What makes an equity crowdfunding raise successful?
The crowdfunding experts at Seedrs explain how to decide on a realistic valuation and how to make your pitch come alive
Decided that equity crowdfunding is the best option for raising funds for your business? With over £400m invested into over 650 campaigns on Seedrs you’ll be in good company.
But how do you make sure your campaign stands out and has the best chance of success? The experts at Seedrs have outlined what’s involved:
First, decide if equity crowdfunding is the right route for your business
There are some key questions that you need to consider when deciding if equity crowdfunding is the best option.
Firstly, do you have a strong community following your business that will take part in your raise?
Secondly, are you confident that you’ll be able to secure an anchor investor prior to your raise going live on the platform?
Finally, do you have a clear value proposition that will resonate with potential investors and enable them to see the growth potential that your business offers? If you can answer “Yes” to them all, then equity crowdfunding could be the right option for your business and you can start thinking about the details of your raise.
Deciding on a realistic valuation and how much to raise
Before you raise, you’ll need to work out what your business is worth – and how much equity you’ll pass to investors in exchange for the amount of investment you raise. Get it right and investors should recognise a good deal and put money into your business. Set the valuation too high and investors may not see the value and decide not to invest their capital.
So, how do you work out the correct valuation?
There are no fixed formulas and companies set their own valuations on the Seedrs platform. Whilst Seedrs won’t offer advice on this, it will challenge valuations that they think are unreasonable and you should remember that the lower the valuation the more potential an investor may see in your campaign.
You’ll also need to provide evidence to back up any statements made in your pitch. For example, a crowdfunding platform would need to verify any claims about your company’s financial performance.
How much should you aim to raise? Well, generally, you should target to raise the amount needed to deliver on the next phase of your business plan, plus an additional contingency amount to cover unexpected costs.
Making the most of your pitch
Once you’re given the go ahead from a platform such as Seedrs to raise, you’ll need to create the pitch that will be presented to investors on the platform.
If you choose to raise with Seedrs, you’ll be supported on how best to tell your company’s story, which will include elements such as:
- Your company’s achievements to date.
- How the company plans to grow.
- A sense of who you are as a company.
- An intro to the team.
- Why you started the business.
- Why you think your company’s destined to be successful.
Don’t exaggerate any facts and figures, as any platform will ask for evidence for each claim. The best practice in ensuring a smooth campaign launch is to gather the evidence as you put each part of your campaign together.
Produce a video and images that bring your pitch to life
This is a great opportunity to show what an exciting opportunity you’re offering to investors. Clearly explain how your product or service works and the potential for growth. Include sequences that show your team, product or service in action, your successes so far and any unique selling points.
Consider using a company that specialises in producing pitch videos to help give yours the professional touch it requires.
Marketing your campaign
You need to start publicising your campaign before it goes live. Activate your network and maximise awareness of your business amongst your target investor base consistently from pre-launch until the close of your campaign.
Campaigns tend to run for up to 60 days so it’s important to be fully prepared. Try and spend two to four weeks planning out the marketing needed to support your raise and the cashflow you will need to enable this.
Before going live to the general public with your raise, begin drumming up interest from your existing contacts and potential investors.
Seedrs will help you run a pre-registration campaign to gather the contacts of potential investors. You can provide it with access to invest in the round before it goes public, giving you more momentum when it goes live.
Your campaign’s live – spread the word!
The platform will start marketing the campaign to their crowd. But you should continue to reach out to your existing community and address any concerns they may have around investing.
- Continue converting customers into investors.
- Highlight any positive news – from improvements to your product/service to hiring key personnel.
- Keep your audience up-to-date with your campaign’s progress, with news on hitting milestones and how close you are to funding
Note that there are restrictions in what you can and can’t say to potential investors and that a reputable crowdfunding platform will be able to guide you on any marketing activity you have planned.
Spread the message and leverage PR
A key part of getting the news of your raise out to potential investors beyond your immediate community is to successfully pitch your PR stories to journalists.
PR is integral to the success of a campaign and platforms like Seedrs can help you with its internal PR team, but here are a few quick pointers to get you started:
- Work out when you want coverage to land and bear in mind the lead times of the various publications you decide to send your press releases to.
- Press should go live when your campaign is public – too far in advance and you might miss out on the chance to convert the readers into customers and investors.
- Create lists of journalists, influencers, partners, customers, angels and Venture Capitalists (VCs) who you’ll want to reach out to. Consider what messages you’ll send to each list and when and how you’ll want to get in touch with them.
- Focus on publications and journalists who are particularly interested in your sector or in early-stage businesses initially, then widen your search from there.
Finally, send out stories that are interesting, concise and include a news hook, such as an impressive/interesting piece of data, growth figures or something topical – along with details of your raise.
Ramp up the interest through your own channels
Deck out your company’s website, social profiles, images and headers to let people know you’re raising and where they can find your campaign. Make sure you talk about any milestones you hit throughout your campaign to make people aware of the progress that’s being made and alert your audience of any events you’re planning on holding to encourage investors to get involved.
Encourage team members and influencers to talk about your raise to widen the net even further.
Feature imagery within your posts, include hashtags, tailor your messages to suit each platform and schedule posts throughout the campaign to ensure maximum exposure and multiple touch points.
Leverage digital advertising
Digital ads are a great way to reach new audiences and retarget your existing website visitors to tell them about your campaign. Crowdfunding platforms such as Seedrs can help you harness the power of digital advertising to raise awareness of your round both before and throughout it.
You can also supplement any social media to your existing followers with paid advertising across social channels such as Facebook, Instagram, Twitter and LinkedIn depending on where you can best reach your target audience. You may also want to consider pay per click (PPC) ads for your brand that link directly to your campaign.
You reached your target! What next?
If your campaign hits its funding target with time to spare before it’s due to close, you can choose to keep it open and overfund. So, you may raise more money than your initial target, but remember, you may need to release more equity in return for the additional funding.
Completing the transaction – final steps
When all of your capital has been received, Seedrs will work with you to complete the transaction. This will involve:
- Completing legal due diligence – Such as ensuring your company has been set up correctly and that when applicable, that clearances for tax reliefs such as EIS or SEIS are requested.
- Subscription agreement and articles – You’ll be asked to agree to a subscription agreement and other related documents.
- Receive your funding – Once you’ve signed our straight forward subscription agreement and other documents, Seedrs will transfer your funds, minus the agreed fees directly into your business bank account. This is usually within a week of closing a campaign.
Beyond campaign success
Now you have a new group of supporters, you should invest time in keeping them interested in your company. After all, as well as being investors, they may also be customers who will want to hear about the progress and successes you’re making with this new injection of capital. And if you decide to carry out a further round of funding in the future, they may well be happy to invest in your company again.
You should keep your shareholders updated at least on a quarterly basis, so that they’re kept up-to-date with the progress the company is making. Seedrs makes this process as easy as possible by supplying you with a template and guidance that makes creating investor updates quick and easy.
This is just an overview of what goes into preparing and running a successful equity crowdfunding campaign. If you’d like further, more detailed advice, don’t hesitate to find out more about raising with Seedrs.