Crowdfunding Archives - Small Business Insider

A startup’s guide to wooing investors online and cementing a relationship

Posted on September 12, 2020 Written by Administrator

If you had tried internet dating when it was new your friend might have raised an eyebrow. ‘How can you find the chemistry with another person online?’ would have been the question.

It was thought that the click (no pun intended) when you meet someone, couldn’t possibly be replicated online. The experience seemed too functional, assessing potential partners in the same way you might choose a new refrigerator – cold and entirely bereft of romance.

Then in 2012 all those raised eyebrows fell. If you weren’t dating online, you were the odd one out. The growth of smart phones, social media and the explosive success of apps like Tinder knocked ‘meeting through friends’ out of the top spot for ways to meet someone special for the first time in sixty years. Suddenly, looking for love online was fun, engaging and the way to find that special someone.

Online dating becomes the #1 way for couples to meet

Source: Rosenfeld. Disintermediating Friends.

If you are wondering what this has to do with raising capital let’s look at the reasons why.

Facilitated by the lockdown, the once slow adoption of digital by the industry has been spurred on at a rapid pace. And just like online dating, online investing will be the new normal.

The investment industry is now having its ‘Tinder’ moment.

And it’s is a good thing. Online dating took off because technology made it easier to find that special someone. It meant no more going to a club and shouting in the ear of someone in hopes you’d make a match or going to a BBQ and hoping there will be a friend of a friend there that might catch your eye. Through tech, searching singles could access the dating pool from their phone, vastly increasing the chances of making that special connection.

The same is true for online investing. Invite-only pitching events, closed networks and a reliance on personal connections all mean a limited exposure to investors, who have to work really hard to find out about deals. Now, with technology, they too can have access to the entire pool of investment opportunities from their phone. For entrepreneurs, that means a greater chance that you’ll catch their eye, get that first date and, if all goes well, seal the deal.

Tinder for early-stage investing

Like Tinder, online investment platforms, like Envestors, allow fundraising companies to have a deal profile. Not dissimilar to a dating profile, this is the place where you tell potential investors all about your investment opportunity. Unlike Tinder, the balance here is on words over photos. A good profile will include a deal summary with videos, team profiles and market information – effectively everything an investor will need to decide if you’re the one.

The market-leading platforms also include a chat feature where investors can break the ice by asking you about yourself. No softball questions here, you’re most likely to get asked to justify your sales forecast or explain how you’ve sized the market. If your profile piques their interest, but doesn’t win them over straight away, investors can follow you and receive automatic updates on your progress, so if they don’t swipe right the first time, you just might get a second chance.

Those lucky enough to find a match will be able to track their progress towards their investment target automatically, as platforms allow investors to pledge and invest online. And once you’ve got that commitment, you can keep in touch with in-built investor relations tools.

If Tinder for investment sounds like your best bet, you won’t be alone. There’s plenty of competition out there. So, to give you a chance to shine, here are our top tips for finding that special someone(s).

How to find your perfect match

A vibrant, informative profile

A top tip for your dating profile is to describe yourself in a way that provokes a question. But for your investment profile, you ideally want to leave no questions unanswered. Having a robust profile is key. If you want a potential investor move things to the next stage, full disclosure is an imperative.

Use video to capture attention. A succinct video overview of your investment opportunity (not your business and definitely not your life story!) will do wonders for arousing interest. Beyond that, ensure you have all your assets on display. At a minimum, you’ll need:

A market overview: What problem are you solving and how big is the addressable market?
- Explanation of your product or service
- Revenue model: how do you make money?
- Traction: How many clients do you have, what shape is your pipeline in?
- Introduction to the management team: track record, sector knowledge & previous exits
- Competition: How are you different (and better!) to your competitors
- Financial projections: How much money are you going to make over what time period?
- Investment Offer: How much investment are you seeking? What is your valuation? What will the money be used for?
- Exit strategy: What is it and what are some examples of recent exits in your market.

Even all that detail isn’t enough. Like a box of chocolates on a first date, you need all your documents wrapped up and ready to hand over. A good investment platform will allow you to control access to your documents so you can share your most intimate secrets with select suitors whilst keeping your details out of the hands of your competitors.

