7 essential tips for equity crowdfunding success

Posted by OnMarket 23 October 2018 @ 12:00am Equity Crowdfunding Issuers

There is plenty of advice handed out when you first decide to undertake an equity crowdfunding raise…….you must have a strong and engaged crowd of customers and supporters, a unique product that will grab attention, and a powerful marketing strategy that is going to convert those who are interested in your company into investors.

Now that companies are able to raise capital through equity crowdfunding, we have listed out what we think are the 7 essential tips to ensure a successful equity crowdfunding campaign.

1.  Make sure you’re prepared

An equity crowdfunding campaign is a challenging and time consuming process. It requires significant planning and consistent effort to raise the required capital and ultimately be successful.

Equity crowdfunding is about more than just raising capital, it is about marketing your brand and building a following. Then, if your crowdfunding campaign is successful, you will be accountable for additional shareholders.

This means that you need to be sure that you and the business are ready to embark on an equity crowdfunding campaign. You need to be ready to devote your time towards planning, marketing and communicating with your existing network of customers and followers.

2.  Build a crowd

Building a crowd is the most important step prior to going live with your offer. Once the offer is live you want there to be a strong investment base that commits funds early so that you can quickly build momentum.

There are a few elements to building a crowd; ensuring that the business is investible, knowing your audience and warming them up.

To determine whether people want to invest in your business, reach out to family and friends and your close network of customers to gain feedback. It is important to know how much they would be willing to invest, their thoughts on the business, and the idea of an equity crowdfunding campaign. This will help to refine what your crowdfunding campaign should look like, and prepare you for the types of questions that other investors will be asking.

Once you know that people will be interested, get to know your audience. Not everyone will be attracted by the same elements of your business. Leverage your audience based on their interests so that you get the most out of them. Segment your audience and begin to warm them up prior to the offer going live so that they are informed about the business and the equity crowdfunding process. This will help to build a strong crowd that is ready to invest early and build key momentum.

3.  Have a realistic investment target and valuation

Having a realistic investment target is important. Ask for too much and you might not achieve your goal, ask for too little and you may have to engage in another raise.

Because equity crowdfunding is an all or nothing process it is important to keep it mind that you will need to reach your minimum if the raise is to be successful. The amount you choose to raise should be enough to take you to your next stage of growth.

It is also extremely important to set a realistic company valuation so you don’t scare investors away. You don’t want to risk a down raising, where your company is valued less, next time around if your business does not meet growth expectations.

4.  Tell your story

Your story is one of the important aspects of equity crowdfunding that inspires investors to support your business. You want to find the uniqueness in your business and its story. Something that will connect with investors and make them see the human side of the company.

If your product or business doesn’t have a real point of difference then you will struggle to get any engagement from investors. So you need to identify what is it that you offer than no one else does, and how your product or service will take the world forward?

You want to communicate your goals in a way that makes investors believe in the business and want to be a part of the journey. Your enthusiasm and passion for the business is important but so is communicating the essence of the business. Finding that balance is the key to a good story.

5.  Have a clear business plan

Your story is what will inspire investors to want to be a part of your business. But, it is your business model and plan that will convince them to invest. Investors want to see a path to potential success. This means a clear outline of your market and opportunities to grow.

Additionally, clearly outlining how you plan to use the raised funds will inform investors of the value of their contribution. If a successful raise this time round could lead to another equity crowdfunding raise or even an IPO in the next 24 months, then communicate that to investors. A clear path to success is what investors want to see.

6.  Have a clear marketing strategy

As much as an equity crowdfunding campaign is about raising funds, it is also a marketing campaign. Whilst you will require a strong marketing strategy to raise the funds, it is also a great opportunity to educate people about your product or service. Building awareness is crucial to a successful equity crowdfunding campaign and the future success of your product.

Social media is an important way to communicate with investors and the public, so having a clear strategy involving content, video and other engagement initiatives is vitally important.

Additionally, you will need to be regularly communicating with your crowd to update them on the business and the campaign’s progress. Our OnMarket crowd have said that a campaign video is what they focus on most when investing. They want to hear from you so that they can gain an understanding of the business from a first-person perspective.

Finally, your campaign page acts as a sales page so you need it to be clear, engaging and informative. Make it easy to follow so that less experienced investors can get a good overview of the business.

7.  Keep investors involved

Regular communication with your investors is important. Investors want to receive more than just equity in return for their investment, they want to be a part of the journey on an ongoing basis. This means that they need to be regularly updated about your business throughout the campaign and post-campaign.

Investors want to know what the company is doing, any additional features of the product or service and they will want to ask questions as well as be kept updated on the progress of the campaign. OnMarket provides the perfect platform for investor communication with a live issuer dashboard that provides live updates on the campaign and allows you to answer investor’s questions.

Finally, your investors can become your biggest supporters. They have a network that extends beyond what you could otherwise generate. If they feel as though they are a part of the journey they are more likely to want to share information about the business with their friends and family or through their social network.