Crowdfunding can be broadly defined as the activity of drawing on a large pool of people and raising small amounts of money from them to fund an idea or business proposal. The global crowdfunding industry has doubled to over billions, according to research, and will surpass the number of corporate investments by the end of the year. While crowdfunding is an extremely popular and interesting method of finding investments, raising money is never easy and requires a well-planned strategy. We highlighted five key steps that, if properly activated by entrepreneurs, can improve the chances of success in crowdfunding.
STEP 1 – CREATE YOUR STORY
Describe the main point that your product or service will alleviate. Remember, there are a number of companies vying for the attention of the same group of people. Make your story engaging, accurate, and tough. Developing a great business plan is an absolute necessity as it can act as an investment catalyst regardless of the platform and funding value.
STEP 2 – CHOOSE THE AMPHITHEATER
Are you looking for equity or rewards crowdfunding? Equity is like going public, offering stocks for cash that must be paid back, while offering rewards in the form of free product subscriptions or services in exchange for investments sought. Understand your investment needs and tailor a marketing strategy to appeal to your target audience. There are special platforms that are geared towards certain types of campaigns. Research and selection of the most suitable crowdfunding platform.
STEP 3 – SHOW THE TEAM
Bring your key team members to the fore and market their experiences and skills. A strong team is a big differentiator as investors are much more comfortable parting with their investment when a start-up is supported by talented people. People buy from people and invest in people. Keep this in mind when presenting your company.
STEP 4 – USE YOUR NETWORK
Involve your friends and family and bring them on board as first-time investors. If you have exceptional people ready to invest or have a small funding collaboration in place, show them off. Outside investors are more likely to invest money if the initial seeding is quick. It’s a confidence factor for crowdfunding investors, who typically don’t have access to the high-end research data on which to base their decision.
STEP 5 – OFFER THE BAIT
Everyone is happy to inform potential investors about investment needs and how the product or service offered can change the world. But take a step back – it’s not about you. Highlight what’s in it for the investor and back it up with credible numbers and accurate market data.
Remember that on a crowdfunding platform, you are interacting with investors, who in turn are also potential customers.