Keeping current

In the same way that a savvy online dater will ensure their photos are current, you need to keep your profile up to date and fresh as investors may be keeping an eye on you from a distance. Add regular (weekly is a good idea) updates on new customer wins, new hires, new partnerships, and sales results. Keep giving investors reasons to come back and take another look. Maybe they weren’t sure the first time, so keep showing them you deserve a second look.

A close encounter

Once you’ve that first date in the diary, get ready to wow them. First meetings are as crucial as first dates. Chemistry is always at play, so you need to ensure you’re prepared so you can relax and be yourself when you finally meet.

We always recommending researching your ‘date’ before you meet them.Find out what else they’ve invested in or what boards they sit on. Ensure you can show them you’ve taken the time to learn a bit about them.

This will make it easier to break the ice and also to find out why they decided to make previous investments, so that you can tailor your pitch to them.

Dress to impress

You also need to dress the part – we’re all getting so comfortable with video calls that it’s becoming the norm to be at least half clad in your pjs, but some studies show that your clothing choice can affect your performance, so take a bit of time to put on your Sunday best – it might just be the difference between a good pitch and a great pitch.

Charm is not enough

The final preparation point is to know your numbers. Don’t just rely on your charm, make sure you know your numbers because you’re very likely to be asked about them and, in many cases, to justify them. It’s worth ensuring they roll off the tip of your tongue and are justifiable.

The investor’s perspective

Our last tip is to try on your date’s shoes! The point is to consider the investor’s perspective. Your business might be the greatest thing in the world – to you, but they are still deciding. Keep in mind their goal is to get their money back, so they need to believe you are capable of delivering the growth you are promising and that your exit strategy — the bit where they get their money back — sound. Like savvy singles who have friends at the ready to make an ‘emergency get out of date phone call’ investors walk into a room backwards, they are looking for reasons not to invest but if you listen well to what they ask you and say, and respond clearly and transparently, you just might get that second date.

The move to online investing is a positive step. It helps investors to find and vet deals and for entrepreneurs easily. For founders of startups it means you’ll have more people looking at your profile. Yes, you will have to change your approach to seeking investment. However, get it right and you can find an ideal match with your investor.

ABOUT THE AUTHOR

Chantelle Arneaud is from Envestors. Envestors’ digital investment platform brings together entrepreneurs and investors across geographies, communities and sectors – creating the single marketplace for early stage investment in the UK. Envestors partners with accelerators, incubators and angel networks to provide a white-label platform empowering them to promote deals, engage investors and connect to other networks. Founded in 2004, Envestors has helped more than 200 high growth businesses raise more than £100m through our own private investment club. Envestors is authorised and regulated by the Financial Conduct Authority.

Web: https://www.envestors.co.uk/

LinkedIn: https://www.linkedin.com/company/envestors-llp/

Twitter: @EnvestorsLondon

What is crowdfunding?

Posted on October 21, 2019 Written by Administrator

Small and medium-sized enterprises (SMEs) in particular often find it difficult to raise the working capital they need. The problems are compounded by the general reluctance of traditional banks to advance such business loans.

Crowdfunding has helped to fill that vacuum. Instead of asking one main lender to advance the required funds, crowdfunding offers a way of inviting a large number of individuals and organisations to each contribute small amounts. The required funding is therefore raised through that pool of contributors – through crowdfunding.

The different types of crowdfunding

In a consultation paper released in July 2018, the Financial Conduct Authority (FCA) noted that crowdfunding is often an important, alternative source of finance for businesses and individuals.

As an alternative source of finance, which avoids any bank or other financial institution as an intermediary, crowdfunding is theoretically a cheaper way for businesses to raise the funds they need and for the individuals concerned to receive a more attractive rate of return.

The FCA also draws one of the fundamental distinctions between different kinds of crowdfunding:

Investment-based crowdfunding

through this means, individuals have an opportunity of investing in companies by purchasing shares or bonds and participating in the returns generated by those investments – for that reason it is also sometimes called equity crowdfunding; and

Loan-based crowdfunding

Just as it says, this is a means by which businesses raise finance from a collection of individuals – also known as peer-to-peer lenders – who provide a repayable loan and receive repayment together with an agreed rate of interest.

