Launching a crowdfund can be nerve-wracking. How high should you set your target? What incentives can you afford to give? How much will it cost you and should you include that in your target? Who is your main competition? The list goes on, but it doesn’t have to be stressful.
We’ve run successful crowdfunding campaigns for clients at varying levels, including HAB Housing’s record breaking mini-bond, which hit its £1m target in just four days, and went on to close with £2.5m. Equity crowdfunding, whereby you offer a proportion of your business in return for investment, is recommended for established businesses with a known audience who are likely to invest in company shares, whilst reward-based campaigns are ideal for start-ups looking to score easy wins with old and new fans.
These five handy tips for a successful bond, equity, or reward-based crowdfund could set you well on your way to reaching your goals.
- Know your audience
If you’re at the stage of fund raising, you should already know your target market. But this time you’re not just selling a product or service, you’re asking for people to invest in you and your brand so you can continue to deliver the service they know and love.
There are two different types of investors: those who will make large donations and want influence in return, and those who are already your fans, who will make small contributions out of a love for what you do. Set incentives for different pledge levels.
Realistically, all your followers won’t be able to donate £100, so start it small and think carefully about what you can provide for your investors in return for their support. What will they want? What do they like? What can you afford to give? A successful crowdfund will depend on your offering.
If you are running an equity crowdfund, not only do you need to consider the percentage of your company you are willing to hand over to investors, you also need to think carefully about the audience you are targeting, and whether they are people whose values align closely enough with yours that you will feel confident working together in the future. It sounds daunting, but it can work.
In March 2016, Monzo, a mobile-first challenger bank, took just 96 seconds to raise £1m on Crowdcube. This is the kind of success that can only be achieved by perfect pre-planning. The raise saw Monzo give away 3.33% equity to 1,861 investors ahead of its official launch.
- Set yourself realistic targets
One of the main things to know about crowdfunding is that the first 48 hours are crucial. We’re not saying this to stress you out – it’s a proven fact! Crowdfunding campaigns that hit 40% of their target in the first 48 hours are the most likely to succeed, and even exceed, their target.
So don’t be greedy. Sure, it’s nice to get a little more than you need as a safety blanket, but set the bar too high and people are less likely to donate, driving down your social proof factor. Be clear about why you have set your limit, what you will use it for, and how you have come to that conclusion. Transparency grows trust.
Tossed, a UK salad bar chain, launched an equity crowdfund around their 10th anniversary which overfunded by 169% to raise £1,269,830. As well as shares in the business, investors were offered discount perks of up to 50% on orders during the life of their investment to engage investors with feasible rewards.
- Exposure is important
Family and friends can be a great help when it comes to raising money. Nobody believes in you more than they do, but it’s unlikely that they’re going to reach your goal between them. Think about influencers in your field. Not direct competitors, but those with a similar audience who can help you reach a wider market of pledgers.
As well as influencers in your sector, think about media outlets: press, radio, and TV stations who might share your values and want to help you promote your brand. But don’t go wild – focus on the right publications for you rather than wasting energy on the big names who are less likely to engage.
Bluetooth soundsystem, 1Q, kept engagement up throughout their reward-based crowdfunding campaign, which raised $194,682 in 2012. Founder, Dave, shared photos of orders being shipped and named products after his backers, which kept investors involved in the campaign and sharing with their networks.
- Build a brilliant campaign
Your crowdfund doesn’t start the day it goes live. Preparing in advance is crucial. You’ll need marketing materials, visual collateral, and planned channels of communication with your audience, whether than be on social media or newsletters. You need to individually contact key influencers, plan content to launch on your website throughout the campaign, and be prepared with thank you messages for those who pledge support. A crowdfund can be exhausting, so do as much preparation as possible, even down to creating tweets and graphics for your emails.
In 2015, card game Exploding Kittens became the most-backed crowdfund ever, raising over $8m on an initial target of $10k, which was exceeded in eight minutes. The reward-based campaign included an engaging video to support it’s popular product, and as the business overfunded, they turned the crowdfund itself into a game, and created expansion packs, an upgraded box to hold two full decks of cards, and a ‘Kickstarter-exclusive surprise’ for their investors.
Communicate openly, engage with your pledgers, and don’t be afraid to promote yourself. If nobody knows that you’re crowdfunding, they won’t know to invest.
- Follow through on your promises
Whether you offered a lapel pin, a free copy of your magazine, or an all-inclusive holiday for two, you have to follow through on the incentives offered to pledgers. Incorporate this cost into your overall target, and be sure to distribute within a month of your crowdfund closing – or indicate up front if this won’t be possible, and when it will be.
The best way to keep pledgers sweet and convert them to followers and customers is to show your appreciation both by fulfilling your promises, and making them feel valued and needed.
Sound easy enough? If you still don’t want to go it alone, don’t worry. Our crowdfunding package is here to ensure your campaign runs as smoothly as possible. We offer bespoke support to suit your needs, whether you’re looking for £100,000 or £1m+. Get in touch today and find out how we can help you smash your target.