Innovative start-ups and SMEs are increasingly turning to equity crowdfunding platforms to present their business projects to potential investors.
There are now many success stories of projects launched through this method, and the numbers relating to the volume of investments raised are growing every year.
Equity crowdfunding is therefore undoubtedly an opportunity that cannot be renounced by the many teams that want to experiment with innovative businesses.
However, access to funding platforms is not automatic and projects are often subject to strict selection criteria.
Moreover, it is essential that each equity crowdfunding initiative is presented to investors so that they can grasp its potential, assess its economic sustainability and develop a personal involvement in the project. Let’s see together what are the 5 things to do and 5 mistakes to avoid in order to start a successful crowdfunding initiative.
5 things to do to be successful with equity crowdfunding
- Structure your business plan
For any business initiative to be seriously considered, it must first of all be credible.
While equity crowdfunding provides access to new forms of funding even for those start-ups that are not yet structured, this does not mean that you can leave room for improvisation.
The business plan is the tool that will allow you to present your project, share the personal or team resources that you will make available, illustrate the revenue projections and explain to investors what their economic return could be.
Always remember that not all investors have a solid financial background. Therefore, always use simple language that will reach everyone, so that your stakeholders can grasp all the opportunities of your project.
- Choose credible objectives
Think Big. Yes, we have always been told to think big, and having big ambitions is certainly important when starting a new business. However, it is important that the objectives presented to investors are credible: those who will invest in your project should be able to consider that they have a reasonable certainty of seeing the illustrated results achieved.
Study your sector, compare projects that are comparable to yours, analyse the business volumes of your competitors: only in this way can you provide objectives that will be perceived as achievable and therefore credible.
- Build relationships
Although equity crowdfunding platforms are based on online meetings between entrepreneurs and investors, we must not forget the fundamental role that the relationships we have managed to build in the real world can play.
Start with the people closest to you: family members, friends, networks of acquaintances. Tell them about your project, explain its potential: they could be the first to become your investors.
Then remember to play it by ear: if you have decided to launch an equity crowdfunding campaign, start 6-12 months beforehand to try to expand your network of contacts as much as possible. Consider any existing contacts: customers, suppliers, media and start telling them about your project, anticipating that you are going to launch the fundraising campaign. If possible, always try to favour face-to-face communication with your potential investors. Try to meet them individually, or organise small presentation events to talk about your project. Take advantage of these occasions to answer any doubts, collect feedback and adjust your approach
- Focus on social communication
Broadening the audience of possible investors is very important for a successful crowdfunding campaign.
Adopt a marketing strategy that allows you to reach as many people as possible, as long as they are potentially interested in your business. Therefore, it is not only the quantity that is important but above all the quality of your contacts in terms of possible return.
Carefully choose the social platforms on which to talk about your project and adapt your communication to the specific nature of each one.
For example, you can use Facebook for your closest contacts or those with whom you can establish more informal communication, while Instagram will be perfect for using images and short videos to describe the path that led you to imagine your business and what you are building in view of the launch of the crowdfunding campaign. And don’t forget the importance of LinkedIn: thematic groups or individual contacts from your professional network can be a great amplifier for your project, and with careful relationship-building, you may also get in touch with investment companies interested in becoming your financiers.
- Work on storytelling
Deciding to fund a startup or business project, as we have seen, definitely has to do with an assessment of the potential economic returns. However, it is not just a question of numbers.
Those who decide to invest in an equity crowdfunding campaign also do so because they feel involved, they trust the team, they share the company’s vision and they are willing to get involved in the first person to achieve a common goal.
All this has to do with a mechanism of identification with the project, and identification will only be possible if we have been able to tell an engaging story.
Charts and tables are not enough, work on all the touchpoints, use all the communication levers: images and videos that tell the story of the project until your backer perceives how important his contribution is to achieve a common goal.
The 5 mistakes to avoid in an equity crowdfunding campaign
- Not planning
An often-recurring mistake is to start a crowdfunding operation without proper planning.
This kind of rash choice exposes us to a higher risk of failure, costs more effort and makes us look bad in front of our supportive community.
For all these reasons, it is absolutely forbidden to leave room for improvisation, while it is necessary to be aware that in order to be successful it is essential to invest economic resources and time to build a credible and solid project. Before launching the campaign, all the company’s energies must be directed towards meticulous planning of the objectives, resources, timeframes, contacts and tools that will be used to make the fundraiser a success.
2. Losing sight of the objective
Once you have landed on a crowdfunding platform, the time allowed to present your project to your audience is limited. It is, therefore, necessary to be able to condense and convey all the information necessary for investors to support the project, without making the mistake of losing sight of the focus.
If you are too busy telling people about the company, the team and the objectives, there is a risk that the communication will be derailed, and that in the time available you will not be able to bring out the arguments that will convince investors to put their money into it.
So be ready, prepare a rudder, proceed by points and always draw attention to the fundamental reason why someone should choose to support your project.
- Do not accept criticism
Building a successful business is never a straightforward path without difficulties, mistakes and frustrations. What you have to do is to take all this into account, face it and correct your course.
There are bound to be detractors, some who think the idea is not as successful as you think. Accept these points of view, try to understand their motivations and, if possible, learn from them.
Don’t forget to also tell about your difficulties.
We have seen how storytelling is essential to get investors excited about your project. Well, there is no story in which the protagonist does not face trials and encounter small or large difficulties before reaching his goal.
Telling the story of the difficulties you face does not mean presenting yourself as inadequate or with a weak project; on the contrary, it will make you credible in the eyes of your interlocutors and reinforce the process of identification that we have seen is so important to make investors choose to join your campaign.
- Don’t put a premium on publicity
An equity crowdfunding campaign is not only an opportunity to get the funding you need to start a business or project; it can also be a perfect opportunity to create “noise” around your business and increase your visibility.
Ultimately it can be an excellent way to advertise yourself, increase your credibility in your target market and strengthen your brand positioning. Failure to make the most of these opportunities would therefore be a serious error of perspective.
For all these reasons, it is essential to prepare a media kit that presents the profiles of all the team members involved in the project and condenses information and answers for investors and any media interested in the operation.
To further amplify the visibility of the company, it is also possible to choose an agency to assist with press office and PR activities.
- Cutting bridges
Equity crowdfunding does not end with the end of the fundraising campaign. Whether or not the financial target has been reached, it is essential to continue to nurture the relationship with your investors, whether real or potential.
If the campaign is successful, the investor becomes a full partner of the start-up or innovative SME. This implies that a relationship is created consequentially, but at this point you will need to commit to keeping your investors informed about the progress of the business.
It is important that relationships with your contacts are not broken even if a campaign is unsuccessful.
We have seen how relationships are at the heart of a successful project and those who have not become your backers today may become them tomorrow. Furthermore, maintaining a relationship, a contact, will help to establish you as a credible partner for future investments.
SCAI Comunicazione is the agency specialised in equity crowdfunding, discover the world of marketing and communication services that we can provide for your company.