Essentially equity crowdfunding is the process through which a large number of people provide money to a business in return for shares in the company. It might not be the easiest way to raise funds, but if done right, it can bring you a lot more than just cash.
I founded Tribe First because I recognised that crowdfunding provided a really unique opportunity in an company’s early life, writes John Auckland from Tribe First. It allowed startups to achieve the same kind of exposure normally reserved for companies with big budgets. This is because someone who crowdfunds will get a lot of exposure on the platform (major platforms have hundreds of thousands of engaged users), and because a successful crowdfunding campaign brings with it a lot of credibility. Ultimately, it engenders trust and that’s something big brands (rightly or wrongly) have over startups.
In this article explains Auckland explains how you can maximise the opportunity of crowdfunding by making the additional benefits as important as raising the money.
Build a tribe
Crowds are indiscriminate, whimsical and unpredictable. They’re incredibly difficult to market to. Tribes are distinct, passionate and predictable, which makes them infinitely easier to connect and build relationships with. The great thing about building a tribe is that they care more. The most effective founders I’ve come across use their first funding round as a means to bring their fledgling tribe together in one place and get them involved in their business journey.
Just look at BrewDog: the Aberdeenshire brewers came up with the idea of Equity for Punks. The simple act of naming their campaign, and in the process their tribe, gave their community a moniker and a sense of belonging. Also, they generously reward their Punks with discounts time and time again, and now that the company is valued at over £1bn, they’ve uniquely created a Bitcoin-esque sense of missing out for anyone who isn’t a Punk.
Marketing and PR – money well spent
Crowdfunding gives you a unique opportunity to run a national (or international) marketing and PR campaign. I say unique, because it’s probably the only time in your company’s early life where you can justify the outlay, since every penny will be providing twice the bang for its buck. Getting a national newspaper placement will bring you new customers, as well as investors, as long as you get the strategy right.
Be warned, telling people you’re crowdfunding is not a story the media care about. So find an angle that’s relevant to your company and current news that will still drive traffic to both your website and crowdfunding campaign. It’s not easy, so I highly recommend you get help from a PR professional.
Three ‘A’s of crowdfunding
You should really only crowdfund if you realise the importance of the three ‘A’s, and your business is in a position to benefit from them.
Advocacy is about winning over investors and/or customers who really believe in your idea, and are willing to support you in your goals (rather than just simply buy whatever it is you’re selling). You’re likely to find advocates during crowdfunding due to the emotional and rational buying decisions they need to make before investing in your company.
Awareness is the sheer amount of brand awareness your company will get during your campaign. For example, at time of writing, Crowdcube has almost half a million users. Just by pitching your investment opportunity, you are making half a million relevant people aware of your company. That’s akin to radio advertising, or a half-decent satellite TV channel.
Amplification refers to the number of highly incentivised new customers you’re going to get from your campaign. Crowdfunding allows you to offer so-called ‘soft dividends’, i.e. free or reduced-cost goods and services, which will incentivise an investor to be a customer, and vice versa. Also, these investors aren’t going anywhere after the campaign, so if you need them to share a promotion or discount code in the future, they’re highly likely to do what you ask of them.
One other benefit to having an audience of engaged advocates is the fact you can ask them for help, with the knowledge they will have your very best interests at heart. I’ve heard of companies getting new board advisors, partnerships and even accountants by asking their tribe for help.
Speak to your investors
You’ve got a tribe – congratulations! Now what do you do with it? The biggest mistake I see crowdfunders make is ignoring their investors after they’ve raised money. These are your biggest evangelists! Work with them and they will help you achieve your goals.
The worst culprits are the crowdfunders who go completely silent until they need more money. They fail to update their tribe with news about their progress (or lack of) but come back cap in hand when they run out of money. Investors want to see you succeed, but they also don’t want to feel like they’re only useful for their money. In fact, treat them well and they will not only follow into the next round, they’ll also provide a lot of value in between.
If you’re thinking about crowdfunding, then I highly recommend you set yourself targets outside of just raising cash. How many press placements would you like? How many new sales enquiries? Do you want to gain new social followers and how many? Having an eye on these targets will also help drive towards the primary goal of having a successful campaign.
More on crowdfunding and small business funding.
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