You've finally decided that crowdfunding is the ideal way to raise capital for your business, now what? It's time to get practical and figure out how to start a crowdfunding campaign.
After becoming familiar with this financial tool through online resources and books on crowdfunding, and distinguishing between the different types of crowdfunding, it is time to get started.
Each step leading up to the launch of the campaign must be carefully prepared and is critical to its success, so the first rule of starting a crowdfunding campaign is not to rush.
We will not discuss a category of crowdfunding specifically, but will focus on the steps to start a campaign in crowdinvesting, where for most of the most important elements the various types overlap.
Step 1: Define the goals
Before taking any outward steps, fundamental and substantial preliminary work needs to be done internally: one of the advantages of doing a crowdfunding campaign is that it forces questions to be asked. The answers must clarify the identity of an entrepreneurial project, the starting point and end points, the structure of the team, and the target audience.
Whether starting with just a business idea, or a startup or an already developed enterprise, it is always essential to ask yourself where you are and where you want to go before starting a crowdfunding campaign. In some cases the answers are obvious and already acquired, in others deeper project work will have to be done.
We are talking about both qualitative and quantitative goals:
- What you want to raise capital for;
- How much capital you need;
- in how long;
- How much budget you have to do it;
- Who will be in charge of the campaign;
- What is your target audience;
- What results you expect to achieve;
- What you will do in case of a positive outcome.
That's right: basically a business plan, but focused on crowdfunding. If there is any weakness, it is best to correct it before putting all the wheels in motion. It doesn't mean that decisions made at this stage should be set in stone: in all projects there is room for change as we go along.
If you haven't yet decided which type of crowdfunding is best for you, starting to answer these questions will also help you figure it out.
Step 2: Choose a crowdfunding platform where to start the campaign
In Italy as of 2022 there are 90 crowdfunding platforms (source: 7th Italian Report on CrowdInvesting) not counting those that deal specifically with donation or reward. It can be difficult to choose one, but it is worth taking time for this decision, because the platform will be a real working partner for months and months.
There are "generalist" crowdfunding platforms, i.e., those that deal with all types of crowdfunding, and platforms that specialize in only one or two: this is not a relevant distinction as a quality of service. It can be useful to do a search using your chosen type of crowdfunding as a keyword and gather objective data and first-hand experiences or reviews. Cross-referencing objective and subjective elements is essential to make a thoughtful critical assessment and not be guided by others' perceptions.
Once you have made a shortlist based on this initial research, for each platform you have to evaluate the service offered: documents and fulfillments, entry selection criteria, rights and duties, timelines, money flow management, type of communication, support during the campaign phase, commission costs, etc. Also put yourself in the users' shoes and check what conditions each platform imposes on investors, whether the website is intuitive and easy to use, whether the procedures are explained with transparency.
When you have chosen the platform best suited to your needs, all you have to do is submit your project and cross your fingers for selection.
Step 3: Prepare the launch
Before the crowdfunding campaign can be started on the chosen platform, there are some paperwork requirements to be fulfilled. The simplest are registering with the portal and entering the company's details and the bank account into which the money raised from the campaign will be paid.
The most complex are the documents. Crowdfunding platforms usually present their companies with a list of all the documents to be prepared and can provide support. Of these, of particular importance and complexity are the capital increase and the offering memorandum. They mainly concern equity crowdfunding and are not mere formalities but also have strategic significance.
Before starting, the minimum and maximum goal of the campaign and the conditions and rewards for investors who decide to participate should also be established.
In addition to the technical and bureaucratic tasks, the preparation phase involves designing the marketing strategy and the tools that will be used to carry it out: nothing must be left to improvisation. Effective communication requires a great deal of material right now: newsletters, press releases, images, social posts, videos, documents, you name it. Preparing everything in advance will help the management and distribution of content across all the media channels you will have chosen.
There is more to crowdfunding than just the Web: although crowdfunding is predominantly an online phenomenon, direct offline contact with people, wherever possible, is most useful in instilling trust.
The positive outcome of a crowdfunding campaign is largely determined before its launch. It is here that the target audience is defined, and testing begins, creating a connection with interested individuals, and crafting a project story. Reaching the starting line with a group of potential investors already contacted, informed, motivated, and engaged in the project is the secret to an excellent start that propels it toward success.
Step 4: Start the crowdfunding campaign
When the ground is ready, go for it! The launch date should be determined together with the platform: it must be a day when there are no other important events for the company, and preferably days close to holidays are to be avoided.
It's time to capitalize on the work done in the previous step, converting all those "potential" interested parties into actual investors, generating word-of-mouth, and nurturing key contacts. Throughout the crowdfunding campaign, it is essential to monitor the results in detail and keep investors constantly updated on progress and any developments. At this stage, most of the work has been done, but one must not lose focus until the goal is achieved (and beyond!) and make the most of all available resources.
If it seems too complicated to organize and manage on your own, you can rely on external consultancy.
To talk about your specific case, figure out the best path for you, and what Turbo Crowd can do to support you, book a call with us!