It used to be that I had to explain to people what equity crowdfunding was. Crowdfunding has now become a mainstream way for companies to raise funds. To give you an idea, in 2014 global crowdfunding reached $16.2 billion raised expanding by 167 percent. According to Massolution’s 2015 Crowdfunding Industry Report , in 2015 the industry is set to more than double once again, predicted to raise £22.4 billion. These numbers are enticing to many seeking to raise funds, however more often than not crowdfunding campaigns fail. Crowdfunding Academy predicts that 60% of campaigns are not successful.
Crowdfunding platforms are not magical cash machines
In my view the two main reasons why crowdfunding campaigns fail are that there is no crowd and/or no marketing strategy for the campaign.
1. You Need To Have A Network
I often have companies come to me with amazing ideas but they have no network.
What I mean by that is:
- few if any customers,
- no email subscribers,
- no social media followers (or indeed social media presence at all!),
- no influential leaders who love them who will tell their crowd,
- no PR coverage,
- no industry body that will shout about them and allow them to take the stage at an industry event…
But somehow, lightning will strike and they believe they will get lucky because they have an amazing idea. I hate to be the one to break it to them but if they have no network or a means of obtaining one, it’s not going to matter how attractive your pitch is, your campaign is going nowhere.
Companies who will be successful crowdfunding need to understand that they have to generate most of the crowd themselves. If you list on a platform and don’t bring the first 30% to 40% yourself you are very unlikely to succeed. Then ideally your initial investors will bring their connections. Companies should realise that the percentage of total strangers who have no prior connection with your company investing are very low.
2. You Need To Have A Marketing Strategy For The Crowdfund
The days when sending out a press release that announced, “I have a crowdfunding campaign!” Would get you media coverage and exposure to investors are long gone. Crowdfunding is not a build-it-and-they-will come type thing.
Even before you plan the launch of your campaign you need to be marketing the heck out of it. You should have been preselling this months in advance by talking to your network, giving them updates on your progress and launch to get them already interested.
Promoting your campaign is a mix of personal outreach, online promotion and public relations. Ideally, you will have a marketing team in place. You’ll want to have a team of key influencers with a big following who will help you during this time. You’ll need a social media strategy in place, scheduling tweets, writing blogs, and sending out emails. Have a wave of press release ready for your launch, when you reach a milestone, and hit your target.