Raising your first equity crowdfunding round:

How to succeed on Crowdcube and Seedrs

According to Beauhurst, equity crowdfunding continues to grow in popularity with 356 campaigns across seed, venture and growth stage successfully raising over £214m in 2017.

But what does it take to launch a successful equity crowdfunding campaign and how can you maximise your chances of success?

We decided to find out by conducting research into those those who successfully raised investment on the leading equity crowdfunding platforms, Crowdcube and Seedrs.

Our sample was made up of 33 entrepreneurs who successfully raised investment on Crowdcube and Seedrs in 2017. Their campaigns cover a range of sectors from Food & Beverage to SaaS/PaaS, with raises ranging from £60k all the way to over £3m.

We’ve put together the following report to share our findings, helping you to understand what it takes to successfully raise investment through equity crowdfunding.

Why Equity Crowdfunding?

We asked our Crowdfunding Champions what attracted them to equity crowdfunding. Here’s what they had to say…

Awareness

Unlike raising investment privately, with equity crowdfunding everything is made public. For those that succeed, this can be a great way to generate awareness and capitalise on free publicity. When asked what was the main benefit of launching their equity crowdfunding campaign, 24% cited brand exposure. For some, this can even lead to an increase in sales, with 33% saying they saw an increase as a result of launching their campaign.

Loyalty

Owning shares in a business is an extreme form of customer loyalty program. The customer actually has a vested interest in the brand’s success.” Many of our Crowdfunding Champions recognised the benefit equity crowdfunding can have on customer loyalty. Not only this, but often these customers will become real ambassadors for your product/service, going above and beyond to promote your brand.  

Speed

As you’ll see later on in this report, the time involved in launching an equity campaign should not be underestimated. However, according to John Auckland, many of the founders he speaks with spend over a third of their time raising funds, and many industry commentators suggest it takes an average of six months to close a funding round. It’s no wonder that our Crowdfunding Champions mentioned speed as one the reasons for using equity crowdfunding. Also, it’s not just the speed that plays a part, it’s the certainty that a founder knows they’ll either close the round or fail by a specific date. This makes it easier to plan the future of a business when you have defined timescales.

The Challenges

Launching a successful equity crowdfunding campaign doesn’t come without its challenges. We asked our Crowdfunding Champions what was the most challenging part of launching their campaign, 55% cited the overall time commitment.

Preparation

As we saw in the previous chapter, 55% of Crowdfunding Champions reported ‘overall time commitment’ as the biggest challenge of running their campaign and the bulk of this time happens before launch. 

 

Time spent preparing

Maximise your chances of success

Build a crowd

Pre-committed invested

Offer rewards

 

Build a crowd

Creating early momentum is essential for any crowdfunding campaign. 85% of our Crowdfunding Champions built a subscriber list of interested investors before launch. This can be a great way to gauge the appetite from your own network and understand how much you can expect them to invest.

Pre-committed investment

It is widely advised that if you can hit 30% of your crowdfunding target in the first 48 hours you are far more likely to go on to succeed. Although this is not a prerequisite it does reinforce the importance of creating early momentum – professors Agrawal, Catalini, and Goldfarb found that campaigns become more attractive when others have found it attractive. Lana Elie, founder of Floom was able to raise 50% of her campaign target on the first day through pre-committed investment, putting her in a stronger position when approaching other investors. Our findings show that on average, our Crowdfunding Champions had 45% of their target pre-committed before launch.

Offer rewards

Nearly half of all our Crowdfunding Champions offered rewards (sometimes know as ‘soft dividends’) to incentivise investors from discounts to free merchandise. Offering rewards can be a great way to encourage investing and build your customer base. If you do decide to offer rewards, be aware that offering rewards above the value of £1000 may have implication on your investors tax relief.

Support

Launching a success equity crowdfunding campaign alongside running your business can be a stressful ordeal, especially if it’s your first time. Thankfully, there are specialist service providers who can assist with all areas of your campaign from accounting to PR. 82% of our Crowdfunding Champions hired one or more service providers to help them with their campaign.