These two forms of crowdfunding have been received with wide appeal in the UK. A story in the Financial Times from September 2018, for example, mentioned the example of one of the leading crowdfunding platforms Funding Circle – said to be valued at £1.5 billion.

As of the 8^th of August 2019, Funding Circle reported that it currently has some £3.54 billion of funds under its management through its crowdfunding platform.

Other types of crowdfunding

In addition to debt-based crowdfunding, or peer-to-peer lending, and investment-based crowdfunding – which are both regulated by the FCA – there are two other principal types, which are not regulated by the FCA:

Rewards crowdfunding

in this variation of the concept, there is no immediate financial pay-out, but contributors may be “rewarded” with gifts – such as concert, theatre or cinema tickets;

the value or number of gifts issued may be proportional to the size of the donation made;

it was one of the first instances of crowdfunding, where a rock band wanted to raised funds for a forthcoming tour and offered free tickets to their concerts for those who donated;

rewards crowdfunding continues to be used quite widely for such artistic endeavours;

Donation crowdfunding

crowdfunding is also used by many charities as a way of encouraging and receiving donations to its cause or causes;

raising donations in this way helps to build a community spirit online and is used not only by charities but also by individuals who are appealing for financial help with particular personal issues or projects.

In addition to its commercial appeal to businesses, therefore, crowdfunding is also a valuable source of funding for charitable and individual projects.

Equity Crowdfunding Masterclass

Nathan Rose, Author of Equity Crowdfunding : The Complete Guide For Startups And Growing Companies: has launched his online equity crowdfunding masterclass. This is online training class you can take in your own time and use to help build a successful crowdfunding campaign to unlock the finance you need to build your product. The masterclass covers 7 main aspects of running and completing a successful crowdfunding project.

Foundation
Crowd building
Authority Outreach
Platforms Selection
Campaign Prep
During the camping
After the campaign

The masterclass has over 40 videos to ensure you are best equipped to run a crowdfunding campaign. Currently the masterclass has $60 off for new students. While priced in dollars, the course in suitable for anyone in any location. It also provides interviews with those that have raised monies before and will share their tips too.

If you are looking at equity crowdfunding, this is the best investment you can make.

https://www.speedieconsulting.co.uk/recommends/resources/equity-crowdfunding-masterclass/

How to build compelling messaging around your equity crowdfunding campaign

Posted on September 4, 2019 Written by Administrator

Many entrepreneurs consider equity crowdfunding a no-brainer. You have a great idea, an innovative product, and/or a disruptive business model ‒ why wouldn’t the crowd invest?

You may be surprised to find out, however, that the majority of equity crowdfunding campaigns never reach their minimum funding target. One of the main reasons for this is the lack of clear messaging. If you can clearly communicate your proposition in a way that resonates with investors and activates their imagination, you’ll stand a far better chance of getting funded.

Clear, compelling messaging is the key to a successful crowdfunding campaign. It’s the thread that runs through all your pitch materials telling investors why you are special, why they should invest, and why now is the perfect opportunity.

So how does one create compelling campaign messaging?

Find your story

When assessing clients to work with, I always look for a good story – either the founder story, a lightbulb moment, or something personal that led to the idea behind the business. So, ask yourself: what’s the human and relatable part of the campaign? What was the story that brought me to this point?

Telling a good story is probably the most undervalued part of campaign messaging. Founders often jump to their idea, USPs, or the traction so far. Of course, these aspects are important, but it’s the story that triggers emotion, creates memories, and builds relationships.

Don’t be afraid if your story is long-winded and unfocused to begin with, you can always trim and make it more concise. The most important thing is to get it down on paper!

The one-minute pitch

Every entrepreneur will be familiar with the elevator pitch ‒ that 20-second snapshot of your business that communicates all the key information. Of course, there is more to an investment opportunity than the basics of the business, so the 20 seconds needs expanding.

