Crowdfunding is a flexible source of finance for entrepreneurs. Crowdfunding finance allows a large audience to view your business and invest in the company in exchange for equity in the company. Investment crowdfunding for financing early stage businesses has gained significant traction across the globe it still remains in its beginning.
The article provides a summary what entrepreneurs should be attention to in order to have a successful campaign raising capital through crowdfunding.
Engaging with investors
A key ingredient to a successful crowdfunding campaign is engaging with the investor community. Engagement needs to be segmented in to three stages: before, during and after the fundraising campaign.
The investors on a crowdfunding platform expect to be kept up to date with new information about the company. Investors pay significant attention how entrepreneurs interact with the community in regards to questions posted in forums.
Entrepreneurs need to have strategy to engage with the investors after the fundraising has ended on the crowdfunding platform. Entrepreneurs should consider managing investor expectations, asking for investor feedback and leveraging the capabilities of the crowd to can create value for the business.
Entrepreneurs should consider suggestions, discuss them as a team, and respond to investors sincerely. Inviting investors into the entrepreneurial process is part of the fun and enjoyment of crowdfunding.
Entrepreneurs should not neglect the importance of investor relations, this could ultimately deteriorate the chances of achieving the funding raising target.
There is a constantly revolving door with new businesses applying for crowd funding and appearing on crowd funding platforms every day. Before an entrepreneur decides to launch a crowdfunding campaign they should first consider if there business is appealing and has achieved enough traction to gain investors interest. Investors would need to see a proof of concept to ensure the business is viable. Many businesses that are just based on ideas will more the likely fail. A proof of concept gives your business creditability.
Financial forecasting is key information investors expect to see. Forecasting is good business practice for entrepreneur to have an idea of how the business will develop. However, it is important to be realistic in forecasting the businesses development. Investors are sceptical about forecasts from entrepreneurs so it is important to present a realistic forecast.
Investors need to see that the entrepreneur’s are passionate about there business, this give a good indication of the entrepreneur’s drive and willingness to work hard and to do his utmost to make his business succeed. Entrepreneurs who are committed to and passionate about their business can be persuasive. Creating a company only works if one is passionate about it. Only then entrepreneurs will go through the demanding process of building a company and survive the downtime.
What’s the USP?
Entrepreneurs fail to understand the importance of communicating a key message that investors always look for, which is “why will your idea succeed?” The USP is the first factor investors consider when evaluating the business, the product or service provided. A business that is lacking uniqueness often results into the investors exiting the investment process. Entrepreneurs must present their USP in a concise and engaging way.
Visual content and more notably video is a key medium for investors to evaluate businesses on crowdfunding platforms.
In most cases the video summarizes the main points of the business plan and gives the entrepreneur an opportuinity to present the information in an engaging way. This allows the investor to get a basic introduction to the business.
Entrepreneurs need to be aware of their target audience and how they convey their business idea comprehensibly and in an engaging, passionate manner.
Instead of reading long business plans many investors solely base their investment decision on the content and quality of the video.