Starting on a shoestring: 5 crowdfunding tips to kickstart your business
Pippa Murray, of shed start-up Pip & Nut, shares her advice on raising finance following her first week of crowdfunding...
It was a totally exhilarating moment when Pip & Nut went live on equity crowdfunding platform Crowdcube. Months of hard work were suddenly released to the general public at a click of a button.
And, it was in that moment, when I finally saw my business up on the site, and sat there eagerly waiting for the first investor to bite, that I became acutely aware that it was sink or swim time. Thankfully, and with a sense of relief and astonishment, I can say that Pip & Nut hit the 100% funded mark in the first eight days of the pitch going live.
Having successfully lined up some larger bits of investment in advance and by sheer fluke, and good timing, such as landing features in two national newspapers on the morning the campaign went live, Pip & Nut’s pitch got off to a flying start. It was able to carry with it that momentum to achieve the funding target and am now overfunding. Reflecting back on my first week of crowdfunding it’s certainly been a whirlwind and an incredibly positive experience. Therefore I thought I’d share some tips from my experiences of equity crowdfunding for those on the cusp of a fundraising effort.
1. Be prepared and available to answer lots of questions
Understandably people will want more detail about your business then what’s presented on the pitch and business plan – in the first few days be prepared for a lot of e-mails to hit your inbox. One way that I managed avoided feeling totally swamped was by doing some prior research on other crowdfunding pitch forums to get a sense of the standard questions that crop up from investors and drafting a response in advance. Time and time again investors would ask about how the company had come up with their valuation. By doing this prep it enabled me to have the answer to hand so that I could quickly fire the answer back to the interested investor with a considered reply, even during the flurry of the campaign.
2. Create an opportunity for investors to meet you early in your campaign
By offering an opportunity for online investors to meet you early on in your campaign, you encourage those who are interested to hop off the fence and invest before they get distracted by something else. Furthermore not only is it a good opportunity for investors to ask you questions directly, and in my case sample the products, but it’s great for you to meet them face-to-face. Since the pitch is online most investors use discrete usernames which makes it pretty anonymous. By speaking to potential investors in person you can gain useful insights into their backgrounds and experience and find out how this might be useful to your business should they invest.
3. Explain crowdfunding and SEIS tax breaks
It’s important to remember that not everyone you speak to about your crowdfunding campaign, especially those that aren’t in the start-up world, will a.) know what crowdfunding is, and b.) be aware of just how amazing the Seed Enterprise Investment Scheme (SEIS) tax break is. Although it’s fairly common place terminology when you speak to other start-ups and professional investors, I sometimes forget that the average person may never have heard about this new form of tax break. Many do not know that by investing in a company that qualifies for SEIS, they will receive 50% of their investment back through tax breaks. Taking the time to explain both these terms will help you secure funds from your own network.
4. Don’t lose sight of the other aspects of your business
As the percentage increased I found I became completely addicted to refreshing the page and checking the pitch stats to see how Pip & Nut’s crowdfunding campaign was doing. And whilst it’s vital to keep a close eye on your e-mails and to be as responsive to investors as possible, it’s also important to keep all the other plates spinning in your business too. By switching myself off from the pitch and allotting times during the day to go back and review it, I was able to focus on all the other aspects of the company that needed my attention. Although it felt like I was neglecting the campaign, one of the best ways to encourage further investment is to update investors on new developments in the business, whether that be securing a new customer or finishing off the product design.
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5. Expect surprises
Don’t expect things to go exactly to plan. I found that interested investors would take a long time to get back to me, or not at all. Some days were slower than others, and I was asked some difficult questions. I found it was important to remind myself to keep looking forward, be pro-active and positive. Even if things seemed like they weren’t going my way, just round the corner a person I spoke to about the Pip & Nut campaign would surprise me and invest – it’s excitingly unpredictable. For more updates from Pippa and her shed start-up follow her on Twitter or Facebook or read her first and second blog for Startups.