There are many resources available on crowdfunding and I encourage every crowdfunder to do the required research before embarking on a such journey. The crowdfunding industry is still in its infancy stage and there will be numerous changes in the future. Keeping up with the recent research on what makes a campaign successful is pivotal. Equitise has provided 5 essential tips on how to build a successful campaign to make the most of their platform.
The first element when preparing for a crowdfunding campaign is setting up a business plan.
1. The Business Plan
What is a business plan? A complete and concise business plan includes several sections equally important.
- Business summary (elevator pitch): This is what investors first read. It is crucial to convey your message in this section as clearly as possible as most investors do not get past this point in the beginning. In other words: How would you describe your business in a small paragraph, in plain English?
- Market analysis: Describe your market size, the target market, the geographic market, the demographics of the local population, the market density (crowded or fragmented) and key competitors.
- Marketing and Sales strategy: Marketing and Sales complement each other and they are at the core of business operations. You should be able to answer questions such as what market needs is the business going to satisfy? What is unique about your product/service? How is it different than your competitors?
- Milestones and History: Include stages of development, key business events and milestones achieved to date.
- Risk Factors: Here is where you describe different risks that can affect the business negatively. As matter of fact, this is your insurance policy against future claims by angry investors.
2. Financial Information
This section should cover information and discussion regarding the business liquidity, capital resources, revenues and expenses.
- The P&L statement: Revenue, expense and profits
- Financial Position: The balance sheet (assets, liabilities and equity)
- Cash Flow Statement
- Financial Projections: Revenue and expenses forecasts for the coming years plus other financial information where applicable. Being conservative is important. A realistic scenario goes a long way.
- Capital Structure: Ownership and capital description. Owners of the company and debt holders if any.
This information is perhaps not applicable to all companies. Startup companies typically do not possess this kind of information, yet it is helpful to include as much information as you can.
3. Use of Funds and Offering Amount
State the intended use of the raised funds as specifically as possible. This will help investors to understand the forward vision of the company in the near future. Other information should include the target offering amount, the deadline of the campaign, share price, equity offered, minimum number of shares offered and the type of shares.
The valuation determine the share price. Here is where inflated valuation can have a negative impact on the business. Try to limit the funds raised to a minimum or to what you need. Investors must feel comfortable with your valuation and financial projections.
4. Communicating with Your investors
“The most important item on any prospective fundraiser’s list is to start building relationships with new people that could potentially fund them some day.” –Joy Schoffler
- Building Relationships
It is no secret that a solid relationship with potential investors gets the funding process faster. Walk in the investors shoes and deliver your message in that perspective. Investors are not just investing in the business but are also investing in the management.
Investors need to believe in the product as well as in the people behind the product.
A study by the Wharton School of Business found that there is a direct correlation between the number of Facebook friends and the probability getting funded. How is this related to equity crowdfunding? Connections are important. Think of it this way, if investors see that co-workers, family, friends or perhaps the management are investing in their offering that instance builds confidence and a favourable proxy.
- Digital Presence
During the due diligence process, investors will research the company, the management and everything that is related to the business.
It is important that you feel confident and comfortable about the digital print of the business and the team behind it.
- Target Your Audience
Try to curate as much contacts as possible. The bigger the audience the better. All sorts of tools are available to create a comprehensive contacts list.
- Consistent Feedback
Every campaign portal has a section for communication between management and investors, if not then there is something wrong.
On the Equitise platform, for example, there is a specific section where investors can ask questions and interact with the management. It is crucial to keep a constant flow of communication as it will create credibility.
Good communication builds good business foundation.
This is just the tip of the iceberg. You can included as much information as you want. However, it is not about the quantity rather it is the quality that matters. Clear and concise information will help to deliver the message intended effectively. Most importantly, do not forget to thank the investors and keep good investor relations.
For more information or to kickstart your crowdfunding campaign visit www.equitise.com.au