When NOT to do crowdfunding: 5 warning signs not to underestimate

Crowdfunding is often told as a “democratic” tool that is accessible and suitable for any business. This is partly true. But it is equally true that not all companies are in the right position to do so, and that ignoring this can lead to ineffective, costly and sometimes harmful campaigns.

When we talk about successful crowdfunding, we are not referring only to the achievement of the financial goal. A campaign really works when the company also succeeds in:

• Strengthen its positioning,
  
• Engage customers and stakeholders,
  
• Validate the business model,
  
• Building lasting relationships with investors and communities.
  

If these conditions are not activated, even a formally successful collection risks being a wasted opportunity, as we explained in our article on the failure of a crowdfunding campaign.

In this article, we analyze 5 warning signs that suggest against crowdfunding: concrete situations in which, rather than wondering. as do crowdfunding, a company should ask itself. if do so or whether it is not better to postpone, rethink the course or choose different tools.

1. No activatable audience base

One of the most common misconceptions about crowdfunding is to think that it is the right tool to “make a name for yourself” by starting from scratch. In reality, crowdfunding does not create domanda, but it intercepts and mobilizes it. Without a minimum audience base that can already be activated, even the best projects struggle to gain momentum.

Capital raising always takes place as consequence of a pre-existing interest: toward the product, service, brand, or entrepreneurial vision. When this interest is not already in some form traceable or engageable, the campaign starts structurally uphill.

An early warning sign, therefore, is the Lack of a qualified contact base: customers, users, subscribers, leads, partners or stakeholders with whom the company already has a relationship.

It is not essential to already have an actual community of supporters: the precrowd is really about building it. However, without being clear about your target audience and without having a minimum online audience, even a cold one, the time frame becomes much longer and it becomes necessary to work on this before even starting with precrowd. 

If, on the other hand, the company's target audience is a audience not present online or too little online presence, crowdfunding may become impossible, unless very large resources are mobilized for offline activities: in this case, it is necessary to stop and evaluate the actual opportunity.

Another critical sign in this regard, in fact, is to think of relying almost exclusively on the crowdfunding platform to acquire investors. Platforms provide an infrastructure, a regulated framework, and a showcase, but Do not play an active role in the commercial promotion of the individual project.

We explained this in detail in our Article on how to choose a crowdfunding platform: it is the company that brings investors to a platform, which enables the collection.

Thus, if a company does not have or cannot build an actionable audience in the campaign, crowdfunding is unlikely to work.

2. Difficulty in exposing oneself publicly

Crowdfunding is, by its very nature, a public operation. A company that decides to raise capital by engaging a broad audience of online investors implicitly agrees to put itself under scrutiny: economically, strategically, and organizationally.

This level of exposure is not neutral and is not reversible. If the conditions to sustain it are lacking, crowdfunding risks turning from an opportunity into a stressor and reputational risk factor.

Lack of information transparency

An early warning sign is the absence of structured and coherent information on key aspects of the company: economic data, corporate structure, governance, growth strategy, use of capital.

In crowdfunding, this information serves both to fulfill formal documentary obligations, both to gain credibility and inspire confidence.

In many cases, the problem emerges even before the campaign, in the selection phase: if the company cannot sustain basic due diligence, it is likely to fail the platform selection.

Difficulty in presiding over confrontation with investors

A second element that is often underestimated concerns the confrontation management. A crowdfunding campaign is not a one-way communication: investors and potential investors ask questions, seek clarification, raise concerns, sometimes openly criticize.

The company must be prepared to Interface directly with potential investors, making themselves available in a timely and consistent manner. Investing one's money in an online project requires a certain degree of trust, which people achieve if they can speak directly with those behind the project. Rare are the cases in which a user is transformed from stranger to investor in a few clicks.

There must be team members deputed to interlocute with potential investors: via email, via social media, via telephone, and through all channels frequented by the target audience. On each channel, it is necessary to take a clear line on what to communicate and how, to know how to handle criticism as well, and to provide for the shortest possible response time.

3. Lack of a structured communication strategy

La communication strategy is the heart of crowdfunding, along with the technologies that make it possible in a widespread and efficient way.

The decision-making process of the investor requires time, repetition, deepening and relationship. An appropriate communication strategy serves to guide users toward the final decision.

Discontinuous and disorganized communication

A frequent warning sign is the lack of marketing and sales processes in the company. Thinking of approaching the campaign with episodic communication, with a few social media posts, an occasional newsletter, updates published only when “there is something new to say,” is a prelude to failure.

In crowdfunding, however, continuity is key For:

• Convey an image of solidity and reliability;
• To become a stable mental presence for users;
• Capture the attention of as many target users as possible;
• complete a decision-making path that physiologically may experience recurrent interruptions;
• Seize all opportunities for conversion as they arise;
• Carry out gradual education, information and persuasion.

When communication is discontinuous, interest dissipates and the campaign loses traction.

Lack of infrastructure for relationship management

Therefore, an additional warning sign in this area is the absence of tools and processes for managing relationships with potential investors, such as CRM software. Without a system to collect, segment, and cultivate contacts, the company is merely “issuing messages,” without accompanying people along a decision-making path.

If initial interest is not nurtured, questions go unheard for too long, investors' thinking time is not manned, the result is that many potential investments are lost along the way just because of the lack of an infrastructure capable of sustaining the relationship over time with many people.

When a company does not have these elements-or is not ready to implement them-crowdfunding becomes inefficient and wasteful. 

4. Insufficient resources, time and skills

Crowdfunding is often perceived as a “lean” tool that is easier and faster than other forms of capital raising. In part, it is, but it remains a Complex project involving multiple business functions and requires an ongoing commitment over time.

Crowdfunding campaign as a marginal activity

When a company lacks the necessary resources-in terms of time, people, and expertise-the risk is not only failure of the campaign, but rushed management that also undermines the side benefits of crowdfunding.

A clear warning sign is a saturated team, forced to Enter the campaign as a secondary activity, to be wedged between daily urgencies. Crowdfunding, on the other hand, requires constant attention: monitoring progress, responding to investors, updates, coordinating communication activities.

Marginal management is immediately reflected in the external perception of the project, which appears unmanned and lacking in credibility, regardless of its intrinsic value.

Absence of key competencies in the team

A second critical element concerns the skills available. Crowdfunding crosses different areas: marketing, finance, legal and regulatory aspects, and investor relations. If these skills in the team in charge of crowdfunding are completely lacking or underestimated, mistakes become almost inevitable.

Not recognizing the complexity of the tool prevents making the right decision between “going it alone” and “getting support.” When this awareness is lacking, crowdfunding risks absorbing resources without generating proportionate value.

5. Unrealistic goals

Crowdfunding is not a quick or automatic process. More importantly, it offers no guarantee of results. When a company approaches this tool with distorted expectations, the risk is not only failure to achieve the financial goal, but a misjudgment of the entire experience.

Economic goals disconnected from reality

An early warning sign is the definition of a collection target that does not take into account the audience base that can actually be activated. The economic goal should be a consequence of hard data: size of the contact base, realistic conversion rates, ability to sustain communication over time.

When the target is overestimated, the risk is not only that of raising less capital than expected, but also that of undermining the credibility of the project during its public display.

Confusing campaign success with business success

A second warning sign in this area is. view crowdfunding as a miracle tool for a struggling or fledgling company. Achieving the economic goal alone does not automatically make the company stronger, more visible or more competitive.

This depends on how the capital and other assets obtained through crowdfunding are managed after the campaign: investor relations, community, visibility, contacts.

Crowdfunding is not a magic wand, but rather an enabling tool that must be wielded to achieve results.