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Common Equity Crowdfunding Mistakes and How To Avoid Them

Remember that you are not the only business approaching the platform

You believe in your business, you know that the market is right and the service or product is perfectly positioned to do well. You just need the capital to get you going. Well so do a lot of other businesses and the most common mistake we see from companies new to equity crowdfunding is that they forget they are competing with many other entrepreneurs looking to launch a crowdfunding campaign. 

You are one of many, so you need to approach the platform in the same way that you would approach a job interview. Do your research. Understand how the platform operates, what it is looking for.  Know what – if any – businesses in the same sector as you it has worked with in the past and how they fared with their investment community. Understand what the platform will ask of you and have those materials to hand.

In short: be prepared and find a way to cut through and stand out.

You only have one chance at this so get it right:

This may sound obvious but it is surprising how often businesses fall over here. Videos that miss the mark. Marketing materials that are shoddily produced or notable by their absence. Business plans that fail to answer obvious and necessary questions. 

You have one chance to win over investors on a platform so make every moment count. Think about business plans that read well and look good – if that means spending a little money or time designing them, spend that time, it is worth it. Think about the one page summary and the information that investors want to see. Think about your pitch video, rehearse, refine and when you are convinced it is perfect, only then record.

And most of all think about your market plan. You may be pitching on a platform but there are investors everywhere. Think about local networks. Look at opportunities to raise your company's profile and in so doing be more appealing to investors. Consider if there are media opportunities to discuss what you do in some way. Work with a local venture capitalist or business angel network if you can. The platform is a way of bringing in the capital you need, it is not the owner of that capital.

Don’t forget to consider the needs of the investor

Time and again we see pitches where businesses do brilliantly at discussing their product, their market and the growth opportunities that they wish to benefit from and completely forget that investors have their own priorities. 

Know your audience. What matters to the investor? Put yourself in their shoes. Consider returns, what is happening in the rest of the sector and market and why you are the best bet. What has come before – for instance if you follow on the heels of a well-known failure why should investors believe that you are any different? How long should they expect to wait before they see returns? What will you be doing to get them? 

Remember that those investing can help your business

Again one to consider when you choose a platform, think about the types of investors on that platform and if they can help you. Too often businesses forget that investors are committed advocates of their business and/or have skills that can be beneficial to them. 

Think of these potential investors as your network of advocates and influencers. Think about how you can connect with them, use that network to your mutual advantage and include that in your marketing plan.  

You really do need a lead investor

Coming to a platform without a lead investor, or investment lead means you are starting with nothing and that is what the platforms investors see. Successful equity crowdfunding campaigns tend to have around 40% of the money that they need to hit their target before launching.

Approach your contacts, local angel and venture capital networks in your area (if you aren’t sure where or who they are talk to your bank manager, the platform, business contacts that are likely to be linked-in with these communities like financial advisers and business solicitors) and pitch to them before you go on a platform. Expect platforms to provide you with 60% or less of your target and know that having some funding in place already is attractive to investors.

Being likable helps

There are rational reasons to invest – an interesting market, a strong product or service, compelling business plan, great marketing collateral – and there are emotional reasons for investing – do you like this business/person? Do you want to help them to succeed?  

Too often all the ingredients are there for a business but for one thing, the likability factor. Whilst some people are quite clearly more magnetic than others and not every business can be established by such personalities, just thinking about how you come across and how you can connect with your audience is important. Your pitch is a performance, so treat it as one. It may be that there are a number of key individuals involved in your business, if so consider who will present your case the best, not just who put it together or who is the figurehead. 

Investors should be aware that investing in small and start-up businesses involves a higher risk of losing their money than investing in established, listed businesses.  They are looking for returns, but may also be utilising this investment to mitigate their tax liabilities and should be aware that in a portfolio of 10 such company investments the statistical likelihood is that only one will do well. Therefore they are looking for a combination of compelling business and marketing strategies and engaging personalities. 

Authors: Oliver Murphy & Sacha Bright


To the best of our knowledge, the information we have provided is correct at the time of publishing. SEIS and EIS tax benefits are dependent on your financial circumstances. Sacha Bright is not a solicitor or accountant and we recommend that you seek professional advice on any topic discussed. 

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