That’s why, when I run equity crowdfunding training programmes, I get our entrepreneurs to start by creating a one-minute pitch presentation. They note all of the good things about their business in a succinct way before developing these points into a short script that can be used as a crowdfunding video.

By keeping the video script short and succinct, it forces the founders to focus on the best, most unique aspects of their business and leave the less important things out. It also creates a clear, coherent message that can then be used across the rest of the campaign messaging.

Meeting an unmet need

Once you have your founding story and one-minute pitch nailed down, it’s time to consider your value proposition. Who does your product or service help? What unmet need or problem do they face? How well does it meet and solve their needs? How many people have the same need? How urgent is the problem?

You can have a fantastic product, but unless it addresses an unmet need, it fails to offer real value.

One good exercise to help pin your value statement down is to consider other solutions or products that offer something similar. What needs are they addressing? How is your solution different? What makes it unique?

Often the best new business ideas aren’t those offering something entirely new, but those that dramatically improve on previous solutions in some important way. Disruptors can only improve on existing solutions to shake-up an established industry.

Finding your target audience

Your key messaging needs to be meaningful to your target audience, otherwise you will struggle to capture their imagination. The essential thing to remember is: know who you’re talking to.

Don’t try to appeal to everyone, it’s impossible and will muddle your message. Instead, research your customers and build customer profiles. Then do the same of your investors. In both cases, think about who they are, where they hang out, what they read, what channels they are on, etc.

Not only will building target profiles help you tailor your messaging to each audience (depending on the medium), but it will also help you find the right channels to reach them. Investors, for example, are more likely to use LinkedIn regularly and read trade publications, making PR and LinkedIn outreach two key channels. Whereas, individual supporters may be more likely to spend their time on Facebook and watching videos on YouTube.

Knowing how your audience understands your product and industry, as well as where they spend their time online, allows you to hit them with meaningful messaging that will increase investment in your campaign.

Test your messaging

The final step is to test your messaging. The easiest way is to ask friends, family, co-workers, investors, even strangers what they took away from your messaging. Did they immediately grasp your business idea? Were they moved by your founding story? Did they pick up on the key USPs you wanted to convey? Did they understand the benefits?

It’s also a good idea to keep an eye on the time it took for them to understand the key messages. If you found that you had to talk for several minutes before they understood, then your key messages aren’t clear or concise enough. They should get the basics within a couple of sentences and understand most of the business in around a minute. Any longer and you will struggle to communicate properly to your actual audience.

Communication will always determine the success of crowdfunding campaigns. There are lots of great businesses out there running equity crowdfunding campaigns, and yours needs to stand out in all the right ways for you to hit your fundraising target!

ABOUT THE AUTHOR

John Auckland is a crowdfunding specialist and founder of TribeFirst, a global equity crowdfunding communications agency that has helped raise in excess of £25m for over 60 companies on major equity crowdfunding platforms, with roughly a 90% success rate.

TribeFirst is the world’s first dedicated marketing communications agency to support equity crowdfunding campaigns and the first in the UK to provide PR and Marketing campaigns on a mainly risk/reward basis.

John is also Virgin StartUp’s crowdfunding trainer and consultant, helping them to run branded workshops, webinars and programmes on crowdfunding. John is passionate about working with start-ups and sees crowdfunding as more than just raising funds; it’s an opportunity to build a loyal tribe of lifelong customers and supporters.

See: http://www.tribefirst.co.uk

Twitter: @Tribe1st

The new approach to business fundraising

Posted on August 7, 2019 Written by Administrator

When you need to raise funds for business growth have you ever considered that you may be reducing your chances of success by using a model where time is limited arbitrarily?

Time is needed to raise capital and growth businesses are now realising the benefits of Always-on Fundraising, in which companies leave themselves open for investment 365 days a year.

An open funding round provides an opportunity to capitalise on any unexpected successes, gives the entrepreneur the best chance of finding their perfect investor(s) and with an investor relations mindset being a constant, follow-on funding. As the days of traditional, time-limited funding round are numbered let’s look at what you need to do to make the ‘always on’ model work for you and your business

Always on Fundraising – What needs to be done?

