SeedTribe’s Guide to Crowdfunding: What is crowdfunding & how does it work?

Crowdfunding with a difference…

Crowdfunding has opened up and democratised investing, making it possible for entrepreneurs with great ideas to succeed where in the past their lack of capital and contacts may have scuppered them. On SeedTribe, everyday investors invest alongside top Angel Investors who want to invest smaller amounts and diversify their portfolios. So, as an entrepreneur, you get the benefits of angel investing and crowdfunding all rolled into one - you’ll complete your round not only with the funds, but also backed by a wealth of industry knowledge and experience.

The SeedTribe team members have vast experience in helping companies raise funding and have raised over £100million for some of the fastest growing and impressive companies in the space. This guide is a collation of their knowledge and will give you the very best chance not only of achieving your funding target but also maximising the exposure that your brand can receive through a well put together crowdfunding campaign.

Key Points

  • Preparation is key and most of the work for your raise should be done in advance
  • Maintain a clear and consistent marketing message across all your promotional materials

This Guide will help you:

  1. Reach your funding target
  2. Get experienced investors on board
  3. Expand your brand awareness
  4. Create a following
  5. Build a buzz about your business

Rules to keep in mind

The promotion of your campaign on SeedTribe is regulated by the Financial Conduct Authority. It differs from other marketing campaigns and so your approach must be a little more considered for the protection of everyone. The rules set out below apply to all aspects of your promotion from your fundraising page itself to your tweets and Facebook posts.

  1. Don’t mislead – Your statements must be 100% accurate and in no way ambiguous. You are responsible for everything you say unless it is approved by SeedTribe as a financial promotion. SeedTribe is regulated by the FCA and they are tough on this.
  2. Acknowledge the risk – where you advertise potential returns on investment you also need to advertise the fact that the opportunity comes at a risk to capital. So wherever you reference reward, balance it by writing ‘your capital is at risk’.
  3. Use evidence – every claim you make in anything related to your pitch must be evidenced by substantive proof.
  4. Key messages – your pitch page should be the basis for all your promotional materials as this will have been approved. Make sure anyone involved with your fundraise sticks to these messages and claims when they are promoting your campaign.
  5. You are responsible – if you promote content that fails to meet FCA standards you are liable.
  6. Overseas investors – make sure anyone you approach who is resident overseas is lawfully able to be involved. Residents of the US, Canada and Japan are currently not.

These rules may seem draconian, but they are for your protection to ensure that you are able to raise funding as seamlessly as possible.

Step 1: Your fundraising page

What to write

Our template provides an easy framework for creating an optimal crowdfunding pitch. The onscreen instructions will give you more detailed advice as to what content you should use in each section so just follow them to the best of your ability. If your application is accepted, a member of our Team will be on hand to fine tune your pitch before it is launched. Please note: it is important that every claim you make can be independently verified. For example, if you say that the market is worth £500 million – you’ll need to be able to prove this.

Tone & Language

You are pitching to professional investors as well as everyday investors; either way it is important to strike a tone of professionalism and competence in addition to keeping the content light and easy to digest. Give them all the important details and get them excited, but don’t overload them with detail and bore them. It goes without saying that your proposal should be free from spelling and grammar errors.

Here’s a checklist

  1. Be clear – explain your product in the simplest possible terms.
  2. Be concise – short sentences with no unnecessary words will keep readers engaged. Wordy pitches put people off very quickly.
  3. Be objective – use evidence to back up your claims. If you qualify every claim you make with substantive proof not only will your business look great, but you will come across as extremely competent.

N.B. The competition to get accepted onto SeedTribe is intense so don’t put off our approval team by sounding unprofessional.

Important Sections

One aspect of the pitch that is of particular importance is the ‘Images and Video’ section. Time and again, we’ve seen how well-branded and visually interesting pitches do far better in attracting investors than pitches whose branding is undercooked. It is therefore essential that you upload a logo and cover image as well as high quality images of your business/product and anything that relates to it.

