It’s Tuesday evening, we sit drinking some peppermint tea, I’d already had four coffees so conscious not to overdo it.
In the past 36 hours we have successfully raised $500k* (£300k pounds) in convertible equity through crowdfunding or our tech startup. We went live 9am Monday morning so we successfully hit our target in 36 hours. Not bad for a day and a half’s work. By the time the campaign closed a few weeks we had raised $750k.
In this post I will take you through how we did it.
First, why Crowdfunding?
I was someone who had admittedly been a little skeptical about Crowdfunding. I’d heard all the arguments: is it as prestigious as landing a top VC? What reputation will be associated with it etc?,
Well my mind had been well and truly changed.
In the weeks on the run up to the campaign we had put a lot of preparation into launching the campaign, learning a lot of insight into launch a crowdfunding campaign in such a way to ensure it success.
In this post I’ll explain the strategy & tactics we employed to hit our crowdfunding goal of $500k in 36 hours, eventually going on to raise $750k in convertible equity, 100% above our funding goal.
Our company’s scenario was perhaps not completely standard as we had previously raised $1 million through established VCs and Angels, but wanted to raise a interim/pre-series A round so why did we go to crowdfunding this time?
We knew the guys at Crowdfunding site Seedrs, (note differences between equity crowdfunding sites like Seedrs and more Kickstarter type crowdfunding sites) and had mentioned to them our intention to raise a pre-series A round via a convertible note. Seedrs told us that they were developing the ability to raise convertibles through crowdfunding, which would be the first time a convertible note had been raised through crowdfunding anywhere in the world, and would we like to be the first to do do. We knew this was a great story so we said yes.
So, We decided to raise $500k (£300k) in convertible equity through crowdfunding site Seedrs, using convertible equity. The terms were as follows:
- Target fundraise: $500k, with the ability to into ‘overfunding’ which basically means it does not have a hard stop ceiling, so we could go over the $500k market is it became super popular)
- A $30m / £20m CAP
- A 15% discount (read what convertible equity and what CAP and % discount are here)
In short – we felt this was a good deal on the table, so we were excited to move forward.
We said hell yes, and we set the launch date for a month’s time
How we raised the money – strategies to help you
Growing up in Ireland, one of my favourite toys was a wind up Ferrari car. When I got it first, I had to assemble it, then you could pull it back on the table and it would wind up. Then when you let go it would shoot off along the table at great speed.
A crowdfunding campaign works a bit like that: Phase 1: Assemble the car. Phase 2: Pull back, and Phase 3: Let it fly
I’ll break down the details of each of these stages below:
Phase 1: Assemble
Selection of platform
There are 500 crowdfunding platforms live in the US alone, raising billions for their companies so with so many options clearly picking the right one is important. There’s four main types of platform: Reward based, Equity, Fundraise and lending. Here’s a good post describing the differences.
Choose wisely and don’t make the decision on % they take alone. We chose Seedrs, and equity crowdfunding site platform here in UK, and I honestly cannot recommend them highly enough. They went out of their way to help us succeed.
Prep of your page, videos etc
It’s a no brainer that your page should look incredible. There’s lots of other resources explaining this so I’ll let you red them. Here’s what ours looked like:
Key things to remember:
- Just like a blog post or book, your title is super important. This is usually what people see when the campaign is shared on Social media. Make it intriguing
- People watch the video first, make it awesome.
- People decide in the first 5 seconds of the video whether to watch the rest. Make the first 5 seconds the most awesome part of the awesome video. If the first 5 secs suck, people are gone
- For the rest of your content: Show progress, examples of people that already use you, support you and make it visual so easy to digest
Creating your marketing strategy
You wouldn’t launch a business, product or event without having a marketing strategy in place…your crowdfunding campaign is no different
You strategy should include all the different channels you’ll be using, your posting calendar schedule and most importantly, there different stories you’ll be leading with
In a campaign like this you’ll need to create a lot of sustained noise about your company. Trust me a month (or how ever long you intend your campaign to run for) is a long time to keep banging on the same message, so unless you have something new to say people will begin to ignore you. SO you need to think of a string of stories to drop out to the media, social media and your community to keep the energy and momentum high throughout the campaign
Good news is that people will love to get behind you doing this – so you just need to give them the ammunition of good content to do so
Other things to have in your marketing strategy:
- VIP list of people who will support you
- Customer success stories are good, we had some from some of our past investors
Phase 2: Pull Back the Ferrari
Pay attention, as this is the single most important thing you need to do to have a successful campaign.
Whatever amount you are looking to get funding for, you need to line up 40% of this in advance of the campaign going live.
Why? We were told that companies that get to 40% funded are 80% more likely to successfully reach their funding goal.
I repeat – once you get to 40% funding you are 80% more likely to be successfully funded. So you strategy should be fully focused on achieving this 40%.
So if your total funding goal is $100k, then you need to have a min of $40k lined up. And of course you can go into overfunding as you then blast through this campaign goal J
But I don’t have any $$ lined up, how can I get this 40%?
Well there’s no secret growth hack to this one. It’s about old fashioned hustling and fundraising. So yes, even with Crowdfunding you’ll need to hit the bricks and go out to raise some cash from investors – good news about doing it this way is:
- You obviously only need 40% of what you you need to raise in total
- There’s less games / deal dynamics involved as everyone’s just putting money into a platform
- It doesn’t matter where this money is from, in our case it came from existing investors, for you it could be from a grant or from an accelerator program etc (disclosure – I haven’t checked if these latter two suggestions are allowed on crowd funding platforms)
Once you have your 40% in place & you have your page and your marketing strategy, your Ferrari is pulled back and you’re ready to let go!
Phase 3 – Let it Run!
If you’ve done the previous two stages successfully – you’re ready to let go of your Ferrari.
The morning of your campaign, you must have the people who have committed to support you (phase 2) literally ready at their computer the minute your campaign goes live. Call them, message them, call at their door – velocity is key here so you want to get to 40% as fast as possible. Why?
Almost every crowdfunding site has a ‘hot deal’ section of the site, and it’s almost always ranked by ‘velocity’ i.e. how fast people are growing. Once you get in the ‘hit deal’ section, you’ll benefit from more organic discovery, as everyone is looking for the hot the new deal!
Once you’ve done this, you’re ready tp punch go on the marketing strategy you’ve prepared in Phase 1
- Keep a daily log of what activity you’ll be doing in a spreadsheet itemised by day
- Share with your team so everyone can get whipped up with the excitement, and share your marketing stories
- Optimise activity to time of the week (we found Monday / Tues but it varies by platform)
- Your friends / supporters / advisors will be one of your best source of promotion, use them!
- Ask if the platform will help by tweeting, featuring you on their homepage or in email blasts
Hope this was a helpful guide to launching your equity crowdfunding campaign, any question please put them in the comments below or call me via Clarity
Have you successfully raised a Crowdfunding campaign? Please share any tips how to do so in the comments below
*why in dollars? Because most of the readers here are based in the US!