One of the many problems facing businesses that need to raise capital is time. While defining how long it takes to raise capital in crowdfunding is not as easy as it sounds, what is certain is that traditional sources of credit, such as banks, have very long response times. As well as the fact that they often pose insurmountable barriers to entry.
For an entrepreneurial activity, especially if very young but not only, the famous saying "time is money" has a kernel of truth. In some cases, it is important to be timely and have resources available just when they are needed. Crowdfunding allows for greater control over the process and, therefore, the timing of capital acquisition: this is one of the advantages for which entrepreneurs choose it.
However, crowdfunding also has its timeframe and is not a friend of haste: a crowdfunding campaign takes an average of 30 to 60 days, but if not properly prepared beforehand, it is doomed to failure.
What does "properly prepared" mean? The preparation phase of a crowdfunding campaign is the precrowd, which we discussed extensively in a previous article; it has basic features common to all campaigns, but it is declined in practice differently depending on the peculiarities of individual cases.
The answer then is "it depends": the time it takes to raise crowdfunding capital successfully depends on the starting point and the ending point, hence the amount and nature of the steps needed to go from one to the other.
Where I want to get to: raising capital through crowdfunding
To know how long a trip will take, today we simply enter the departure and arrival coordinates into a navigator and wait for the very quick response. Based on that data, we can better organize the preparation of the trip, so that we do not risk delays, taking the wrong route, running into inconveniences we do not know how to solve, etc.
The same is true for a crowdfunding campaign, only we have to give ourselves the answer and it is not so immediate. The end point is easy: it is the financial goal, the amount of capital you want to raise. This parameter is extremely subjective, but it must be declined into two pieces of information to be included in the capital increase document to be filed with the notary:
- minimum goal (inseparable threshold)
- maximum goal.
Carefully calibrating this range can have an important impact on the outcome and duration of the crowdfunding campaign. If the range is too wide, you run the risk of giving an impression of lack of seriousness: shooting high but settling for much less means you have no idea what you are doing and why you are raising that capital. On the other hand, if the range is too narrow, there is no room to go further and take advantage of all the time available when things are going very well, or to do a second round of raising within the same capital increase.
Small tip: in Italy it is better to do a long capital raise, at least two years out of the three the law allows, so that you can do multiple rounds of raising or extend the crowdfunding campaign if needed!
Where I start: self-analysis
The starting point, however, is less easy to define. It includes the size of the company, its stage of development, the composition and skills of the team, the experience in crowdfunding , the existence and consistency of a network of useful contacts and a community of customers and stakeholders, the brand identity, and last but not least the available budget (because no, crowdfunding is not free).
All these elements make up the starting point for a company about to do a crowdfunding campaign and are crucial in determining how long it takes to raise crowdfunding capital.
The preliminary stage of any campaign, therefore, is a lucid and thorough self-analysis. A business plan within a business plan, specifically devoted to the crowdfunding campaign as a line of business in its own right. Because, we cannot remind ourselves enough, crowdfunding is not a hobby.
In general, therefore, the higher the target and the younger, smaller, and more inexperienced a company is, the longer it will take to raise capital, because the precrowd phase will have to be longer. But in between there are many nuances: if a company is young but has a large digital presence and familiarity with the Web and CRM it will have a leg up over a long-standing but very traditionalist company, for example. Anyone, or almost anyone, can do crowdfunding. There are many possible cases, so it is essential to do proper self-analysis to understand which you fall into and consequently how much time you will need.
Preparing a crowdfunding campaign: how long?
In light of the self-analysis done after reading the previous paragraph, you can honestly outline how much time you will need to prepare your crowdfunding campaign. Do not underestimate and do not be in a hurry, as you would pay for it.
Preparing a crowdfunding campaign consists on the one hand in preparing the operational tools (CRM software, social media, database, textual and visual content, advertising plan, website, etc.), and on the other hand in the preliminary involvement of potential investors to collect "expressions of interest," i.e., statements of investment intent signed (formally or informally) online. In the article dedicated to precrowd you will find everything in detail.
The important thing here is to understand that the duration of the precrowd is the answer to the question, "How long does it take you to reach 90 percent of the unbreakable threshold in the form of expressions of interest?" You are unlikely to get a precise answer, partly because it is a theoretical achievement, but you can keep this question as a reference point to see how far you have come and how far you have to go as you go.
If you already have a very loyal customer community, an active and established online presence, and good relationships with stakeholders, it will probably take you very little time with the right strategy. If you're starting from the opposite situation, however, you'll need longer preparation. No problem!
In any case, precrowd is unlikely to last less than 30-45 days. Don't be afraid to postpone the campaign launch if you realize you are not ready-it will be worth it.
How long does a crowdfunding campaign last?
The actual duration of a crowdfunding campaign is much easier to define: it usually ranges from 30 to 60 days, but can also go up to 90 and on some platforms up to 120. There are no fixed rules.
One must also always consider, of course, the selection time by crowdfunding platforms, which must sift through all the proposals they receive from companies and choose which ones to launch on their portal. Usually this time goes up to a maximum of one month.
Typically, the fastest campaigns are lending crowdfunding campaigns, and that is what makes them so attractive compared to a bank loan, although interest rates can be higher. Equity crowdfunding campaigns, on the other hand, usually have higher financial goals and last longer, also because the type of investor involvement is more challenging.
If you're wondering how long it takes to raise capital through crowdfunding and your fear is that it's too time-consuming, we're not going to lie to you and make you believe that it's something quick and easy. But it certainly is a more accessible and faster channel than many of the more traditional ones, and most importantly, it offers an added value that makes the time spent extremely efficient: it allows you to sell your product or service and do marketing while raising capital. And it is an incredible opportunity for growth and training.
To receive professional advice on your specific case, however, you can book a free initial consulting with us.