VideographerPhotographer (2)

58%

financial adviser

12%

Lawyer

21%

consultant

9%

pr agency1

18%

marketing agency

6%

Marketing

According to crowdfunding expert Kendall Almerico, most equity campaigns fail because they do not market their offering correctly. Like in your own business, it is important to have a clear marketing plan for your equity crowdfunding campaign, providing clarity on who you will be targeting and how you will drive them to your campaign.

Most effective channels

We asked our Crowdfunding Champions what was the most effective channel for securing investment. Our findings show a more targeted approach of reaching out to investors directly was the most effective channel. Although equity crowdfunding platforms have removed the need to deal with investors directly, meeting face-to-face may still be the preferred option for professional investors who are more accustomed to this approach. Rishi Chowdhury from IncuBus for example, found that 80% of his face-to-face meetings with investors lead to investment in his campaign.

12%
Social Media
15%
Email Subscriber List
49%
Direct Outreach To Investors

Funding split

Understanding where your investment is likely to come from and the value of your own network is vital. To understand the funding split of a typical campaign, we asked our Crowdfunding Champions to indicate what percentage of their total raise came from their existing crowd (friends, family, customers), the platform and their marketing efforts during the campaign.

Average campaign funding split:

Existing crowd44%
Platform 32%
Marketing efforts during campaign24%

Advice

“Talk to people who have already done it. Mobilise your contacts before campaign and schedule them so the campaign gets momentum and ticks along. Meet people face to face.”

Crowdcube & Seedrs 2018 Report

Tagore Ramoutar

The Oxford Artisan Distillery

“Prepare well! And get those first investors committed before launch.”

Crowdcube & Seedrs 2018 Report

Gareth Williams

Yellow Dog

“If you're very early stage have plenty of people lined up to invest before you start.”

Crowdcube & Seedrs 2018 Report

Jim Law

Find a Player

“Focus on the details of your campaign page and ensure the campaign is delivered coherently”

Crowdcube & Seedrs 2018 Report

Joe Devereux-Kelly

Cool Cold Brew

"Prepare your video really carefully"

Crowdcube & Seedrs 2018 Report

Dr Paul M. Upton

Ultramed

"Promote heavily before and during the campaign."

Crowdcube & Seedrs 2018 Report

Steve Wilks

For Good Causes

"Know your pitch & numbers."

Crowdcube & Seedrs 2018 Report

Nadeem Abbas

Love2Laundry

"Put your all into every part of it, from the video to events you run to shouting about it on social media. Don't hold back!!"

Crowdcube & Seedrs 2018 Report

Emily Fitchett

Fitch Brew Co

"Be understandable, professional and believable."

Crowdcube & Seedrs 2018 Report

Alex Joll

Eat Square

"Engage your customers - make your customers your investors, and your investors your customers."

Crowdcube & Seedrs 2018 Report

Matt Ovenden

Borrow A Boat

"Follow the advice of your consultant."

Crowdcube & Seedrs 2018 Report

Paul Francis

HÜGGE

"A good pre-launch campaign is key to make sure you have a good chunk of the target already lined up. Use your existing community if you can."

Crowdcube & Seedrs 2018 Report

Alex Narracott

Much Better Adventures

"Prepare your pitch."

Crowdcube & Seedrs 2018 Report

Amanda Cook

I Love Snacks

“It makes much more sense to own a little bit of successful company, than having most of shares of a company which worth nothing.”

Crowdcube & Seedrs 2018 Report

Franck Oksen

OKSEN

"Pre raise as much as possible 30% plus"

Crowdcube & Seedrs 2018 Report

Anonymous

Crowdfunding Champion

"Put your all into every part of it, from the video to events you run to shouting about it on social media. Don't hold back!!"

Crowdcube & Seedrs 2018 Report

Anonymous

Crowdfunding Champion

"Spend at least 3 months, plan really carefully before launch and only launch when you know you have 50% already."