As part of creating this visual appeal, a video can be very powerful. Many crowdfunding sites make videos mandatory as they consider it essential to capturing the imagination of the everyday crowd by spinning a compelling narrative. On SeedTribe, we do not consider videos as essential to piquing interest from prospective investors especially if the rest of your proposal is well conceived.

That said, in addition to adding to your impression of general competence, a video can be a great way to explain your business to prospective investors. Put yourself in their shoes, do you want to read some text to understand how a business works or have it explained in a good video?

If you don’t have a video and want to create a decent one but without going to ridiculous lengths and expense you can write a script and submit it {here}. You’ll be able to get a really good animated video made to fit the script.

Alternatively if you want to shoot a proper video, reach out to a local university. You’ll easily find a good student eager to build out their portfolio probably for free!

Step 2: Pre-Launch

When you and the SeedTribe team have finalised your pitch, you’ll then be ready to launch. But before launching, we recommend taking the following actions:

Prepare answers

You can’t necessarily predict what prospective investors will ask, but there are some questions which will almost certainly come up. As such, you should have template answers prepared for these questions as this will save you a lot of time and effort.

There are four principal topics that come up for questioning:

  1. Valuation – you should ensure that you have a sound argument in place for the valuation you’re raising at.
  2. Financials – rest assured that these will be scrutinised, so make sure they are realistic.
  3. Sales & Marketing – People will want to know your roadmap for growing the business. The more specific you can be the more impressed people are likely to be.
  4. Exit Strategy – investors want to know how they are going to make a profit. Naturally, you’re not expected to be a prophet, but you should be able to give them a realistic plan based on what similar businesses have achieved.

Tell your Team

This sounds obvious; and it is. But that’s all the more reason not to overlook it. Your team should be fully aware not only of the fact that you are crowdfunding, but also of all the key points and messages, so that when they get asked about it they will be able to stick to the party line in their answer. They should also be clear on where to direct people if they want to invest. One email to your entire team with a list of key messages and processes should act as a sufficient reference point for them to adequately support your raise.

Identify & Segment your Network

Your own list of contacts can play a significant role in giving your fundraise traction and momentum. Your own network, friends and colleagues can introduce helpful contacts, share your campaign and even invest personally so it’s important to tie them in from the start.

You and everyone involved in your company should download your email lists from each of your email accounts and arrange them in a spreadsheet. Delete any irrelevant contacts and segment the rest in three principal areas:

  1. Influential People – these are people who wield significant sway in industries relevant to your company. They may command a large social following of people who would be interested in your company. These people will require personalised emails as you attempt to build a strong relationship with them.
  2. Friends & Family – they will no doubt already know about your campaign and will be happy to promote it for you.
  3. Suppliers and Acquaintances – these people will need to be persuaded to promote you and/or invest in your campaign.

Each group will need to receive a different email when you launch. Group 3 will receive a mass mail. 1 and 2 should receive more personalised emails and phone calls down the line if required; they should also receive an email in advance of launch (see below).

Reach out in advance (to influencers and friends only)

It’s worth reaching out in advance to all your contacts (both personal and business) to inform them that you will shortly be contacting them to request support for your crowdfunding campaign. This will get them thinking about it and hopefully they will be more open to supporting you when you reach out actually asking them to take action.

Setting expectations is well-acknowledged and yet woefully underused marketing strategy. The idea behind it is that it gives people more opportunity to make the decision – if you only send an email asking them to support you immediately, they would probably make a snap decision then and there, and then never come back to it. Letting them know in advance sows the seed for them to support you.

Step 3: Promotional Channels

Emails

Emails are a powerful and low cost means of driving investment. The moment you launch, you should email everyone in your network both personal and business. Everyone – even if you think there’s no chance of them showing support. You never know what can happen once you’ve put the possibility out there – you can only know that nothing can happen if you don’t create the possibility.

