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Crowdfunding campaigns that have very quick initial momentum are often caused by lots of hard work from the team prior to the campaign launch. Take Oppo Ice Cream for example, who funded in just six hours via Seedrs, eventually reaching 265% of their goal from hundreds of investors. It’s clear that these founders invested a lot of time and effort into warming up their crowd and it paid off. One of the things to definitely tick off your ‘hard work before launch’ list, is engaging your own network to ensure that your crowd are ready and waiting to invest.
The first thing that we encourage anyone considering crowdfunding to do, is to test if you have enough of a crowd to do so by creating your crowdfunding ‘hit list’. This should be a long list of people you could ask to, or know will invest, should you launch a crowdfunding campaign in the next couple of months.
Before you launch into sending a bulk email asking everyone if they would invest if you launched a funding round, stop. Don’t email anyone yet. Simply create your ‘hit list’.
Simple table, no nonsense.
|First Name||Last Name||Email Address||Amount expected||Likelihood of investment (1-5)|
This table format is helpful as, if needed, it’s easy to import into a mail client such as Mailchimp at a later date.
A ‘likelihood of investment’ score of 5 means that the person is very unlikely to invest if you asked them to, but there’s a small chance that they might. A ‘likelihood of investment’ score of 1 means that you are almost certain that they will invest if you ask them to. These top spots are usually reserved for very close friends that you know you can rely on, investors you have already received firm commitments from (in writing) and your mum and dad, for example.
Once you have your ‘hit list’, we usually recommend you do a bit of maths to estimate your ‘safe bet’. Here’s how…
Take your ‘amount expected’ and divide it by the ‘likelihood of investment’ score as below.
|Amount expected||Likelihood of investment (1-5)||Safe bet|
The ‘safe bet’ column is often a much more realistic total of what you could expect to receive from your crowd, in this case £20,216.66.
*CAUTION – this is not a crowd, nor is it enough momentum for a very significant raise. We strongly recommend your hit list has at least 50 people on it.
Once you have calculated what your current ‘safe bet’ total is, we recommend that (to begin with) you make this amount at least half of your provisional funding goal. So, for our example above, we would recommend that your provisional funding target should be set at something like £40,000.
This doesn’t mean that the final 50% of investment is up to fate and that’s all you need to achieve. The final 50% will come from more hard work on your part which we’ll get to another time…
But as a very initial exercise, particularly for young startups considering their first round of crowdfunding, this method is one way of seeing if you’ve got enough to really begin considering crowdfunding. Often, the conclusion of this exercise is either;
If you’re not quite there yet, don’t worry. As your business grows, you will find that you meet and talk to more and more people who encourage and support you. You’ll meet potential investors and, as your business model improves and you begin to generate further revenue, you’ll more easily line up potential larger investors which will greatly increase that ‘safe bet’ number when you return to this exercise in the future. If you want to make this exercise more successful, I recommend beginning by attending networking events, joining a local business incubator and, of course, using social media to begin to grow your personal reach.
If your ‘hit list’ is impressive and your ‘safe bet’ is safe, then over the coming weeks/months your job will be to prove that ‘safe bet’ is accurate as you prepare your business for crowdfunding.
Crowdfunding can be extremely rewarding and beneficial for your business, but it’s important not to enter into it lightly. Exploring and engaging your own crowd is one of the first steps towards success.
IdeaSquares offers automated tools and hands on support for early-stage businesses towards crowdfunding success.