To date providers have seen huge success through their online funding support platforms. For an example of crowdfunding popularity, just look at Kickstarter. The website has seen 187,657 projects successfully funded since 2009 (as at September 2020), and that number continues to grow!
Many of the various platforms boast easy to use systems with an emphasis on DIY features. They make it quite simple for entrepreneurs and start-ups to connect with individual investors in order to get started in the market, or even grow their existing business.
But does this mean you should only rely on your abilities and knowledge when it comes to raising funds? Sure, putting together a crowdfunding page may seem easy, but there’s a load of “behind-the-scenes” work that needs to go into a crowdfunding campaign.
We have assisted many clients in this process and they found working with a business advisor really helped boost their campaigns in ways they didn't originally envisage. In this post we provide you some useful examples.
There are 4 important ways a business advisor can help with crowdfunding campaign:
For many small businesses, particularly start-ups, running a crowdfunding campaign may not be as cut and dry as you think. Working with an experienced business advisor will provide you with the support needed to navigate through the complexities that come with raising finance.
In fact, it's most beneficial to work with an advisor before you start your campaign journey because (and don't be shocked!) crowdfunding may not actually be your best option for obtaining finance.
If you've calculated that this route to funding is the best fit for your business then an advisor will be there to guide you through the process of deciding how much you need to raise, what's likely to be realistic, and how to make it happen within the timeframe required.
However, it's not just as simple as sitting down in a quick meeting to go over the bare essentials needed to get your crowdfunding campaign started.
Here are 4 questions you and your advisor can use to help determine which funding option would be the best fit:
The key to a successful equity crowdfunding campaign is investors, and what do investors want? They want the details! Before individuals go ahead and put money into a start-up they generally want to know who and what they are investing in and also very importantly, why.
Providing this information is crucial when it comes to crowdfunding because at the end of the day investors on these platforms are taking a leap of faith in you and your product/service without even shaking hands. Designing a campaign with the proper pitch and importantly, financials, will increase your chances of attracting investors.
The most successful crowdfunding campaigns will present a compelling pitch, a detailed business plan and some visual aspect; this can be a product image, mock-up, or a video.
Professional, financial forecasting is an element that can take your campaign from mediocre to exceptional by providing investors with a look at realistic, achievable figures.
Equity crowdfunding involves a certain level of knowledge to answer questions, not all owner managers may have that financial aptitude. There's a lot to know even when you're using a platform that's been simplified.
Working with the right team in place means you'll have a sounding board, someone to ask questions to, seek advice from, and even challenge you on things you might not have considered. This doesn't just have to be about your campaign (although it's a good place to start), you have to think long term and make decisions on what your steps will be after your crowdfunding campaign is completed.
Once you've achieved the funding required, this doesn't mean that the relationship with your business advisor ends. Far from it. Instead, it means that you'll work together in different ways as your start-up (hopefully) scales. You'll need systems and processes that can track your investment and performance whilst also expanding as your business grows.
Think also about how you want to proceed with the business in the future; it's never too early to consider the strategic direction in which you'd like to take the business. Use your advisor to discuss plans for growth such as:
If the ultimate plan for your business is to sell, you will want to consider how crowdfunding might impact the valuation and your ability to sell in the future. Again, be sure to discuss this with your advisor well in advance of fund raising.
Sukhi Jutla, Co-Founder and Chief Operating Officer at MarketOrders, explains her crowdfunding experience and how working with Wellers helped raise much needed funding.
"You probably would be surprised to hear that 80% of the work is usually done before you go live on your crowdfunding campaign and a huge part of that work actually comes from having clear, accurate and concise financial forecasts.
"It is this financial data that will help to drive and create the narrative to your investors. Working with Wellers, our Business Advisor, Ross, not only was able to help us walk us through our financial projections but he questioned our assumptions and stress-tested them. This was to ensure we had fully thought through every outcome and possibility and also helped us, as founders, to question the validity of our business model and demonstrate how much funds we really needed.
"But numbers on their own only tell half the story. Investors are, after all, human beings, and humans connect best with story and emotions and this is what differentiates Wellers from other advisors.
"They were able to bring the numbers alive by helping us to create a powerful narrative and story about our business, which was backed up by the numbers. This provided people with the confidence to invest in our business. In fact, some of our investors actually messaged us during the campaign to say that they had never seen such detailed yet easy to understand financial statements.
"Working with a business advisor also helped us to better understand our business model and to be better equipped with questions during the campaign so that we could execute it with confidence."
As you can see, taking on the challenge of starting a crowdfunding campaign can be intimidating. However, working with a professional partner can help make the process smooth and successful.
You can also find out more on the 5 Equity crowdfunding campaign tips to start your business.
The content of this post is up to date and relevant as at 08/10/2020.
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