How does ‘Always on’ work in practical terms? While the concept is radically different some of the early steps will have a sense of familiarity, but you are looking at them through a different lens. Here are five key areas of activity:

What is your investment opportunity?

You need to start by defining your investment opportunity which includes deal structure, valuation, share price and your minimum and maximum investment levels.

Even though you’re ‘Always on’, you must have clearly defined investment levels. This benefits all parties. Your minimum investment level protects investors by ensuring that you have a significant cashflow runway to execute on your plans and projections while the maximum level dictates the total number of shares you are willing to sell at that price, protecting the shareholders from dilution.

Get the right tools in place

You need an FCA-regulated environment in order to promote your investment opportunity, accept pledges and draw investment. The new breed of White-label platforms like Envestry for Scale-ups, provide off-the-shelf functionality to allow companies to create a branded fundraising portal that easily links to their current site. With FCA-coverage built-in, companies can focus on the hard work of attracting investment rather than regulatory fine print.

Promote, promote and promote

With your fundraising site up and running, it’s time to promote your investment opportunity. Before you do anything, think about the investor journey by type. For example, personal connections who may be new to investing will need more guidance as they go through the process than experienced investors. To accommodate those new to investing, how-to guides, investment glossaries and frequently asked questions are imperative. Whereas, your communications to experienced investors can focus on the why instead of the what.

Have a first close

Once you hit your minimum investment level, you can do a first close and draw down the pledges, while keeping your round open. This allows you to start fuelling your growth while continuing to attract investment to your maximum level. Up until you reach your maximum you can continue to draw down funds at significant intervals as they come in.

Close a round; open the next

While the name ‘Always on’ might imply one continuous round, the best way of using this approach is via a series of back to back rounds (tranches). As a growing business you will want to change your valuation and share price to reflect the progress you have made. It is worth noting that on rare occasions businesses may also reduce share price, known as a ‘down round’.

So, when is the best time to close one round and open another one? Clearly, once maximum investment level has been reached, the round will have to be closed. Beyond that, anything significant which justifies an increase in valuation, such as a securing a large new contract, reaching a customer milestone or securing regulatory approval on a product, should prompt you to close the round and open a new round at a higher share price.

It makes a lot of sense for businesses to use the Always on Model particularly if they are generally raising funds every six to eighteen months. In future I expect it to be the norm for all companies from seed through to sale to have a section of their website devoted to ‘investor relations’. A section which should attract interest from both loyal and new investors.

ABOUT THE AUTHOR

Scott Haughton is COO of Envestors, a fintech company that connects investors and scale-up companies. With its fundraising platform Envestry for Scale-ups, companies get a personalised site to promote deals, raise finance and engage with their investors 24 hours a day, 365 days a year.

Envestry has raised £100m+ for over 200 companies through its own private investor network.

Founded in 2004, Envestors is regulated by the FCA and has offices in the UK, the Channel Islands, the UAE and strategic partners across China.

Web: https://www.envestors.co.uk/

LinkedIn: https://www.linkedin.com/company/envestors-llp/

Twitter: @EnvestorsLondon

Facebook: https://www.facebook.com/pg/envestorslondon/posts/

How can you put energy back into a slowing crowdfunding effort?

Posted on August 1, 2019 Written by Administrator

I’ve seen a vast array of businesses run crowdfunding campaigns in wide variety of industry sectors. It can be surprising which campaigns capture the imagination of investors, and rocket towards their target, and which falter midway through.

Why is this? One of the main differences is timing. If the market isn’t ready for your product, regulation holds back earning potential, or your ideal investors are distracted with another campaign, your campaign won’t get the investment you seek. With any luck, your market research will highlight these potential issues before you go live and you can adjust your timing accordingly.

Often, it’s simply an issue of momentum, where not enough lead investment has come on to give the wider crowd confidence in a business. Or a campaign experiences the dreaded ‘pitch death’ when it doesn’t get any investment for a few days, causing the founders to lose all morale.

