Have an intriguing and clear story. Having a relateable story that solves a burning need makes people more willing to give you their money. So you need to be able to express very clearly what your intentions are and their significance. You have to be prepared to consistently put yourself in front of crowds of investors and connect with them directly; through a video, or in a town hall meeting. Potential investors need to see enough of your passion to think, “Wow, I want to be a part of it.” If not, in the words of Olamide… I’m sorry palasa, You suck! And that’s it; no funding!
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Communicate in strenuously clear terms your exchange with them. To avoid any confusion down the line, establish a clearly written guideline(s) of the investment(s) that the crowd is about to get into ahead of time – ideally with the advice of a legal counsel or trusted mentor. Set all parameters up front: This is what you are getting right now, this is how we reached this price, this is how it might change in the future, and these are your rights in the events where there are further rounds of financing required.
Make sure that crowd investors understand that if they invest N1, 000 which initially represented 10 percent of the company, then the company grows and gets additional rounds of investment, that N1, 000 will no longer represent 10 percent of the company. Every time new money comes in, the earlier investors are going to own a smaller percentage of the company. Make sure you state how many times you will approach the market for funding, when and why.
In our current economic recession, saving money is tough enough, talk less of raising it. Thus, you have to prove that you know your onions and have the ability to manage people’s funds. If not, I hope your karate skills and those of your lawyer(s) are as good as Bruce Lee’s if, God forbid, the law suits come piling.
Have an existing network of investors (not potential, but actual investors). Crowdfunding depends heavily on trust and reputation, so you’ll need a core inner group to vouch for you, help spread the word and then actually invest (no use having vouchers who are not investing).
Every successful Crowdfunding campaign must have an immediate first-degree network that jumps in or is already neck deep into that campaign.
But this doesn’t mean you need to have thousands of Facebook or family friends; you just need at least a small group that is willing and has already put down, say maybe 15% of what you actually need, to help you get the ball rolling along much faster. Crowd investors have a very high sense of hesitation, so they feel better donating their own money when they see that others have already, too. Just make sure you’re no MMM and give people’s monies back as and when due oh!
Refrain from the desire to raise N100million from 100million people. Just because it is called Crowdfunding does not mean you have to raise so much from a sea of people all over the place. More times than not, you will find it easier to deal with the least number of investors that you can feasibly handle. Refrain from going into time consuming business discussions with ten million people who can only offer N2, 500 each, when you could better spend your precious money–raising time talking to the essential few that really matter; The ‘big boys and girls’ that can cough up a mil or more without batting an eyelid.
Map out a qualitative investor strategy and relations plan. It must include how and when you are going to communicate with investors and respond to their queries. Once again, let your investors know what to expect upfront, most preferably answered, in full, in a business plan/proposal/investment guideline/prospectus.Otherwise, managing the relations with a myriad of‘chump–change’investors will become overwhelming if not downright impossible (you’re too young to die, so don’t kill yasef by yasef).
Stay as much in control of your company as possible. Entrepreneurs, especially first-timers, are often unaccustomed to being held accountable to shareholders. You are going to have to deal with all the negative burdens of what public companies deal with, which is disgruntled and sometimes, unequivocally greedy shareholders.
Particularly if you raise money through Equity Crowdfunding, you need to be prudent in what amount of power you give your investors. You don’t give this type of investors what you would give, to say, venture-capital investors. Venture capitalists can often control major decisions in a startup, but you don’t want to give crowd investors, especially those you don’t know well, the power to influence significant company decisions, like hiring and firing the CEO, selling the company, raising capital, or taking loans. That could be terrible, if not downright disastrous, for business…How’s your karate skill shaping up thus far?
Be active online; really active. How much you can raise depends on how many potentially good quality investors you can reach. Crowdfunding is really about your MEGA social-media networking skills. Make sure you have built your Facebook fans, LinkedIn connections,Twitter followers, and your email list way before the campaign and have been actively talking about your product/service. All of that is your social currency. Use it wisely.
Cool perks; don’t start a campaign without them. In exchange for their money, you’ll need to offer investors an appreciable enough level of reward; whether it’s a product sample, the ability to vote on how the product/service is designed, an opportunity to get early access to a product/service before it hits the regular markets, or upfront capital gains before the next round of fundraising.Also, it is hugely important to offer multiple levels of perks to provide incentive for a higher and/or broader range of contributions/funding. Shoe get size; don’t give a big shoe to a small man; and vice versa.
Concluding Part(s) coming up; Do Stay tuned and never forget…Crowdfunding is built around relationships. An extremely difficult but very possible human phenomenon…you just need to think through it, or simply ask us…[email protected]
About the Author
Whenever he is up nights, Brain Essien faffs around the internet gathering material for detective novels he is not sure he’ll ever publish. He likes to play investment and brand strategist in the mornings and website architect/builder in the afternoons. On weekends, he likes to throw on a few apparels and gadgets and go bounce people out of their own parties if they become a handful. Besides that, he loves reading detective novels, building muscle, daredevil racing, video games, shadow chess and cooking.
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