Equity crowdfunding is an established part of the financial landscape for entrepreneurs who want to rally support around their venture and raise finance to grow.
“We’ve had some students use crowdfunding to great success,” says Jeff Reid, founding director of the Georgetown Entrepreneurship Initiative at Georgetown University. BS Entrepreneurship graduate Jeff Stefanis co-founded electric bikes supplier Riide while still in school. He used Kickstarter in 2014 to get 286 backers who pledged $120,000 to help bring his project to life.
Equity crowdfunding is an effective way for entrepreneurs like Jeff to judge the demand for their product and kick-start a nifty idea.
Yet many entrepreneurs make the mistake of putting their pitches online, sitting back and waiting for the money to roll in like cash from an ATM, says Goncalo de Vasconcelos, co-founder and CEO of crowdfunding platform SyndicateRoom, which he founded while studying for an MBA at University of Cambridge’s Judge Business School. To make your campaign a success and raise the cash your venture needs, you’ll need to grind.
And the work should start before your campaign is live. Launching your crowdfunding page with an initial investment is an effective way to increase your chances of success. Richard Heyns, founder and CEO of brytlyt, which used SyndicateRoom, says you should aim to raise at least 50% of your fundraising target before hitting “post”.
Start by tapping into your business school network — although it will help if your anchor investors are prominent financiers.
When you have interested people investing from the start, your product or service is perceived as more valuable. “It gets you traction,” says Richard. There’s a lower perceived risk, which can lead to further funding. After securing 70-75% of its crowdfunding target before launching its campaign, brytlyt surpassed it by 50%, raising £300,000 in 14 days.
Another way to boost engagement and get traction with investors is to include a compelling video in your pitch. In fact, placing a video on your crowdfunding page will increase your chances of success by up to 50%, according to Kickstarter.
That’s because a strong video narrative will give you a closer connection with investors. “The video is crucial to get personable,” says Charlie Thuillier, managing director of OppoIceCream, which raised £650,000 on Seedrs.
And you don’t have to be Martin Scorsese to captivate your audience; these days, you can shoot high-quality video on a smartphone.
First, look at successful crowdfunding campaigns online and play their videos for inspiration. Then write a script and make sure it hits all of the key points you need to get across. “Explain your story and product. Then try to answer the key questions you think people will have,” says Charlie. Finally, record your video in a well-lit room and remember to speak loudly and clearly. It’s a good idea to shoot a sample scene and watch it back on your computer, testing for video and audio quality.
A carefully crafted video, coupled with lead investors, will give your crowdfunding campaign momentum. But you must not leave your backers in the dark after they’ve supported your project.
Maintaining engagement is critical, says Ayan Mitra, CEO at Code Investing (formerly CrowdBnk), who earned an MBA at London Business School.
Interact with your audience by sharing frequent updates, utilizing social media outreach and sending thank-you emails. You could try posting updates counting down to significant events in the campaign, conducting product giveaways, or even hosting a contest. This will build anticipation and increase investor engagement with your campaign.
Even once the crowdfund is over, it’s important to keep your newly-formed fan base informed. “Otherwise, they will feel disillusioned,” says Charlie. This will ensure you can continue to tap into your investor base for customer referrals and for future fundraising campaigns. “You now have an army of supporters,” says Charlie. “Use them for whatever you want to achieve.”