Deciding to embark on an equity crowdfunding round is a big decision for any founder. A successful campaign requires a lot of planning before launch and an equal amount of work during the raise.
Before founders submit a campaign they should ensure that these five elements are well prepared to maximise their chances of success.
1)Know what you want
Before promoting a crowdfunding campaign, it is essential that founders are confident with what it is they are offering and willing to give in exchange for investment. The valuation of the business is one of the most crucial decisions a founder must make, as it will greatly impact the success of the campaign.
Valuations of early-stage businesses are particularly tricky as there is often little information to work with; you can read more on this subject on theSeedrs blog.
The other two essential elements founders must consider are how much they aim to raise, and what amount of equity they are willing to give away. Striking the wrong balance between these two factors can have negative implications in the future, so businesses must be confident about their decision before going live.
2)Utilise your network
Similarly to offline investment, investors tend to follow the crowd.If people see a campaign is performing well then they are far more likely to check out the pitch and invest. That is why it is so important that founders leverage their existing network for investment at the beginning of the campaign. They know you best after all.
By bringing in friends, family or current clients to invest, the campaign will gather some early momentum before any external investors pile in to find out more about it.
3)Create an amazing video
An engaging video can make all the difference to a potential investor’s decision. It gives founders the chance to convey their business and their personality in a short space of time. Think of it as an online elevator pitch.
If possible, spending some budget on a professional videographer is a wise decision. The difference in quality and style is noticeable, and it will increase the chance of investment. If that isn’t an option, keep things simple by shooting it all yourself and ensure that you are letting people know what makes the business different to its competitors.
4)Host an event
Hosting an event for potential investors is another great way to attract investment into a campaign. These events give founders the opportunity to go into more detail about their business and answer specific questions people may have. Investors may be more likely to buy into a business that they have met in person, so events such as these increase the chance of investment.
Each business has it’s own personality and the event should always reflect that. Consider venue, location and atmosphere in order to make the event a unique one, as investors attend a lot of similar events so standing out is essential.
In order to ensure that investor’s questions are answered in the best possible way, as many of the startup team should be at the event. Each team member brings their own expertise and knowledge about the business, and their insight will be invaluable when answering questions.
5)Have a clear exit strategy
No matter how interesting or innovative your business is, investors are unlikely to be interested if there is no clear exit strategy in place. For early-stage businesses this may seem like a long way away, so this is a good opportunity to plan for the future.
It isn’t unusual to have multiple potential exit strategies. It can be hard to predict the future direction of the business, so keeping options open is advisable as long as founders have a detailed explanation for each potential outcome. Investors really want to know that you’re thinking about it and are developing a business that, ultimately, wants to create stakeholder value.
There are many other things to consider when raising an equity crowdfunding round, but you should definitely consider these five elements before getting started on your pitch to help increase your chance of success.
Written by Tom Channell from Seedrs and Sam Hodges from AltFi.com