Crowdfunding: The recipe for success

Crowdfunding success is not a given, but there are things you can do that significantly boost your chances of hitting your target and over-funding. Over the last couple of years, I’ve worked with numerous start-up founders and business owners – and interviewed many more. It has been interesting to hear them agree that there are three consistent drivers of crowdfunding success. Taken together, these drivers offer a recipe for successful crowdfunding.

1. Take time to plan for successful crowdfunding

The days of pulling together everything you need for a crowdfunding campaign in a couple of days are long gone – if, indeed, they ever existed! It takes time, a clear plan and persistent and diligent implementation of that plan to achieve crowdfunding success.

Matt Dyson, founder of Rockit overfunded on the equity crowdfunding platform Crowdcube to raise over ￡250,000 in May 2018. He is clear that  

“thorough preparation for the campaign was a key attribute in our success. We spent several months planning and preparing the video, pitch deck and financial forecasts. Several serial investors commented on the attention to detail and the fact that we supported our assumptions with detailed explanations.”

Robert Woodford, former Marketing Director at Deep Time Walk, who successfully crowdfunded on the reward-based platform Crowdfunder.co.uk, goes further

“Planning is essential – I can’t stress that enough – as is keeping the momentum going throughout the campaign.

We starting thinking about our campaign six months before we went live, and then planning started in earnest three months before. Crowdfunding takes longer than you might think.”

Peter Ramsey, founder of Movem who has successfully crowdfunded twice on Crowdcube agrees

“Crowdfunding isn’t easy. There’s a lot of work and effort that goes on behind the scenes…it takes a lot of time. It probably took me 2 months from making the decision to do crowdfunding to going live.”

2. Set yourself up for success by finding your first investors

Another key driver of successful crowdfunding is the need to find your first investors – to “prime your pump” for success. Most people now recognise that you have to both find your first investors and tee up when their investment will actually be pledged on your chosen crowdfunding platform. What is perhaps not so well understood is the extent to which you have to do this.

Matt Dyson of Rockit is clear on this point

“We managed to reach 40% of our funding target prior to going live on Crowdcube. This, coupled with the fact that we still had some SEIS allowance for the early investors, meant that the campaign got off to a flying start.” 

Peter Ramsey of Movem agrees

“I’d raised 40% of our target prior to putting our crowdfunding campaign live. That was hard work and took time, but it was really important in creating momentum for our crowdfunding campaign when it did go live. It’s the key really, demonstrating momentum.”

Kellie Forbes, co-founder of YUU World is refreshingly honest in stressing the importance of finding your first investors

“I cannot stress enough how important it is to do some in-depth prep and ground work on lining up initial investor pledges. I’d recommend lining up initial pledges that account for 40%-50% of your target – and you need these pledged in the first few days of your campaign to get the traction your campaign will need to reach “the crowd”. We now know that we were not focused enough on finding that first 30% (of our target). It was dependent on us to get those pledges in and, whilst we believed we had these teed up, it took more than we anticipated to bring them home. If we had understood the importance of this better, we’d have prepared more pledges before going live.”

3. Prepare a marketing campaign to support your crowdfunding

Don’t assume that once you have developed all the elements for your crowdfunding campaign and found your first investors that that is it. You can’t just sit back and watch the money roll in! You need a full blown marketing campaign to ensure as many people as possible know you are crowdfunding, and that they visit your page to invest.

Your marketing activity will, most likely, start with your existing network. You need to galvanise your personal contacts – both to find your first investors but also to start driving word-of–mouth marketing.

Peter Ramsey describes the effort involved in this very vividly

“You have to keep talking to everyone you think might be an investor. I’d wake up at 7am every day and spend the whole day contacting as many people as I could. Literally until I went to bed! I used everything available to me. LinkedIn, email contacts, the press, friends of friends, Facebook adverts…you name it. I tried it.”

Matt Dyson also recognises the effort involved

“The days were long and we often found ourselves emailing responses to potential investors late into the night.”

Matt was determined to leave nothing to chance and looked for ways to keep the news story – and with it the campaign momentum – going in order to be successful at crowdfunding

“We promoted the raise on all our social media platforms, posting regular updates about the campaign but also about key successes within the business generally. We were also lucky to be featured on ITV’s ‘This Morning’ and that generated additional press interest. This PR drive was probably the most effective way of engaging with the crowd as it snowballed organically and drove lots of potential investors to our campaign page.”

Kellie Forbes also noticed the importance of PR and found that this had benefits above and beyond the crowdfunding campaign itself

“The amount of exposure our business received was very beneficial. We’ve had some lovely PR including a spot on  BBC Business Breakfast. Better still, we’ve seen this exposure directly impact on sales. Our sales increased by almost 20% thanks to the crowdfunding campaign exposure.”

These days, just announcing that you are crowdfunding isn’t news-worthy enough. It’s unlikely to be enough of a “hook” for people to take notice – let alone drive someone to invest. Robert Woodford developed a matched funding initiative to drive interest and action in his successful crowdfunding campaign, as he explains

“Essentially, I got three donors in place who each promised to contribute a relatively large sum if we raised matching funding through the crowdfunding site. It was difficult getting the first major donor but, once we had one on board, it was easier to encourage others. The first donor offered a commitment of ￡1,000 if we could match it through the crowdfunding site. I then got a commitment of a further ￡3,000 from another two donors. This created a theoretical match-fund pot of ￡4,000. All we had to do was raise the same amount of money through our “crowd” and that would trigger the match-fund investment. Our wonderful “crowd” came up with the goods on the same day we told them of the initiative! So, what started as a ￡1,000 commitment became an ￡8,000 investment.”

Having got people’s attentions it is important to keep the momentum going too. All crowdfunding campaigns have slower days when the investment just doesn’t seem to be coming in.

Matt Dyson recognises this  

“There were times when the investments were slower and it was really useful having a plan to promote the campaign using different channels to increase engagement on these quieter days.”

Matt and his team used key developments in the business to keep momentum going

“Whilst we were live we signed several distribution deals including one in the US. We also won several design and consumer awards. These successes were very timely and we certainly found it encouraged investment during the campaign.”

Crowdfunding is not something to leave to chance – you need to plan well in advance, find your first investors and prepare a marketing campaign to raise awareness of your crowdfunding effort. What is reassuring is that many agree that if you follow this recipe you have every chance of success.

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Hatty Fawcett, founder of Focused For Business is an experienced crowdfunder, access to finance adviser and growth mentor to start-ups and small businesses. She runs Crowdfunding Accelerator which makes it quicker and easier to be successful at crowdfunding.