Are you ready for equity crowdfunding?Dec 04, 2019
With the new year approaching, you might be thinking about raising investment for your business and wondering, "is crowdfunding right for me?"
Here are a few questions to ask yourself to help you determine how close you are to being ready to crowdfund.
What stage is your business at?
Is your business proposition just an idea or are you already active and trading? Businesses that have some traction tend to perform better on crowdfunding platforms. You don’t need to be a well-established business to successfully crowdfund but you’ll need to have a working prototype or be able to demonstrate proof of concept. So if you’re still at the early stage of your business, read our blog post on how to build traction for your startup.
Have you got a plan?
It is said that investors tend to walk into a room backwards, they’re always looking for the exit. That’s true for equity crowdfunding too. Investors will want to know what your plans for the business are, how you intend to scale it and ultimately, provide a return on their investment. Make sure you have your plan clearly laid out and articulated clearly in an investor deck, a business plan or an executive summary.
When do you need the money?
If you are in urgent need of cash to keep your business afloat, it may not be the right time to crowdfund. In our experience, it takes on average 3 months to prepare a crowdfunding campaign. Then you need to factor in a month or two while your campaign is live on the crowdfunding platform and then a few more weeks for the completion process. All in all, it could take 4 to 6 months before you have the money in the bank. So if you’re looking for a quick fix, you might want to look at other options and then start thinking about a crowdfunding campaign at a later stage.
How busy are you?
Raising investment for your business is a big time commitment. In our experience, it can take 15 hours a week to prepare for your crowdfunding campaign and once the campaign is live, you’ll still need to be actively involved throughout to ensure you get it over the line. So if you want to embark on the crowdfunding journey, it’s a good idea to ensure you have time set aside to do just that. If you have a big launch coming up or other commitments taking priority, you might want to postpone your crowdfunding plans until you can actually dedicate yourself to it.
Have you got a crowd?
It shouldn’t come as a surprise that to crowdfund, you need a crowd. There is however a common misconception that the crowd appears out of nowhere to support your campaign. In reality, complete strangers on the internet are fairly unlikely to back your project unless you already have the support from your own network. In the same way that you’re likely to check customer reviews before buying a product from a company you’re unfamiliar with, investors will be looking at who else has invested in your business before making a move. The more of your friends, family, customers and other acquaintances invest at the start of your campaign, the stronger the validation for your investment proposition. So if you haven’t yet, start floating the idea of crowdfunding within your own network to gauge how well it might be received. If you feel uncomfortable talking money with your pals, have a look at this blog post for some pointers.