Equity crowdfunding offers entrepreneurs an opportunity to become much more active in the fundraising process.
Chance Barnett, the CEO of Crowdfunder, sums it up well: “No longer do entrepreneurs have to wait for and depend on introductions, email responses and scheduled meetings in order to get their company and fundraising pitch in front of a broad pool of investors.”
What does this mean for you?
How can you take to make your equity crowdfunding campaign as successful as possible?
If You Fail to Plan, You Plan to Fail
Much of an early-stage entrepreneur’s time is spent pivoting and adjusting to meet market demands. It can be difficult to plan years – or even months – ahead when so much of your focus is devoted to what to do right now to keep your company afloat.
But equity crowdfunding can give you the capital you need to create something sustainable. Committing to a process brings order to the chaos.
Adequate funding is the lifeblood of any successful entrepreneurial venture. Unfortunately, many entrepreneurs overlook the importance of planning a successful crowdfunding campaign.
It’s always a good idea to start with a business plan, as well as the legal and financial documents needed to comply with SEC regulations before launching your campaign.
Your business plan doesn’t just tell you what you’re trying to achieve. It also helps inform your priorities, determines your valuation, and how much equity you plan to offer.
At Its Core, Equity Crowdfunding Is about Telling Your Story AND Building Trust
The mechanisms for connecting with investors and seeking funds are different, but what makes investors “tick” are the same.
No longer do you have to approach individual VC firms and give the same pitch over and over again. However, your online pitch (via a crowdfunded portal) needs the same elements as those in-person pitches in order to succeed.
Investors are still asking the same questions:
- What’s your elevator pitch?
- What’s your story?
- Can I trust your team?
Answering these questions is paramount. Every aspect of the crowdfunding process, from which portal you list on to your documents, website, and promotional strategy become part of investors’ calculations.
Facts and figures will help, but so does the story behind your business and vision for its future…
What Do You Believe In?
This sounds like a simple question. Perhaps it sounds like an unimportant one. However, it can have a dramatic impact on the sustainability of your business and its attractiveness to equity investors.
Businesses with well-defined beliefs – those who have carefully considered what they stand for – often stick around for decades or even centuries. With time, belief-fueled businesses perform better than those looking to make a buck without a clear focus.
It is this strong identification and commitment to beliefs which has helped make brands like Apple, Southwest Airlines, Pixar Studios, and USAA household names.
Why Is Your Business on the Face of the Earth?
It’s one thing to have a belief (“blue is better than red,” for instance). But it’s quite another when those beliefs go beyond the superficial and cut to the very core o f why you are in business.
In the eyes of investors, behind every great company lies an authentic sense of purpose. What difference are they trying to make in the world?
This is integral to your success. Back your business with an authentic purpose, and it resonates in everything you do (whether it’s your website, an ad, the products you create, or even your investment pitch itself).
In Today’s Emotion Economy, It’s Not about What You Sell but What You Believe In
In the industrial age, selling products just meant having a better, cheaper, or faster option than your competitors. Businesses saw great success by focusing on features and benefits.
Now, in today’s extremely competitive space, things like quality and decent price are necessary, but not sufficient, for success. Today demands a different type of competitive advantage – one based on emotion.
Brian Wong describes the situation today as the “Age of Emotion.” Brands are more attractive to customers (and investors) not just for what they sell, but the beliefs that drive them.
This helps explain why certain companies are dominating their industries. Nike is more than just about shoes; it is about “Just do it” – achievement and personal greatness. Apple is about challenging the status quo, favoring simplicity, and delighting their customers.
Centering your brand on a worldview is one of the most powerful ways to develop a happy, loyal customer and investor base. People gather around those who share similar world views with themselves.
Your Financials Tell a Story
When investors have access to a few years worth of documents, they get a snapshot of the health of your company and where your priorities lie. If your profits are increasing, they get to see that you have what it takes to run a successful business.
Every decision you make has financial implications – including the decision to crowdfund.
The more transparent you are with these documents, the more comfortable people feel to invest. Determine your costs in terms of funding, time, and personnel. Most importantly, let investors know exactly where their funds will go (you can use a Sources and Usage Statement or Profit and Loss Forecast) to add a layer of assurance and drive investment.
Even Your Legal Documents Paint a Picture
Legal documents give confidence to investors that you’ve complied with the necessary regulations to protect their financial interests.
Beyond this accountability, legal documents also promote transparency because they outline which rights shareholders will have, as well as the specifics of the equity crowdfunding deal.
Finally, protecting your intellectual property with patents, copyrights, and trademarks reassures investors that they’ve invested in a stable asset.
Plan Ahead – These Things Don’t Happen Overnight
You have the power to shape your investment pitch in the most compelling way possible, but it won’t happen all on its own.