GUEST BLOG POST -Joy Schoffler
The number of entrepreneurs who are turning to crowdfunding to raise capital and launch their projects is increasing rapidly. In a recent report by industry analysts Massolution, it was reported that crowdfunding grew by 81 percent worldwide and with total funds raised exceeding $2.7 billion in 2012. While there seems to be countless success stories of businesses raising thousands to hundreds of thousands of dollars, it’s not as easy as it looks, and many do not meet their goals. Leveraging your—and your company’s—social capital is critical to success.
Successful crowdfunding does not generally consist of hundreds of disconnected, random people simply throwing money at your new venture. Go ahead and throw conventional wisdom out the door. Studies have shown that most successful campaigns are less than 30 days in length and have a significant portion—as high as 30 percent—of donors lined up ready to contribute on day one.
Depending on which platform you use, you may even have to reach a certain percentage of your goal in order to receive any funds raised at all, meaning fundraisers need to hit the ground running from day one. In order to build an effective crowdfunding campaign and accomplish your crowdfunding goals, here are five rules of thumb to follow:
1. Work Your Network before the Raise: The majority of funds will come in at the beginning and the end of the campaign. Your business plan, cost estimates, marketing and PR strategy all need to be refined and in place before you think about starting to crowdfund online. Start contacting respected businesspeople within your own network to get their thoughts and solicit their interest so that you have people lined up to donate on day one. Furthermore, crowdfunding is all about networking and there’s no better way to build your network than through social media. Take the time to build out your Facebook and Twitter pages and target social media influencers in your industry, respond to their comments and get their thoughts on your idea. If you are thinking about using equity crowdfunding to sell shares of your business—now is the time to start building up your network. While it is illegal to solicit funds (in exchange for equity) until the JOBS Act regulations get implemented, the longer you know potential investors, the better the odds are that they will crowdfund your company when the time comes. So, donation, reward or equity crowdfunders have no excuse not to get their networks ready now!
2. Build Your Brand: Your personal brand and that of your company are among the most important assets of your business and a key ingredient of building social capital. But before you can build it, you must define it. Take an inventory of those things that may strengthen or diminish your brand’s image. Is your messaging clear and to-the-point? Are your branding elements consistent across your website, social media platforms, email and other communication channels? What kind of language and tone are you using to differentiate yourself? If you’re uncertain how you or your business is perceived, ask friends, family and trusted colleagues to provide honest feedback. Today, our digital presence means everything. Before you ever think of asking for a penny, do a thorough inventory of your digital presence, and if there is anything you are not sure about, fix it—you only get one chance to make a first impression.
3. Plan, Plan, Plan: French author Antoine de Saint-Exupéry once said, “A goal without a plan is a wish.” Every crowdfunding campaign must have a plan. Aside from the obvious plans for using funds, you need to have a plan in place for executing the campaign. In our CrowdBuilder platform, we walk crowdfunders through a six-week campaign preparation program before launching. Helping people refine messaging, building up a high-quality digital presence, getting networks ready and helping to get 30 percent of investors pre-committed before campaign launch is the goal of our program. Regardless of what platform you use, it is important to have these items in place.
4. Build Credibility: While on average, 30 percent of your campaign contributions may come from friends and family, you want to have a solid digital presence on the web so people learning more about you see a rich history of high-quality press coverage. Earning the notice and respect of journalists who will write about your business can mean the difference between success and failure. A comment about your business in your local business journal, national newspaper or magazine, blog or other relevant publication can build the credibility needed to attract investors, fans and customers.
5. Leverage your Expertise: Differentiate yourself and your business in your industry by using your expertise to educate others and position yourself as an industry thought leader. Take opportunities to speak at conferences and events and to contribute to online or print publications. The more opportunities you have to speak about your business or your industry, the more you elevate your reputation and your brand. Speaking engagements are also a wonderful way to meet high-quality prospective contributors as you will already have proved yourself as an expert in their eyes if you presented well.
Crowdfunding is growing rapidly and has the potential to change how capital is raised, bring innovation to the marketplace and create new businesses and thousands of new jobs. It offers every entrepreneur the opportunity to turn their ideas into reality – but like any other high-stakes venture, requires thoughtful planning and strategy before the game even begins. Take time and prepare your network.
About the Author
Joy Schoffler, principal of public relations firm Leverage PR, has spent her career launching high-performing startups and helping them achieve growth through creative publicity strategies. She has helped early-stage companies make the INC500 list, raise large amounts of capital, get acquired, secure Fortune 500 accounts, and experience tremendous growth. She has developed a first-of-its-kind publicity platform for crowdfunding and growth- phase companies—CrowdBuilder–to help companies increase their base of contributors and customers. Joy is also the chair of the Publicity Committee for the Crowdfunding Professional Association (CFPA) and sits on the ad-hoc committee for the Crowdfunding Intermediary Regulatory Advocates (CFIRA).