5 Ways to Ensure the Failure of Your Crowdfunding Campaign (And 5 Secrets to Success)
n their ideas into successful businesses. As with any form of soliciting money, there are the right ways to go about it, and there are the wrong ways. Even the greatest of ideas have the distinct possibility of failure despite the exciting and lucrative assistance of an equity crowdfunding campaign. Listed below are five common mistakes we have seen that can deter a company from successfully reaching a crowdfunding goal.
- Rely on existing communities of investors from a single platform.
Wishful thinking is imprudent and futile. Previous investors that are associated with a selected platform will not automatically invest in any campaign listed on the platform. StartEngine has over 57,000 registered users, but none of these previously engaged users will invest in a campaign without proper promotion or belief in the idea, product, or business. Kickstarter has approximately 11 million users, but if a hopeful team does not promote their campaign to Kickstarter’s already established user base, they will raise zero dollars, and ensure the failure of their campaign.
2. Believe that people are primarily motivated by financial returns.
People want to feel that they are a part of something larger, substantial and positive. The feeling of making change in the world motivates people. The general public wants to invest in companies they believe in, because they feel their investment is a tangible effort to make the world a better place. Today, even more than the prospect of a high return on their investment, people want the chance to become a part of — and to own a part of — a company that could potentially change the world.
3. Think that equity crowdfunding is a part time job.
There is a clear and obvious pattern in startup founders and their rates of success. The founders who are solely focused on elevating their startups to the next stage are infinitely more successful. Founders that are distracted by other obligations — whether that is other businesses, jobs, or priorities — do not succeed. It takes a focused founder and team to execute a successful crowdfunding campaign.
4. Try to bundle more than one company into a single raise.
Investors like a focused business with a clear vision. A company that is trying to promote both a publishing company and a product company will seem conflicted to potential investors. It takes a driven and resolute company and team to succeed in changing the world, and you do not want to muddle your campaign by promoting several different companies under one raise.
5. Assume there is an established market of startup investors, who are merely waiting for any startup opportunity to invest in.
This is what I like to call the Shark Tank Factor. Every week, there are millions of people eagerly waiting to watch the show because they are interested in startup and investment opportunities. Some entrepreneurs believe that potential investors — like Shark Tank fans — are simply waiting for an investment opportunity to materialize, but just showing them any opportunity does not guarantee their investment.
Companies able to avoid these five disastrous mistakes are off to a great start. In addition to knowing what not do, here are five of the best practices that may help ensure a prosperous campaign:
- Build the size of your community.
Find out who is interested in your product or idea, and reach out to like-minded demographics.
2. Build the engagement of your community.
Ensure those who show interest, maintain interest.
3. Create a compelling message that transcends the product, and focuses on the purpose.
Take a look at the Elio Motors campaign that promoted the revival of the American dream with their revolutionary product.
4. Plan a systematic and methodical approach.
Sequencing and timing are crucial.
5. Launch with momentum.
When your campaign goes live, you need traction within the first three days. Pre-line up your supporters and investors, but be mindful of the regulations which limit promotion. You need to make a splash. Even if that means getting your mother on board to be first in line to invest. If your mother is not on board, it is time to re-evaluate your idea.
The views and opinions expressed in this article are those of author Ron Miller. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:https://www.startengine.com/assets/Disclaimer.pdf