Crowdcube & Seedrs 2018 Report

Anonymous

Crowdfunding Champion

"Only go into the raise having commits of 70% of your target in advance. If you don't have commitments but need the money, lower your target and carry on raising."

Crowdcube & Seedrs 2018 Report

Anonymous

Crowdfunding Champion

"Lots of preparation, getting pre-commitments and marketing it aggressively via all channels available."

Crowdcube & Seedrs 2018 Report

Anonymous

Crowdfunding Champions

"Talk to people who have already done it. Mobilise your contacts before campaign and schedule them so the campaign gets momentum and ticks along. Meet people face to face."

Crowdcube & Seedrs 2018 Report

Anonymous

Crowdfunding Champion

"Monitor all active campaigns for a couple of month's prior to learn the do's and dont's. Be entriely open and honest in communication with potential investors through the platform. Your performance here is more important than the pitch, always assuming the idea is a good one."

Crowdcube & Seedrs 2018 Report

Anonymous

Crowdfunding Champion

"You need a good lead investor to generate momentum (unless the business already has significant traction/market presence)."

Crowdcube & Seedrs 2018 Report

Anonymous

Crowdfunding Champion

"Ensure you have identified 50% of your target funds from your existing network."

Crowdcube & Seedrs 2018 Report

Anonymous

Crowdfunding Champion

"It's not as easy as it looks."

Crowdcube & Seedrs 2018 Report

Anonymous

Crowdfunding Champion

"Prepare every answer the crowd may ask you in advance."

Crowdcube & Seedrs 2018 Report

Anonymous

Crowdfunding Champion

"Aim to raise more money and get help with the campaign."

Crowdcube & Seedrs 2018 Report

Anonymous

Crowdfunding Champion

"Make sure you have at least 50% committed privately in advance."

Crowdcube & Seedrs 2018 Report

Anonymous

crowdfunding Champion

"Prepare prepare prepare. And a short and punchy video."

Crowdcube & Seedrs 2018 Report

Anonymous

Crowdfunding Champion

"Do your homework. Prepare meticulously. Pay to have professional documents prepared for you: a great Pitchbook, excellently presented financial forecasts. Invest in a great crowdfunding video (£3k at least). Also hire a crowdfunding consultant/expert. Whilst this costs money, it really increases your chances of funding as they have built up so much knowledge and expertise on the subject."

Crowdcube & Seedrs 2018 Report

Anonymous

Crowdfunding Champion

"Have as much as possible lined up and focus on overfunding."

Crowdcube & Seedrs 2018 Report

Anonymous

Crowdfunding Champion

Acknowledgements

A huge thank you to all of the companies that took part in our research with special shout out to our equity crowdfunding experts who helped put this report together.

Nathan Rose

Nathan Rose is the bestselling author of Equity Crowdfunding: The Complete Guide For Startups & Growing Companies. He has appeared at crowdfunding events around the globe, including in Toronto,
Amsterdam, London and Paris, and has spent time as an Expert in Residence at CrowdfundingHub.
Today, he runs the website www.startupfundingsecrets.io, as a way of helping startups from all over
the world use equity crowdfunding to gain marketing exposure and raise money at the same time.

John Auckland

John Auckland is a crowdfunding consultant and writer. He’s the CEO of a crowdfunding marketing communications agency TribeFirst, and he also runs both Virgin StartUp and Grant Thornton’s crowdfunding accelerator programmes. TribeFirst has run over 50 campaigns raising more than £14m across Europe and the US, so there’s not much he doesn’t know about crowdfunding!

Future Research

We will be building upon our research at the start of 2019,  looking at the successful equity crowdfunding campaigns of 2018. If you have any feedback or suggestions for what you’d like to see in this report, please get in touch

Are you a company interested in supporting us? We’re always on the lookout for partners to help support us with our research and overall mission to help crowdfunders succeed. If you’d like to explore ways of working together, please get in touch.