Thinking about using crowdfunding to raise money for your business? Charlie and Harry Thuillier, co-owners of healthy ice cream start-up Oppo, recently completed a record-breaking crowdfunding round. Here they tell us their story and offer up five top tips…
We were feeling nervous on the morning we pushed the live button.
We had never done anything like it before, so much of our information was now public, and we were trying to raise £100,000 for a start-up that only had a months’ worth of sales. We had rejected a previous investment offer in favour of crowdfunding through the equity platform Seedrs, whereby members of the public could buy a share of the business, and we had no way of telling whether our decision was the right one.
The maximum amount of time we had to raise the funds on the platform was 60 days, and we were preparing ourselves to campaign hard for every minute of that time. Failure to make the target would be very public.
To our surprise, the Oppo campaign passed its target of £100,000 just minutes after going public on the platform. It became the most overfunded campaign on equity platform Seedrs, and apparently the fastest ever food or drink company to reach its crowdfunding target. Here are the five elements we recommend you follow to make your crowdfunding campaign even more successful.
1. Have a product that people understand, need and want to buy
Other than maybe your Mum, no-one will invest in your business if they don’t think you have a fantastic product that people want and need at a price they are willing to pay. Your pitch needs to explain simply what it is that you do and how that benefits other people. Crowdfunding investors buy into in a product or service they would want to purchase themselves. If they don’t understand your business, or if it’s very niche, they are unlikely to invest.
But more than the product, they’re investing in you and your team. So make sure your personality, passion and credentials come across, particularly in the video. Your story needs to demonstrate how you are uniquely placed to build a fantastic business. Give your investors a story they want to be a part of.
2. Attract your crowd
Crowdfunding is all about flock mentality. The more investors you have, the more investors you will attract. It’s like rolling a snowball down a hill. The hardest and most important part is to create a core of investors who have already bought into you. You can then start rolling the snowball and pick up some momentum from the first investments to build your campaign.
Here’s the process we followed:
- Build a database of interested individuals. You can do this by emailing your contacts and getting them to sign up to a list to pre register their interest in buying shares in your company. You can also use popups on your website and social media to build this list and start providing them with information so that they’re raring to go. Together with your friends, family and other close contacts, investments from this source should represent at least 30 per cent of your target.
- Put the campaign into ‘soft launch’ so that those with the link can see it but the rest of the public cannot. Invite your pre-registered prospective shareholders to invest. Once you’re at 30 per cent of target or above, then you can release it to the public. You can have the best business plan ever, but until you reach around 30 per cent of your target, most won’t invest in you because it will appear that you don’t have support from your core followers.
- Communicate with your potential and confirmed investors, and provide business announcements during the campaign. If people can see evidence of momentum (such as new sales or product innovations), it will give you even more buzz. Use any hook you can to create PR during this period to attract more attention – simply announcing that you are crowdfunding may not be enough.
- Set and agree the amount of investment that you will accept and don’t be afraid of turning people away who come in after this threshold. Keep them hungry for a future round of investment when hopefully you’ll be even more valuable!
3. Don’t stay behind your computer screen
You’re asking people to give you their hard earned money. Therefore some investors will want to meet with you, look into the ‘whites of your eyes’ (in the words of one of our investors) and determine for themselves if they trust you and your team to use their money wisely.
So be proactive and organise a simple event where people can join and ask questions of you and your team, ideally the night before launch. If an event is impractical then at least make yourself very available for investors to meet.
4. Be fair - don't over value your business
This is as much social responsibility as ensuring success. The small investors tend to rely on the big guys to do the due diligence on your company. It isn’t fair to over inflate the value of your company. It just annoys investors and erodes belief in you. Be clear when answering questions as to how you have valued the business, and avoid over promising. Crowdfunding is so accessible now that anyone can make an investment. You have a responsibility to ensure that they realise the value of their investment can go down as well as up.
5. Use your new contacts and make them into ambassadors for you
Much of the reason we decided against VC investment at this stage was because of the marketing impact of crowd funding. We wanted to get hundreds of people on board who would help spread the word and support us in our goals. It’s an amazing opportunity to enable dozens of fans to own a stake in your business and therefore want to make it a success. So during the campaign and after, make sure you use your new contacts to help you – whether that’s helping to market your brand, provide advice, or even offer feedback on new ideas and products.
Good luck! As always, it’s all about showcasing your product and the team in the best possible way, and then building a network of investors who will want to be part of your journey well after your campaign has completed.