How do you talk about money with your friends?Jun 10, 2019
Talking about money can be uncomfortable...
but even more so when it’s with the people you are close to. Yet to succeed at crowdfunding you need to gain the trust of the wider public and nothing says “trustworthy” quite like the confidence vote of other people.
When crowdfunding, you need to be prepared for the fact that the crowd isn’t going to rush to invest unless you present them with a strongly validated proposition. That typically requires lead investment as well as a strong show of support from your network before you’ve even presented the campaign to the crowd.
So how do you discuss money with your contacts?
Make a list
To start with, draft a list of all the people that you know. Then, based on what you know of them and their circumstances, assess how likely they would be to invest in your venture and how much you believe they may be able to invest. Also, ask yourself if there are any other ways they could add value to your campaign.
Prepare your proposition
With equity crowdfunding, you’re not asking for donations, you are seeking investment. Your investors will expect to get some form of return on their investment and all being well, they will benefit from investing in your business. So you need to keep at the forefront of your mind that you are not just asking for money, you are presenting them with an opportunity.
These people might be your mates but you’re about to present them with a business proposition so treat it as such. Put together a presentation that they will be able to understand. Explain what your business does in simple terms, what you intend to do with the money and what the investment proposition actually entails.
We usually recommend that the first time you approach your contacts should not be the time you ask for money. It’s best to approach the people you know before you need investment, involving them by seeking their advice or feedback. There is a saying that goes: “Ask for money get advice. Ask for advice, get money twice.”
Based on the reactions you get, you’ll be able to gauge who is most interested and adjust your future pitch accordingly.
To ensure you don’t ruin your relationship down the line, always be transparent when presenting acquaintances with an investment proposition. Investments of this nature carry risk so don’t make promises you can’t keep. For example, instead of promising returns within a certain timeline, it’s a good idea to tie in returns with certain key milestones but equally, don’t be afraid of sharing your ambitions for your business.
You will likely be faced with refusals, and that’s ok. Not everyone in your network will be in a position to invest in your business when you’d like them to. But it’s always worth considering if there are other ways in which they can help you. Could they facilitate introductions? Could they provide relevant business advice? Could you put their skills to good use?
For those who agree to invest in your venture, it’s a good idea to show them some gratitude. Are there perks you can offer them? Remember that perks don’t always need to be free stuff or discounts, they could also be a special event or an exclusive look behind the scenes.
Communication is key
Whatever you do, make sure you keep your contacts updated on your progress before, during and after the campaign. Again, be honest here. Explain to people which milestones have been met, which have been missed and why. You are likely to need investment again at some point in the future so you want to keep your investors on your side. You also want to show progress to those who couldn’t invest, who knows, next time they might be in a position to support you.