Crowdfunding for SMEs — 5 things you need to know!
This is my first article on LinkedIn and the reason for starting it, is one of my New Year’s resolutions for 2021 — “To do more things out of my comfort zone” and writing personal articles is one of them.. Let’s see how it goes!
Crowdfunding. Why this topic? Maybe because at Mr Lee’s we have done it a few times, can clearly see how much more successful we have been each time we did it and wanted to spare you some of our mistakes? Also maybe because I have spoken to a few people last year and they were really grateful to know all the below beforehand, which proves this topic has some legs? Either way, here are the main 5 points I believe you should know before you start your crowdfunding campaign:
Notes: This is mainly based on my experience with crowdfunding on Seedrs — other platforms may have slightly different rules.
1.Plan for it 4–6 months in advance to have time to get your ducks in a row
Depending on the amount of money you want to raise, you need to start preparing for the campaign long before it is launched (4–6 months for the reason explained in point 2), then have it run for a month or two, and then allow a month or so to finish the documentation and arrangements. I would also add a month on the top too, in case you need to extend the campaign for the reasons mentioned later.
Meaning — it will be a while till you get the money, so make sure the realistic timescale is incorporated into your business planning. With the lines of Kenny Rogers; “You never count your money When you’re sittin’ at the table. There’ll be time enough for countin’ When the dealing’s done.” don’t spend it before you have it.
To prepare for the campaign from the marketing point of view you will need a lot of time and assets (collating all the documents, emails and agreements to prove your claims, writing copy for decks, websites, blogs, emails, social media, creating banners, videos, writing press releases and pitch press etc). Make sure you allocate budgets (and time..and you will need a lot of it) to have it done before you launch. I will cover it in more detail in my future posts.
2. Secure 30–40% of your desired budget before-hand
This is something we had no idea about when we created in 2016 our 1st campaign in about an hour on Indiegogo and hoped to reach $300k starting from $0. It’s been 5 years and it is on $142 now…Glad we didn’t hold our breath! It still makes me smile when I’m thinking of it, but you need to admire the ambition:)
Social proof and fear of missing out (FOMO) plays a role here as people are much more prone to invest if they see that others are doing it. So these 4–6 months before the launch are there for you not only to get all the above assets ready, but mainly to find private investors and get them to invest 30–40% of your desired target through the platform before it goes out to the wider community.
3. Well known investors are worth a fortune
If the investors backing you up are prominent people associated with other brands and/or major investments in the well known brands, this is gold! You can use it in your PR and portfolio as a trust factor — “If Elon Musk is in, I’m in too!”.
Prominent investors also have a great network of alike friends and acquaintances. They will share with them the excitement of investing in your business (the more they invest, the more chance they will talk about it!), and refer you to more investors — you may be surprised but it happens a lot, so worth putting your energy into enticing a “big fish”.
4. Get a “feel” of how much you can raise so you don’t lose out
One of the less known facts is that on some platforms you need to reach the target amount to be able to withdraw the money — “all or nothing “ kind of a deal, so check with the platform you are using, if that’s the case. Meaning — make sure your target is achievable.
Seedrs, where Mr Lee’s were crowdfunding, have their database of investors who vouch how much they would invest in your company before the launch. I believe many other platforms do it too. You can then estimate based on the numbers you can expect from them, add your private investors and a bit on the top coming from investors gained through your marketing campaign.
What is worth mentioning, is that some platforms will let you extend the campaign to reach the target, as they obviously also want their fee from you!
Don’t be greedy. I believe it is better to have your target lower and overfund, than too high and not reach it.
5. Create a marketing plan just for the fundraising campaign
This is the fun part for a marketeer — to plan the approach and activities on each stage of the campaign to give it the best chance of succeeding..
Ideally you should have a dedicated person who is a project manager for this campaign and the main point of contact to collate all the assets and execute the project plan.
We have done a weekly project management plan, where you plot the activities which will be done on the platform, on your social media, on your website, email newsletter, in press and if possible, during the events where you can meet with investors to pitch them face to face (a bit tricky these days though for obvious reasons) over that week. These activities are of course all plotted together to build up the interest over time. You may have to have the copy approved by the platform before it goes anywhere, so make sure you allocate time to have it all signed off.
This all may feel like a lot of work, but fear not: usually the crowdfunding platform has people who are holding your hand on every step of the way and can provide you with additional resources if needed.
Good luck with your crowdfunding efforts and hopefully it clarifies the process a bit!
Check out my next post about my experiences in doing PR for a food startup.