What We Learnt From Crowdfunding
ResourceCoherent recently overfunded on Crowdcube as part of the Crowd 10 programme.
Crowd 10 supports companies throughout the entire process of launching a crowdfunding campaign. You can find out more about the Crowd 10 programme here.
Crowdfunding looks easy. But it’s not.
It looks like you just upload a video, submit a business plan and wait for the money to roll in.
But there’s a lot more to it than that; it requires a lot more time and dedication than you might expect, and there’s a lot more uncertainty and unpredictability than you would think.
We want to share some of our experiences and give some tips for anyone thinking of launching a crowdfunding campaign. Read on to find out what we learnt from crowdfunding.
Here’s what we found
It requires a lot of time.
A lot more than we would have expected. Your campaign page is basically a sales pitch, and a bad sales pitch will lead to no investment.
You’ll find yourself spending a lot of time planning and recording your campaign video, summarising your business plan to form the basis of your campaign page, and preparing the appropriate documents to send to interested investors. And this is all before the campaign starts.
Once live you’ll be constantly chasing people who promised to invest but are yet to cough up. You’ll be sending emails to just about everyone you’ve ever met at a networking event, connected to on LinkedIn and worked with in the past.
You’ll be writing and sending regular campaign updates, scheduling hundreds of tweets and Facebook posts, and refreshing your campaign page every 10 minutes.
This all becomes way more intense in the final few days of your campaign as you scramble around trying to reach your goal. If you’re already funded by then, your time will be spent having celebratory parties. You just can’t catch a break.
The crowd effect doesn’t exist until you’re basically funded.
We were told that the so-called crowd effect (unknown people investing because other people have invested, and not because they have any previous knowledge of the product) would kick in around 60-70%.
For us, it didn’t properly kick in until we hit 90%, and really started to make an impact after 100%. Once the campaign finished, around 35% of our investors were part of the ‘crowd’ and the majority of them invested after we’d hit 90%.
It’s worth noting that Coherent is a B2B company and is probably much less familiar than a B2C company is to ‘the crowd’. This could explain why the crowd kicked in much later; they didn’t know much about the industry and wanted validation from other investors first.
It’s difficult to know what you’re investors are thinking.
We had people request our business plan and ask us a series of questions on intricate aspects of our business, to then invest £50.
We had some investors that didn’t contact us once, and yet still invested several thousand. And then we had those in the middle who requested a business plan, needed a couple of nudging emails and invested a moderate amount. In a typical investor pitch, you can judge the likelihood of investment based on the investors’ body language, emotions and responses. It’s much harder to judge this over email.
This uncertainty makes it very difficult to know your current standing because you can’t really predict how much more money will come in.
Here’s our advice to you
Build a long list of interested investors before you start.
The list should include everyone you can think of; friends, family, and investors you’ve met along way. But don’t assume that because you’ve got a list of interest totalling 80% of your target that you’re going to completely fund within the first couple of days.
You probably already have a relationship with these interested investors; if you send them an email asking them to support you, they’ll say yes. Getting them to commit is a different matter.
That being said, this list should give you a good idea of how likely you are to fund, and how much time and effort you’re going to have to put in during the campaign to secure investment. It should also help you get plenty of investments in the early stages of your campaign which is great for exposure.
Don’t do it just for the money.
Sure, raising finance is the most obvious reason you would launch a crowdfunding campaign, but there’s so much more you can get out of it.
You can use it for validation, exposure, to attract bigger investors for future rounds or to find investors who will also become customers (if you’re building a community, having customers invested in your business is a very strong place to start).
The benefits of crowdfunding, beyond just the financial, can be great for your business. If you’re considering launching a crowdfunding campaign, make sure you don’t underestimate just how much work it takes.
But put in the work and you’ll reap the rewards on offer.
Final Thoughts
If you have any questions about crowdfunding, feel free to email us or tweet us @coherentwork
