Raising Finance

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How to triumph at crowdfunding: The expert’s view

5 Mins

Crowdfunding sites enable entrepreneurs to showcase their businesses and the investment opportunity to a nation of ‘Armchair Dragons’ who can invest as much or as little as they like. To ensure you reach your funding target, it is important to make the pitch stand out from the crowd and the following five tips will give your crowdfunding campaign the best chance of success. 

1. Make your pitch compelling 

Keep your pitch clear and simple – and avoid using jargon – so that potential investors can easily understand what and who they are investing in. Investors wait for opportunities that move them, so inject some enthusiasm and life into your pitch summary.

Our research shows that ‘perceived market potential’, ‘prior experience of the entrepreneur’ and ‘the idea underpinning the business’ are the most important factors for investors when making a decision, so it is very important to communicate these aspects of your business effectively. With this in mind it is essential that these elements should form part of a well-written business plan with financial forecasts that add-up.

Tech start-up, Escape the City, who turned down offers from VCs to successfully raise £600,000, deliberately reworked their original VC pitch to make it more appealing to smaller investors. They placed the founders at the heart of the pitch and told the story, explaining the vision and philosophy behind the company in a clear, concise and compelling manner; The result, it attracted 394 investors.

2. Start promoting yourself today

You should start raising interest as soon as possible; don’t wait until the day your pitch goes live, but start warming up potential investors today. Tell your friends, family, customers, suppliers and other potential investors, and then keep them updated with progress. The importance of early momentum and investment progress is a really important factor for success; a pitch will attract more interest if it has already managed to secure a decent chunk of the target.

For example, The London Distillery Company had already secured £150,000 investment from business angels toward its £250,000 target when it approached my company. Having investment already secured will naturally catch the eye of other investors as it helps to validate your business. The London Distillery Company was able to comfortably raise the remaining £100,000 in just a matter of weeks.

3. Sign up for tax incentives

The UK has some of the most generous tax incentives in the world to help small, higher-risk businesses raise the finance they need. Registering your company with Enterprise Investment Scheme (EIS) or Seed Enterprise Investment Scheme (SEIS) gives investors substantial tax breaks – up to 50 per cent for SEIS and 30 per cent for EIS – and are a crucial ingredient for attracting investors and successfully rising equity finance. The qualifying criteria vary under each scheme but the rewards for eligible companies and investors are too attractive to ignore. All but one of the 60+ businesses to have raised finance via Crowdcube have been eligible for either EIS or SEIS.

4. Keep everyone updated

Entrepreneurs need to embrace the principles that underpin all good crowdfunding; be proactive, well-prepared and eager to engage with investors. Keeping investors and pitch followers (sometimes over 100 people can follow a pitch that they want to track) abreast of developments by publishing regular updates can be a powerful way of converting interest into investment. Don’t limit yourself; get out and talk to people face-to-face, there’s nothing like it for getting investment.

Dariush Zand, the founder of OVIVO Mobile – a Mobile Virtual Network Operator (MVNO) – embodied everything that we like to see from an entrepreneur raising finance. Dariush embraced the opportunity, leveraging his existing network and community. As well as posting regular updates to his pitch he also held several investor events, both face-to-face and via a webinar. The tactics and enthusiasm worked, with OVIVO raising over half a million pounds of investment over two rounds on our platform.

5. Get real

Don’t be over-ambitious with your target and don’t put people off by overvaluing your business. Set yourself an achievable investment target, e.g. under £150,000 is realistic unless you have some significant investors lined up.
And, good luck!

Luke Lang is co-founder of Crowdcube

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