5 Tips to Successfully Raise Capital Through Crowdfunding

Raising equity capital through crowdfunding is a new and empowering thing for entrepreneurs and investors alike. Today's investment world is changing.

Today, you can do absolutely anything you set your mind to and it doesn't have to happen in a traditional way --that's why crowdfunding has been so successful!

Title III of the Jobs Act, is that it allows the everyday American to invest in private companies they love and believe in -- people you think will take it all the way.

Companies through rewards based and equity crowdfunding campaigns are raising billions of dollars. This has led many to believe that crowdfunding can democratize product innovation and access to capital by allowing small business owners, who lack access to resources to find funding and markets.

Amitava Chattopadhyay, a guest writer with "Entrepreneur", states: "The World Bank is upbeat. It estimates the crowdfunding market will reach $90 billion annually by 2025. That's roughly 1.8 times the size of the global venture capital industry today."

We know that most startups fail. In fact, nearly 90% of all small businesses never make it to year five. In a similar sense, most crowdfunding projects also fail to get fully funded. On average only 36% actually succeed. This is very similar to what happens in the venture capital orld.

Chattopadhyay says that "according to research by CB Insights, just over 70 percent of startups stall at some point in the VC process and fail to exit or raise follow-up funding."

So how can you help your crowdfunding campaign succeed?

The truth is, you'll have to put in time, energy, and a concerted effort to connect with your friends, family, followers, and client base to get people who are already familiar with you and your company to buy your products and investing your company. Companies like America's Real Deal and ISM, the Independent Stock Market, can help, but statistics show that over 70% of people investing in crowdfunding campaigns come from the companies personal efforts. This is because at the end of the day, people invest in people. If they know, like and trust you, they will invest in you.

Here are five tips to help you build up the trust you need to

run a successful crowdfunding campaign.

1. Don't Oversell It

This might seem like poor advice, but it is surprisingly one of the main reasons why many companies fail on crowdfunding platforms. Chattopadhyay did a recent research paper with co-authors Anirban Mukherjee of Singapore Management University, Cathy Yang of HEC Paris and Ping Xiao of University of Technology Sydney, and found that claiming that a product is "innovative" reduces the total pledge amount by 26%.

2. Be the Driving Force Behind Your Project

You, as the founder of the company need to be the face of your campaign. Over 73% of all people who invest in a crowdfunding campaign, invest because they already know and trust the people behind the project.

Think of yourself as the engine behind your projects. Backers are more willing to contribute to a project if they know that the creators and business owners are actively engaged, genuine and passionate about making it succeed.

3. Give People a Reason to Help

When you are launching a crowdfunding campaign, you aren't just selling a product. You are also selling yourself. It's so important that your story and the excitement of being part of a new endeavor. What's exciting is that most people are more interested in helping launch something amazing than actually receiving a cool product. Remember this and capitalize on telling a compelling story. Then offer up a legitimate, emotional reason to support your venture.

ISM with America's Real Deal helps entrepreneurs with this by producing Pre-Season Spotlights that tell the story of each of our clients to capture the heart and the reasons and motivations behind why our entrepreneurs do what they do.

3. Engage Your Personal Community

Your community and by association their communities is your greatest resource. These people already love and trust you. This is why it is so important to create a good relationship with your previous and current clients, friends, family, neighbors, and online social community. You can show your trust by sharing details about your project -- what it is you are doing and why. This can be done on one-on-one visits, phone calls, text messages, and even through live group events.

a. Utilize Newsletters & Social Media

One great way to engage with your community is to take advantage of word-of-mouth marketing tactics. One reason for many clients' successful campaigns is that they focus their efforts on email marketing by sending newsletters to all of their customers and subscribers.

They make sure these newsletters and emails are compelling by including graphics, ensuring key information was at the top, with quick access to links explaining all the benefits of investing. Lucky for you, ISM's team creates several custom newsletters for all of our companies that do just that! It's up to the business owner to send them and engage as many people possible. Every time successful crowdfunding campaigns send out a newsletter, their success peaks. Entrepreneur, Dwight Peters with Origami Slate said, "We received 91% of our funding through our email campaigns and only 9% directly through the crowdfunding portal."

So what does this mean? YOUR efforts and your contacts matter. Send our newsletters and emails to everyone you know to help engage them in this incredible opportunity.

b. Put Yourself Out There

Going along with engaging your community, you can't be afraid as an entrepreneur to leave your comfort zones. As an introvert myself, this used to be the most difficult part, so I understand. Asking family, friends and strangers for help, making several promotional videos and repeatedly reminding people how much of a difference there help really makes for my ventures, was always intimidating.

People know what crowdfunding is all about and most of them have an innate desire to help and give, especially when you are adding value to their lives as well. When you take a leap of faith and put yourself out there, you will quickly find how much people truly want you to succeed. You are already passionate about what you do, so why not tell the world?

c. Utilize Social Media

One of the easiest ways to tell the world about your project is with social media! People love videos so doing Live Facebook and Instagram videos will generate a lot of traffic naturally to you. They don't have to be very long. Just tell them how much it means to you when they VOTE, BUY and INVEST in your crowdfunding campaigns.

With ISM and America's Real Deal, our strategic partners help create valuable content for you to promote your campaign. But the more active YOU personally are, the better!

4. Focus on Facts

Within your crowdfunding campaign, focus your product description on facts, specifically on your product's features and benefits. Remember to be honest and upfront about everything within your campaign. ISM's pre-vetting and compliance team will do its best to ensure this happens to help protect you as well. According to Chattopadhyay, "There are three main types of product attributes: search, experience and credence attributes. Search attributes are those that enable a customer to find things out about the product without actually buying it. For example, if you are selling a washing machine, you can explain its size dimensions, or its noise level in decibels that have been tested and certified and therefore can be shared as fact for the consumer to consider."

Though people purchase on emotion, a crowdfunding campaign works a little differently and the facts of your company and products need to be transparent. People appreciate honest and statistics, as well as a little tugging on their heart strings. Make sure your campaign provides a good, descriptive balance.

5. Give Value

Ultimately, business owners have to be able to demonstrate value and diminish the gap in risk perception. Really think: WHAT VALUE DO I PROVIDE THE WORLD? Let's emphasize this.

To do this, you must stay true to honest facts and make it clear exactly what your backers are going to get. State the pros and cons, evenly. In earlier research, Chattopadhyay found that claims of novelty and usefulness together work to convince consumers of a product's benefits. Amitava states, "participants in this earlier study were rating products and not actually buying them, meaning they were not carrying any risk. It therefore stands to reason that removing as much risk from the transaction as possible makes potential backers more comfortable with your pitch."

ISM helps try to remove as much risk as possible, by coming in as a partner with every company they work with. You receive coaching and mentoring from consultants who have taken companies public and have raised hundreds of millions of dollars for entrepreneurs just like you.

If you know of an entrepreneur and business owner ready to turn their 5-year plan into a 3-year plan and raise debt-free equity capital through crowdfunding, please contact our Director of Business Relations: [email protected] or visit www.AmericasRealDeal.com