Raising funds through Equity Crowdfunding (ECF) has made acquiring capital more accessible than its traditional counterparts, though it is not always guaranteed that companies will meet their funding goal. However, there are many simple measures that can be taken to ensure the success of an ECF campaign. Thus, these are some tips to consider when raising funds through ECF to help improve the prospects of a successful ECF campaign.
Before registering to raise funds through ECF, it is important to ensure that your business has shown exponential or steady growth over the past few years. This growth could be in revenue or other key performance indicators (KPI) such as number of users, number of merchants or average order value. This needs to be made clear as startups are notorious for using a lot of cash in the earlier stages in order to grow, therefore showing your business growth provides the confidence and reassurance to investors that your business is capable of using the funds efficiently.
2. Product-market fit
Prior to the campaign, it is important to establish that there is a market for your product and that your idea is unique. What sets you apart from your competitors? A unique product with a market that needs it can get any investor excited as it demonstrates that your product is not just profitable, but also easily scalable. You may have growth in revenue or other KPIs, as mentioned earlier, but if there is no potential or opportunity to scale, investors will see a significant obstacle in the business plan.
3. Bonus or Incentive Schemes
During the pre-live stage, it is always worth trying to secure 30-40% of your funding target as it provides some security prior to your campaign going live. One of the ways in which you can do so is through bonuses and incentive schemes in the pre-live stage as it can help stimulate early-bird investors. On pitchIn, for example, roughly 80-90% of the investors invested during incentive periods. Therefore, incentive periods are particularly effective when raising funds as it provides your business with the opportunity to secure some funding before going live, thus enabling you to enter the market with greater confidence.
4. Anchor investor outreach
As mentioned, it is important to try to secure 30-40% of your funding prior to entering the market and finding an ‘anchor investor’ that will commit to a substantial amount can also help your business achieve this. Thus, it is worth reaching out to prospective angel or sophisticated investors and organising roadshows with them to garner their interest during the pre-live stage. By having an anchor investor before your campaign goes live, it will help build confidence in your ability to achieve your funding goal. This can also trigger ‘hockey stick’ growth in your funding once the campaign goes live as many retail investors will begin to invest out of the ‘fear of missing out’.
5. Showcasing your team
One of the most important things you can do to improve your prospects of raising funds is by emphasising how capable your team is at executing your idea. Despite how compelled your potential investors maybe by your story and product, if there is no confidence that your team is the right team for the job, they won’t be interested. Therefore, it is important to showcase all the relevant experiences and skills your team has to demonstrate your team’s ability to make the idea feasible. A good team can make a subpar idea work, but a subpar team cannot make a good idea work!
In conclusion, the tips mentioned above are some of the most important factors to take into account when raising funds and achieving a successful ECF campaign. However, these factors do not automatically guarantee successful funding and can only act as a guide to improve your campaign. Therefore, we thoroughly encourage you to read more and do more research before beginning your ECF campaign.
If you are considering Equity Crowdfunding (ECF), speak to us at Leet Capital. We would love to have a conversation and get to know you and your business better. Contact us through WhatsApp at +60 11-5628 0817, email at email@example.com or visit our website at Leet.Capital.