Coreen Kraysler, CFA
Interested in equity crowdfunding as a financing option for your company? Follow these six steps to improve your odds of success.
1. Make sure your offering page is easy to read.
All crowdfunding investment is driven through your offering page, so it is critical that your company’s story is communicated effectively, in easy to read language. Be clear and concise in describing the market opportunity and how your product or service solves the problem. Avoid big walls of text by using subheadings and bullets, and use plenty of high quality graphics; product and team photos, charts and graphs, and GIFs are all great ways to entice the reader.
Whatever you do, do not skip this step! The fact is, if given a choice between reading and watching a video, most people will pick the video. Make it short; 60-90 seconds is ideal. Use the video to showcase why people should invest, and try to connect with the viewer emotionally. Make sure to hit only the main points of your value proposition and don’t overwhelm with detail.3. Leverage your community.
Customers are your most loyal fans and you shouldn’t hesitate to reach out to them. Vendors, friends and family are also great candidates. Ask them to invest and share your offering via social media. Then keep them updated regularly regarding your progress. Remember, the beauty of equity crowdfunding is that you don’t have to be a millionaire to participate; the minimum investment can be less than $5, and your community wants to support you. Those small dollar amounts can add up fast.4. Take a multimedia approach.
Use social networks, email, and traditional media to get your message out to potential investors. Twitter, Facebook, and LinkedIn are great places to announce your offering and post your video. Do you have an email list? Then use it! Remember to include a link to your offering in all public communications. We recommend including a link on the homepage of your website, as well. Also, if you have any contacts in the press, now is the time to reach out to them. Traditional media coverage with a specific call to action can generate significant interest in your crowdfunding campaign.5. Value your company at an attractive level.
One of the first things investors look at is your company’s valuation; 2-4 million dollars is the sweet spot. Above that range, it becomes more difficult to attract interest. Investors are looking for value, especially given the higher risk associated with early stage companies. Better to price slightly below market and create a feeding frenzy, as Bill Gates did with Microsoft's IPO, than to let your offering languish due to lack of interest.6. Have a block of money lined up in advance.
Investors look for momentum. We have all heard about the importance of social proof, and equity crowdfunding is no different. If people see that others are investing, they are more likely to participate, as well. That is why it is so important to have a block of money lined up in advance. Make sure to stay within the Reg CF guidelines, though: you are not allowed to “precondition” the market by publicly announcing that your offering is coming before it is actually live, but you can have private one on one conversations with potential investors in advance of its opening.
If you follow these six steps, you will be well on your way to a successful crowdfunding campaign. Happy fundraising!
April 23, 2018
Coreen Kraysler, CFA