Other campaigns, however, may be struggling due to poor communication or a lack of outbound marketing messages. You can’t expect enough investors to find your campaign organically in order to reach your target and, if investors simply aren’t aware of your campaign, they won’t be able to fund it.

Good, consistent marketing messages can help hammer home those key benefits, explain features and revenue streams, and grow your reputation as a business that can get things done.

If you find your campaign stalls here are some actions to rescue the situation and engage investors.

A charm offensive

Both LinkedIn and the Angel Investment Network (AIN) are ideal places to find investors. Advanced searches allow you to be very targeted in who you reach out to and means you can create tailored messages to each potential investor group.

With LinkedIn, you’ll need to create a short invitation to connect message of 300 characters at most, followed by a longer message for new and existing connections explaining your proposition. LinkedIn messenger isn’t the most user-friendly place to read longer messages, so try and keep it as concise as possible while still including the key information, such as:

The problem you are solving and your solution ‒ one or two short sentences
Your key USPs ‒ one sentence
Market size ‒ something short to pique their interest
Traction so far ‒ these could be 3-4 bullet points
Call to action ‒ usually a question for them to respond to, such as “Would you like to arrange a short call so I can answer any questions you may have?”

While you can’t attach files directly to LinkedIn messages, you can include links. We often use solutions like DocSend to include a copy of an executive summary in the message, providing potential investors with even more information and a taste of your branding.

AIN is very similar, except you can be even more targeted in your search and you know everyone on the platform is an active investor. Instead of invitations to connect, you’ll need to draft a short nudge message of up to 5000 characters which will lead potential investors to your campaign page on the AIN site. There they will be able to download key documents and see your entire campaign, so linking to your executive summary isn’t necessary.

Reaching out and engaging potential investors directly is one of the most effective ways to draw attention to your crowdfunding campaign and opens you up to their extended network as well.

Positioning your PR

Writing article for the press can be one of the most effective marketing tactics for any crowdfunding campaign. But instead of thinking of it as an opportunity to talk about your product and crowdfunding raise, you should consider how to hook your ideal investors and educate them on your market.

We meet a lot of founders who just want to promote their product or service – that’s called advertising, and understandably you’ll be asked to pay to place an advert.

Instead, find an angle that will capture the attention of the publication’s audience ‒ your potential investors. Make it useful and genuinely interesting, solve an issue they might have, and show how your solution can do it faster, cheaper and/or easier.

Positioning your PR articles in this way will get the widest adoption by relevant press. The byline and ‘about the author’ section are where you can mention your business and crowdfunding raise, gaining your campaign much-needed traffic.

Making use of social advertising

Advertising on social media networks, like Facebook, Twitter and LinkedIn, allows you to target users based on very specific parameters, delivering different messages to each. As such, social ads can be fantastic at addressing the different concerns of different investor groups.

Perhaps one audience is more concerned with saving time while another cares more about saving money. Perhaps you have a two-sided marketplace that benefits businesses and customers. Social ads are short, punchy ways to deliver these messages directly to the most relevant audience.

The main benefit of social ads, however, is that they can perfectly complement your PR and outreach messages. They are regular reminders of your business, your idea, and your campaign.

Say a LinkedIn investor sees your outreach message, searches your brand name on Google, and sees a bunch of press articles you’ve written. Perhaps they download your executive summary to read later before becoming distracted. Adverts popping up on LinkedIn and Twitter, for example, would then remind them of your brand and proposition, bringing them back to your original message for a follow-up.

Facebook ads can even be used to promote the PR coverage you gain from your articles, helping enhance your reputation through third-party content whilst educating your marketplace. They really are the perfect complement to your other marketing activities.

Wherever you are in the process: planning a campaign, in the early days, mid-way through and experiencing a dip you need to use these marketing activities and get attention and interest. Don’t use all your fire power immediately. Hold little back in case your crowdfunding needs a mid-campaign boost.

ABOUT THE AUTHOR

John Auckland is a crowdfunding specialist and founder of TribeFirst, a global equity crowdfunding communications agency that has helped raise in excess of £17m for over 50 companies on major equity crowdfunding platforms, with a greater than 90% success rate.

Twitter: @Tribe1st