Running a successful community round
If you are a founder and thinking to raise money with crowdfunding platforms, this blog is for you.
My simple understanding
Please don’t think that you’ll raise money just by uploading a pitch deck on crowdfunding platforms like Wefunder, StartEngine, Republic, etc. No, these crowdfunding platforms are best only when you have enough crowd. All the successful companies that raise money have their own community.
What I mean by community is, you already have customers, existing investors, or a community that supports your product. These are the people who understand your problem and know what you are trying to do. People who never heard about your product will never come and invest in your company, even if it’s just $100 bucks. These platforms have hundreds of companies raising on their platform, and convincing them to invest in your company is like finding a needle in a haystack.
The Importance of Preparation
The first and main reason startups often fail to raise money is due to lack of preparation. Preparation involves crucial steps such as setting the funding goal, establishing a public launch date, setting a closing date, gathering assets for running marketing ads (if applicable), copywriting, graphs etc
For deciding funding goal, you need to have clear expectation about how much are you willing to raise? Be realistic. You know how much you can raise from your friends, family, and customers. This is Phase I of the community round, and you should aim for at least 25% of your total funding goal.
Phase II is the round where you’ll need to reach out to your personal network, promotions, advertisements, and attending events. This should be 50% of your total funding goal.
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Phase III is where you’ll reach out to the people who learned about your product during Phase I and II but didn’t invest. You need to give them urgency about the round closing. This is the easiest round since these people already know about your product. This will be your final 25% of the raise. This is how you can set your funding target.
Setting a Clear Closing Date
Most founders don’t have a closing date in mind when they start to raise. Having a clear goal of when you are closing is very important. Raise funds as tightly as possible. Don’t open the round forever. Have a clear closing date. This will create FOMO (fear of missing out) among investors, which is very important. It’s easier to raise money from 5 investors in the same week rather than from 5 investors in 5 different weeks. This is how fear of missing out (fomo) works. Investors move when they have fomo. You are not creating FOMO if you are talking to them one at a time.
Common mistakes to avoid
1. Uncertainty about your offering: Are you raising from unaccredited investors or accredited ones? Be clear on your offering. The most common option in crowdfunding is Regulation CF (Reg CF). Learn more here.
2. You need a good landing page: Your landing page should be attractive and informative. It’s the first impression potential investors will have of your company. How is your fint? How is your color? Is your content easy to grasp? Is your website taking too long to load?
3. Lack of customers and prior investors: You need a base of customers and some prior investors to show traction and credibility. This proves that people believe in your product.
4. No exposure: If your startup isn’t featured in major publications, people will have less social proof. Successful companies are featured in reputable magazines. Aim to get some media coverage to build credibility.
5. Not dedicating enough time: Fundraising is a full-time job. You must dedicate 4–5 hours a day solely to fundraising when you’re actively raising. Investors will ask you questions, and it’s important to respond promptly. Your answers are also visible to other users who visit your campaign, so this answer carefully.
6. Just thinking people will invest: You need to hook people. They might view your pitch deck and subscribe to learn more about your company. Allow them to subscribe and send them regular updates on your company’s progress.
Tips: People likes story. What’s your story?
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