12 steps to crowdfunding success
Two weeks ago millennial travel agency Bohemian Birds has raised €60.000 at a €500.000 valuation from 82 investors within 7 hours through equity based crowdfunding platform Symbid. How did we manage to convince so many investors within the blink of an eye to support our mission to help 10.000 people empty their bucket list by 2020? Based on my own experiences, I am describing the “12 steps to crowdfunding success”. This article is most applicable for start-ups that have already generated some online followers.
Step 1: Mobilize a killer team
An ideal crowdfunding team consists of 8 roles: (1) a graphic designer for compelling images and video animations, (2) a video producer with a background in advertising, (3) an accountant to prepare all the financial statements, (4) an excel whiz kid with a background in private equity, (5) a business plan writer with a background in strategy consulting and (6) a campaign manager with distinctive influencing skills and an incredible network. In our case two people of Symbid supported us: (7) Marc Buurman (Campaign management) and (8) Evelien Boender (Marketing).
Suggestion: Get investors on board that not only invest money, but also invest time, like for instance seed stage venture capital fund Blooming & Booming did during our campaign.
Step 2: Write a convincing business plan
A rock solid business plan consists of 6 elements supported by 6 additional documents. The 6 elements are: (1) summary, (2) product, (3) market, (4) team, (5) sales and (6) financials. The 6 additional documents are: (1) cash flow statement, (2) profit and loss statement, (3) balance sheet, (4) use of funds that you are aiming to raise, (5) company valuation report of Equidam and (6) shareholder agreement. A business plan should be concise, data-driven and realistic.
Suggestion: Fill in the Business Model Canvas to start thinking about your business plan.
Step 3: Set a reasonable company valuation & fundraising target
Whether investors will buy into your story or not depends heavily on your proposed company valuation. If you aim too high, investors will receive a stake that is too little to ever receive their money back. If you aim too low, you are perhaps not taken seriously. So, how do you set a company valuation that is precisely right? Well, my suggestion would be to make use of Equidam, a company that has built a company valuation tool. Fill in the required data and they will provide you with an extensive company valuation report based on your results, forecasts and industry benchmarks. The average start-up goes for a one million euro valuation. With Bohemian Birds, we decided to go for a valuation of half a million euro, because (A) the margins in the travel industry are relatively low and (B) we wanted to provide the crowd with a unique opportunity to become a shareholder of our company at a reasonable price.
Suggestion: Fill in the Equidam company valuation tool to get a reasonable valuation.
Step 4: Make a compelling video
A compelling video is of vital importance because it is the first thing that potential investors will check out. There are 7 guidelines for making a video that does the trick: (1) make a video that is no longer than 100 seconds, (2) invest in a professional voice over (e.g. through Jesper Vieveen or Kristiaan Hartmann), (3) start your video with a question to make a connection with the crowd, (4) tell your message in different chapters: What do we do? What are our USP’s? What have we achieved so far? What are our plans till 2020? How much money do we aim to raise in exchange for what equity stake?, (5) include facts such as the number of Facebook followers and the amount of revenues generated, (6) include icons of well-known media outlets in your video (in case you have had media attention) and (7) finish your video with a question to the crowd and a catchy slogan. In our case: “Bohemian Birds. The specialist in every bucket list.”
Suggestion: Get feedback from people with experience in advertising, like we got from the former Head of Production of Wieden+Kennedy and the Founder of &LELOUX.
Step 5: Get feedback from potential investors
Getting feedback from potential investors on your crowdfunding proposition is essential for two reasons: (1) it makes your proposition stronger and (2) it is a subtle way to let your family, friends and fools know that you are planning to launch a crowdfunding campaign. Rumor has it that if you ask for money, you will get advice and if you ask for advice you will get money. We received valuable feedback from many people. Examples of feedback that we got were: “Describe the niche market that you are aiming to enter and why you will succeed.” “Clarify the assumptions behind your revenue projections.” “Be transparent about the potential risks that your company has.” “Describe the role of your team members.”
Suggestion: Make a list of 25 potential investors in your network and ask them to give feedback on your initial proposition. We got feedback from for instance the participants of the BrownCow Young President Inch by Inch Program
Step 6: Raise 40% before the start of the campaign
According to marketers there are different types of people: innovators, early adopters, late majority, etc. The majority of the people don’t like to be the first consumer to buy a product or to be the first investor to invest in a start-up. So what? Find a couple of innovators before trying to reach out to the masses. We got 40% of the initial target of €40.000 in investment commitments before the start of our campaign. We asked those people to sign a letter of commitment, to make sure they would invest on the first day of the campaign. If potential investors visit your campaign they will have more trust in your company if you have raised 30% of the desired funding on day 1.