As mentioned above, the emails you plan on sending out to your network should be prepared in advance of launch. Your first step should be to segment your contacts into lists of people who’ll receive the same email; and then create a template relevant to each of your segments. The smaller your segments the more tailored you can make your message; the more tailored your message the more it will feel like you are genuinely reaching out to them and not simply spamming them. Obviously the more touched they feel by your message the more likely they are to give your campaign a moment’s notice.

Next step is a follow up email or a thank you email depending on what actions people have taken. It’s important to keep people involved in a positive manner no matter what initial actions they have taken regarding your request. The longer you keep people involved the more you extend the possibility that they’ll support you.

Regarding the action you want people to take – when you create your emails we’ll provide you with the code for a link to your fundraising page and a link for people to share your proposal with their contacts. So in your email reaching out to people you are going to be asking them to take two actions: 1. Go to your fundraising page and invest, 2. Share your proposal with all their contacts.

Email Tips

  1. Subject line – The subject line can play a significant role on the open rates of your email; and thus the success of your email campaign. The subject line should of course be tailored to suit the segment you’re emailing, but generally speaking you need to think of something that will intrigue people and make you stand out in their inbox.
  2. Email Body – the content of your email should be concise and punchy. You want to impress and intrigue as you build towards your CTA (call-to-action) at the end of the email. You need to articulate:
  • why you’re emailing them i.e. you’re crowdfunding and want their support
  • how great your company is
  • how they can help

Website

People checking out your business will of course visit your website. Consequently, the homepage of your website should make explicit reference to your crowdfunding campaign on SeedTribe. Once you are approved we will provide you with the code for a banner widget that will stick to your homepage; and on which you can advertise your fundraise and direct people to your fundraising page on SeedTribe. If you don’t do this on your website, a) people won’t take your raise as seriously and b) you are missing out on generating organic and relevant support for your raise from people landing on your website.

Social Media

Following the same principle as emailing everyone, you also want to post and promote your fundraise on as many social media channels as possible. These channels are a fantastic means of broadening your exposure and engaging different people.

As a starting point you can post on all your personal social media accounts (Twitter, LinkedIn, Facebook) as well as on your company accounts. Just as with the emails your two call-to-actions should be 1. Go to the fundraising page and 2. Share the post.

Regulatory Point

All your posts should be treated in the same way as your fundraising page in that they should include risk warnings and reference to the fact that it is a financial promotion. The FCA is hot on this; and as you are responsible for this, it’s a good idea to follow this basic guidance:

  • On any post, always include the text ‘Capital at Risk’ (not as a hashtag).
  • If you link to your fundraising page, you ALSO need to include an image that has the full risk warning and financial promotion text. We will provide you with templates for this.
  1. In addition to posting, you should message all your contacts (keeping the message as personal as possible) and ask them to invest and/or support your campaign by sharing etc.
  2. Make sure that your company profiles on your various accounts include details of your fundraise of SeedTribe. Your own profile and those of your colleagues should also be explicit in referencing the raise.
  3. Join angel investor groups and discussions to search for potential investors. You can also search for investors and send them a direct message. As long as you keep your tone professional, people are often flattered by this sort of approach; and even if they don’t invest, may support you in any number of ways.
  4. As you keep updating your fundraising page on SeedTribe, ensure that you update your profiles here too.

N.B. Unlike other crowdfunding platforms which often do very little to aid your campaign other than host the listing, we’ll be matching you at every turn. Your page will be shared across all our social media accounts as well as being emailed out to targeted segments of our huge investor database.

Communities

Where social media posts can be a scatter gun approach, this next point can telescope in on people directly relevant to your business; by posting about your business on fora and communities specifically related to your business area, you can advertise to people who will already be half-interested both in supporting your business and promoting its existence. When posting to these communities, it may be wise to mix between simply promoting your raise and just engaging in the forum itself in a useful way and having your fundraise as a side note. People on these sites tend to find the latter approach more palatable than aggressive self-promotion. At the same time it’s important not to be too subtle in case they miss it!

