Five things I wish I'd known before starting a crowdfunding campaign
Guardian Professional, Thursday 5 June 2014 08.58 BST
Ambitious crowdfunders need to stack the cards in their favour, and there are five ways to enhance your chances of success. Photograph: Pegaz/Alamy
1. The right platform
There are five types of crowdfund: equity, donation, reward, debt/peer-to-peer lending, and royalty (which takes a percentage of future revenue in return for investment). To succeed, the type has to match your ethos, organisation and brand. At Stickyboard, we opted for equity raise using Crowdcube’s platform. We offer community web development, so being owned by the community fitted our principles. The platform you choose will be the shopfront for your campaign, so take a look round to get a feel for projects and perhaps sign up to a few to see how often they send newsletters and promote projects.
2. Focus on why you’re a good investment
This point took us a while to realise. We started by spending more time saying why what we did was great rather than pointing out why investing in us would be awesome. Focus on how an investor benefits (eg, EIS tax relief, rewards, return after what period), and how you know they will see those benefits (eg, your USP, years of experience, track record, quality of team and non-executives).
3. Be prepared to run a full time ‘election campaign’
You would have sold yourself and business before, but not like this. You, your team, and brand need to be personable, likeable and get in front of as many people as possible. Investment depends on your likability as much as your strength of idea. Just think of a crowdfund as an electoral campaign: its time to pull favours, message everyone you know, host and attend events, hold open sessions for investors to come meet you and appear in video interviews.
4. Stack the cards in your favour
A few weeks into our crowdfund we learned at an RSA event that, in general, the first 30% of your invest comes from your friends and family, the next 30% is invested by your wider circle of associates and partner networks, and the final third is the “crowd”.
We found that while people may be brilliant at retweeting, to get investment rolling you have to reach out personally and pre-align investors before hitting each stage. To achieve this and make sure a campaign does not start at zero, some platforms do soft launches before general release. In our experience, your core early adopters will be the secret to unlocking the levels above and expanding the reach of your campaign.
5. Be aware of the 10%-50% danger area
Studies have shown investment propensity increases with funds raised. For instance, if you’re trying to raise £50,000, every time your go beyond a £10,000 marker, your likelihood of investment supposedly increases by 4.1%. The closer you come to your target, the more likely you will make it. But, just after your initial launch is when your campaign will most likely fail.
The average amount funded by failed projects is 10.3% and 97% of these failures never make it past 50%. So, 10-50% is the danger area and you need to get out of it as quickly as possible. We found that keeping momentum requires you constantly showing success to followers of your campaign. This requires thinking about timing success stories, press coverage, and pre-aligned investment.
James Sweetman is co-founder of Stickyboard, an organisation that builds websites and platforms for local organisations.
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