Perhaps you think you’re ready to crowdfund. And, you’ve might have decided crowdfunding is the best way to get the money you need to take your business to the next level. But, before you commit yourself, have you checked whether you’re really ready to crowdfund?
First off, you need to assess the suitability of your business against the crowdfunding model. Although there are many businesses models primed for success through crowdfunding, not every business is suited to the format.
So often we see founders become heavily fixated on their product, leading to blind spots around other success factors. They assume that a good product will be adopted by the market and that’s enough to get investors, and the crowd, climbing aboard. However, you need to turn your attention to a number of suitability criteria. Most notably, to crowdfund successfully, you should:
- Have launched your product or service already.
- Be able to demonstrate early revenues and user growth numbers.
- Have a community of people (such as customers or personal networks) who would be interested in investing in the business, even if it’s a small amount.
- Have commitments in the round already from private investors, such as angel investors, VC’s or family offices (However, at Seedrs we do offer our Anchor Investment Service which can help you find that pre-aligned capital!)
You should also consider the following six questions:
1. Can you set out the opportunity for potential investors?
If your campaign goes live on Seedrs, could you:
- Explain the opportunity – have two versions ready: an elevator pitch that articulates in a couple of sentences why people should invest in your business, and a longer story.
- Describe your business successes to date.
- Explain your performance goals.
- Introduce your team.
2. Is it easy to explain what the money will be used for?
Get plenty of quotes for what you intend to get done with the money. Add a contingency amount for each item on the list. And, don’t forget to allow for your crowdfunding platforms costs. Investors are likely to scrutinise your figures, so don’t just work with rough ‘guestimates’ if you can use solid figures.
3. Can you tap into your network?
You shouldn’t just rely on a crowdfunding platform and its investor base to get you to your target figure. It’s better to validate the opportunity you’re offering by getting a few investors or your community on-board first. Try reaching out to:
- Previous investors in your business.
- Any high net worth contacts you may have.
- Your customers.
- Friends and family.
4. Are you prepared to talk to the media?
There are plenty of articles on here about how to tap into the power of PR. But are you set-up and prepared to use PR as part of your marketing push for your funding?
5. Will you be able to quickly make ad-hoc updates?
Be ready to make ad-hoc updates to showcase all that the business is doing during the raise. Think about what may come up and how you might phrase it. Send out Tweets and emails as you introduce new product lines, get mentioned in the press, win awards or hire people.
6. Did you know that it’s all or nothing?
On most platforms (including Seedrs), if you don’t reach your target, all the money raised goes straight back to the investors. And, you simply don’t get funded. So, be sure to have a:
- Realistic target in mind that will get you to at least the next level.
- Robust marketing plan in place to push the raise.
- ‘Gap’ funder in place that would be prepared to put in the money needed to reach the target if it looks like you wouldn’t otherwise make it.
Think you’re ready to crowdfund?
Once you believe you’re ready to crowdfund, apply to raise.