstarter and went on to see his company sold to Facebook for $2 billion. Or take the example of UK craft brewer BrewDog, who’ve raised over £39.33 million pounds on CrowdCube to fund their expansion. Then there’s Revolut, who raised £3.9 million on the Seedrs platform to launch their digital bank.
They make it look so simple. But does that mean people are queuing up to invest in new projects and business expansion ideas? And is crowdfunding easier than asking the bank for financial support?
Well, sometimes. But for every successful campaign, there are thousands that fall at the first hurdle. According to Kickstarter, 36.66% of campaigns on their platform succeed in their funding goal.
So, what are the key factors that will help make your idea one of the success stories?
raised by craft beer company BrewDog on the CrowdCube platform
1. Offer something tangible
Think very hard about what you’re offering your backers in return for their investment. No one will give cash for something they regard as of little value. From festival start-ups offering backers VIP tickets, to the restaurant openers giving supporters a weekly meal voucher, fully-subscribed projects always offer something tangible. There could also be extra special experiences for major investors.
2. Have a product or idea ready to go
Successful crowdfunders always have something that’s on its way to existing. Not a prototype or idea, but an original item, in development, already en route to the shops or manufacturers.
3. Have a fanbase
Maybe your street food stall is the talk of the market, and you want to get versions of your meals into Waitrose. Or perhaps your website is seriously popular and you want to design an app. The truth is that most successful projects already have a mailing list or support on social media from people. That’s people who like what they’re doing and want to see it secure wider support.
4. Look professional
If you look at the most funded projects on sites like Kickstarter and Indiegogo, you’ll see they all produced slick websites and informative, entertaining, and professional-looking videos. If you’re not confident with film, consider asking your local university if film-making students will help you out for a reduced fee. Or you could check out websites such as StudentGems.
the number of projects on Kickstarter that reach their funding goal
5. Create real business plans
You’ll also need to provide lots of financial and project details. If you’re hoping crowdfunding is a quick route to cash, with no need for the usual business plans and due-diligence a bank would demand, think again. However much cash you’re asking someone for, most investors putting money into a new project will look over the details with a fine-tooth comb.
6. Be realistic
After all, it’s better to exceed your target than miss it. And choose your timeframe carefully. Analysts reckon the projects that raise the most have a deadline of around 70 days. Much longer and people get bored and walk away.
7. Plan ahead
The biggest flaw for many would-be crowdfunders is that most only think as far as getting their campaign live. How to fulfil the promises and deliver to backers is too often overlooked. But fail to do so and all goodwill will evaporate. What’s more - your firm’s reputation could be ruined. So make sure you’ve got everything right before clicking ‘publish’.
8. Crunch the numbers
Make sure you've done your maths and got all your figures right before you launch your campaign. How many units/experiences/etc do you need to sell to reach your crowdfunding goal? Is that number large enough to give you the required funds, but also manageable enough for you to deal with the logistics of fulfilling the orders?
9. Keep people up-to-date with your progress
When you’ve secured your backing and hit your target, don’t leave people in the dark. Sometimes projects take longer than expected to complete. But most investors will be understanding about that. So keep your backers in the loop. Send regular updates, with photos or videos of the progress. Or have a dedicated Facebook group for investors or invite them to follow you on Twitter. Keeping up the engagement could also be good for future sales and PR opportunities.
10. Deliver what you promised when you promised
You’ve already beaten the odds to successfully crowdfund. Now, if you can deliver on your promises and keep your investors happy, that’s a pretty good grounding for wider commercial triumph.