Suggestion: Ask people that want to invest to sign a commitment letter to make sure that they will invest on day 1 of the campaign
Step 7: Prepare the marketing campaign in collaboration with Symbid
Symbid, the world’s leading equity based crowdfunding platform, has tons of experience and can help you to gain momentum. I can recommend you to read their “Crowdfunding handbook for entrepreneurs” and to follow their suggestions exactly. Discuss with Symbid when you will send newsletters, press releases, etc. They have 30.000 newsletter subscribers, of which 3.000 are considered “frequent investors”.
Suggestion: Closely collaborate with Symbid during the campaign, because they have a lot of experience and they have a financial incentive to succeed as well
Step 8: Launch the campaign through all channels simultaneously
Launch the campaign through the following channels: Newsletter, Facebook, LinkedIn and Twitter; both of your company and of Symbid. Take the following actions: (1) One week before start: Inform your newsletter subscribers about your plans. (2) Three days before start: Remind a select group of loyal followers that they can start investing through a secret link. (3) One day before start: Send WhatsApp messages to 50 influencers in your network. (4) At day of start: Send email to newsletter followers of your company and of the 3.000 “frequent investors” of Symbid. (5) Share your video with the crowd through your personal and business social media channels. (6) One day after start: Let Symbid send an email to their 30.000 newsletter subscribers. (7) One week after start: Launch Thunderclap with at least 100 people. Click here for more info on how Thunderclap can help you to reach people. If you follow these 7 steps, you could reach 50.000+ people within a couple of days, obviously depending on the number of online followers your company has.
Suggestion: Learn from other successful campaigns. We copied our message from Peerby of Daan Weddepohl. They raised $2.2 million through crowdfunding. Click here for more info.
Step 9: Inform the crowd about the progress
Inform the crowd about the progress when you reach important milestones. For instance when you have raised 50% of the funding. In our case, we initially set €40.000 as our target. We reached our target within 3 hours and decided to increase our target to €60.000. Learn more about interacting with the crowd through this talk of Seth Godin.
Suggestion: Be very transparent in the communication with the crowd, they will appreciate it.
Step 10: Thank investors through a video update
After a successful campaign, you will have new shareholders in your company. In our case, we have 82 new shareholders that together have a 12% stake in Bohemian Birds. It is common to update investors four times a year through a quarterly report. Traditionally, this is done through for instance Power Point presentations. However, I would recommend sending an update through a video. It saves time for investors and it boosts the level of trust between the entrepreneur and the investor, because they can see you and your business partner in real life. We included four things in our video: (1) summary of the crowdfunding campaign, (2) results of 2016 Q1, (3) plans for 2016 Q2 and (4) financials 2016.
Suggestion: Make a video on a quarterly basis and keep it short, ideally no longer than 100 seconds
Step 11: Finalize the legal & financial matters
Symbid has standard legal and financial procedures. All investors are legally structured within a Symbid Cooperation that participates in Bohemian Birds BV. These are the steps that you will have to take: (1) ask 3 shareholders to join the board of the cooperation, (2) submit the names of the board members and passports to the notary, (3) start using the Symbid monitoring tool for a yearly financial update, (4) sign the newly updated shareholder agreement and (5) receive the money from Symbid.
Suggestion: Get legal advice from experts. We were lucky to have one lawyer as an investor, so we asked this person as Head of Legal & risk.
Step 12: Generate free publicity after the campaign
Next to being a way to raise funding, crowdfunding is a phenomenal marketing tool. After finishing your campaign, make sure you write a blog about your experiences (like I am doing here) and share this with your network. In 2015 for instance, Bohemian Birds aimed to buy the world’s first crowdfunded private island through crowdfunding. We raised €56.000 out of our target of €200.000. Despite the fact that the campaign did not succeed, we generated a lot of free publicity with an estimated 30+ media articles with around €250.000 in advertising value for free. Read more about in in the article: Reflections on a pioneering crowdfunding campaign.
Suggestion: Most advice is written by business people who have been there and done that. Start blogging even though you are just a beginner like me. People will appreciate it.
I hope that you have found this blog inspiring and insightful. If you have any questions or just want to get in touch, please don’t hesitate to contact me.
Cheers,
j.t.mutsaerts@gmail.com | +31 6 55 87 53 53
P.S. Bohemian Birds was mentioned in the articles 25 Dutch startups to keep an eye on in 2016 and 7 most innovative start-ups in The Netherlands. We want to thank the 82 investors for their €60.000 investment, so we can deliver on these statements made by the media.
