Crowdfunding in uncertain economic timesNov 07, 2019
We have been experiencing tumultuous economic and political times of late. There isn’t a day that goes by without headlines about Brexit, a certain president’s excessive use of Twitter, the international trade wars that ensue and how in the midst of all this, a new recession threatens. Uncertainty and seeking investment aren’t considered a good pairing. So how does this impact crowdfunding?
We’ve been monitoring hundreds of crowdfunding campaigns for the past few years and we have noticed that investment is most definitely still there and, that investors are being more selective in where they put their money. So if you are thinking of crowdfunding, what does it mean for your campaign?
Have a plan
Before you even think about crowdfunding, you need to define what your investment proposition is going to be. You need to think about your business valuation, how much you’re planning to raise and what you’ll be using the money for.
To appeal to investors, you also want to differentiate yourself. So make sure your branding is strong and that your story and key messages are clearly defined. Your pitch should be easy to understand for everyone who comes across it, not just the people in your sector or professional investors. The crowd is made up of a wide cross-section of the population so explain things as simply as you can.
Make sure you know what your business is, what your market is, who your customers are, etc. Know where you want to take the business and what its potential is. It’s important to be confident around all that. And of course, ensure potential investors understand how they will one day enjoy a return on their investment.
Get endorsement from your network
Where there is uncertainty, people seek reassurance and the endorsement of others is just about the strongest validation you’ll ever get. In practice, it means that businesses with more traction tend to perform better at the moment when it comes to crowdfunding. You don’t have to have been actively trading for years with thousands of customers but you need to show that there is a definite appetite for your product or service. If you are an early-stage business, check out our blog on how to gain traction.
When crowdfunding, you’ll also need to validate your investment proposition. This is best done by securing cornerstone investment and gaining the support of your own network before you launch your campaign. Think of it this way, if two campaigns launched on the same day, similar target, similar valuation, but one reached 30% of its target at launch and the other 80%, which do you think will look like a safer bet to the crowd? That’s right, the higher the support from your network in the early days, the more likely you are to get the attention of the crowd and hit your target. This leads us nicely onto the next point.
Don’t rush the process
In our experience, it takes 8 to 12 weeks to prepare for a crowdfunding campaign which sometimes surprises people. That’s because preparing to crowdfund entails a lot more than writing a nice pitch and shooting a fun video. To get your campaign off to a strong start, there’s a fair amount of marketing work that goes in before you’ve even launched the campaign. Finding lead investment and warming up your crowd takes time but their support is crucial if you want your campaign to gain the early traction needed to succeed.
You’ll need a crowd to crowdfund so make sure you build your tribe ahead of time with the help of a carefully crafted communications plan, including email, events, social media etc. All the famous crowdfunding success stories had an engaged community behind them prior to launching, so take a page out of their book and get engaging.
Once your crowdfunding campaign is live, the countdown starts. But there is no timer on your preparation so don’t rush the process unnecessarily, make sure you have everything in place for a really strong launch.
Cast your net wide
The crowdfunding sector has considerably matured over the last few years and while it used to be considered an alternative way to raise investment for startups, it is now much more mainstream. It is relatively common nowadays to see VCs, angels and other institutional investors investing alongside everyday investors in crowdfunding campaigns. It’s also not uncommon to see businesses crowdfund a part of their raise while they get the rest of their funding round from institutional investors. So when considering crowdfunding, have a look at all the options available to get you to your goal.
We would recommend that you attend relevant networking events in order to meet VCs, angels and other high-net-worth investors and speak to them about your plans. We would also strongly advise that you make good use of LinkedIn to connect with the types of people who might be interested in supporting your campaign. Their advice and feedback could be invaluable in helping you pitch your investment proposition in the most attractive way possible.
Don’t wait for better times
If like us, you’ve been following the Brexit process, you’ll have realised by now that there is no way to accurately predict how and when this will all end. And realistically, we don’t know what crises might be around the corner. So if you are in need of investment to grow your business, don’t hold off in the hope that the situation might settle down.
Instead, focus on the key points above and if you need help, click the link below to speak with our UK crowdfunding specialists.