Events

In the past some companies have had great success by organising events where prospective investors are invited to drop in and speak to the Team. They’re a great way to showcase your company in a more personal way; to show off your Team; and to build rapport with potential supporters. You can structure this in any way you like: you might want to do a formal presentation with a Q&A session to follow; or you might prefer just to organise a drop-in where investors can come and speak to you.

Webinar

Webinars provide even greater scope for prospective investors to “meet” you and your company. Despite being less personal than face-to-face drop-in events, they offer the chance for you to showcase your personality and that of your company to a larger and more diverse number of investors. It also has the additional benefit of not having to leave your office or having to provide drinks and nibbles etc. Before launch, we will schedule a date for this with you and help you set up the necessary software.

Paid Ads

PPC (pay per click) ads on Google and Facebook are a great way to boost your exposure to a wider audience. These of course require an influx of funds which you may not be keen to do, but it's something you should take into consideration. Crowdfunding is not only a good way of getting funding but also promoting your business to a wider audience. The more people you can get talking about it, the greater your chance of gaining funding and popularity more generally. Setting up and managing a PPC campaign can be complicated if you’re new to it, so if you don’t have someone capable of doing it for you, we’ll be happy to get one of our PPC and SEO experts to do it for you.

Physical

Depending on the nature of your business, the use of physical promotional materials can be an excellent means of corralling support. Materials to consider include:

  • Posters
  • Flyers
  • Window graphics
  • Stickers
  • Packaging
  • Postcards
  • Staff uniforms

In your design of any of the above, keep to your distinct brand colours and make your text clear and concise sticking to the central message that you are crowdfunding on SeedTribe and would appreciate support.

PR

More traditional media avenues can also be an invaluable source of exposure. Reach out to anyone you know in the industry and ask for a feature. We’ll be happy to help with this too. Press releases will not only reach of wider audience, but will also give you more of a chance to tell a story that people can get behind than in social media posts. In addition to added exposure, a press release also brings with it a certain amount of validation. That is to say, if your business is being featured in publications, it follows that your business is strong and worth paying attention – at least that will be the thought process of many who see your feature in the press.

How to

Crowdfunding is now a popular means of raising funds and increasing your brand exposure; but as such, there is considerable competition to capture people’s attention. Here’s how we recommend ensuring your Press release doesn’t fall on deaf ears:

  1. Make it interesting – This is obvious. But believe it or not, most people will not find your raise particularly interesting in itself, but what they may be engaged by is if you can tie the promotion of your raise into a wider media story. For example, if you’re a GreenTech company make biggest part of your release about a sustainable future etc…

    This is actually an extremely important point – such is the ubiquity of crowdfunding campaigns nowadays that they no longer constitute interesting stories; journalists will reject applications which focus on the fact of crowdfunding. So to make your application interesting, don’t mention the crowdfunding, choose something interesting (and related in some way to your business); only at the very end of the article should you promote your fundraise.
  2. Make journalists’ lives easier – Journalists receive loads of requests for press releases – if you make it easy for them, you’re more likely to get yours into print.
    • Keep it short and punchy
    • Keep it objective – the journalist has to make it a balanced piece not a shameless promotion
    • Give them some great images to work with

    Finally, you should begin reaching out to journalists well in advance of launch and try to time the release of any piece with when your page is live.

Updates

Finally, the importance of updating your proposal should be pretty self-evident. Your progress bar will move automatically each time someone pledges investment, but anything of note you achieve while the campaign is underway should be added. Each time you make an update to your proposal, you should post the update across all channels. This will help keep you firmly in the public eye.

Questions

Your answers to questions posed by prospective investors on your fundraising page go a long way in your attempt to make a positive impression on them. The way you are perceived as the entrepreneur will have a significant impact on the way your business is viewed.

Do:

  • Reply quickly
  • Be polite and address them with ‘Hi + their name’ and thank them for their question at the start of your response
  • Answer clearly and concisely
  • Keep a positive tone but avoid hyperbole
  • Prepare answers to obvious questions in advance

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