How to successfully complete an equity crowdfunding raise

Are you looking to raise capital? Like any startup, to scale your operations and become the unicorn that you could be, you will need growth capital. While SMEs do have a few options to decide between in terms of raising capital, there’s one that’s becoming increasingly popular in the Australian startup community — equity crowdfunding (ECF).

What is equity crowdfunding? Unlike rewards or donations-based crowdfunding, an equity crowdfunding raise invites the crowd to become shareholders in your business. Following the massive trend of the US and UK, in just three years the Australian ECF market has continued to grow on a year-to-year basis, having raised a total of $128,454,206 over 176 raises.

ECF is a unique method of raising capital as it is available to anybody and everybody, democratising investing and supporting startups. Equity crowdfunding enables you to take investment from sophisticated and high net worth investors, as well as the everyday ‘man on the street’… Everyone is part of the crowd.

As you may know, private companies can only have 50 non-employee shareholders, with equity crowdfunding any investor that becomes a shareholder in your company is exempt from this 50-shareholder rule. Instead of attempting to appeal to venture capitals and angel investors, you can now target like-minded individuals who relate to the purpose and initiatives of your business. For this reason, there are many direct and indirect benefits of participating in an ECF campaign.

While you’re raising the capital you need to grow, you’re simultaneously building brand awareness, welcoming onboard brand ambassadors, executing a customer acquisition strategy and reducing customer acquisition costs, as well as gaining a better understanding of your business’ unique selling point and opportunity. The unmatchable benefits of this capital raising method is why many Australian businesses are opting to use equity crowdfunding.

Equity crowdfunding is effective and puts power back in the hands of the general community. However, although equity crowdfunding is a viable alternative to venture capitals and angel investors, to achieve a successful campaign you must plan and strategise your execution.

To assist you in preparing for a raise, we’ve put together a comprehensive checklist that demonstrates the initiatives you will need to complete to maximise your chances of blowing the raise through the roof.

Your equity crowdfunding checklist:

1. Ensure your company infrastructure is in place

   Complete and decide on a shareholder agreement, share split and constitution.

2. Build awareness of the campaign prior to going live

   • Build your network and accessible data base;
   • Contact your immediate connections and inform them of your timeline; and
   • Source and reach out to third parties in your industry that you can partner with to promote the raise. 

3. Make social media your best friend

   Before your raise — and when your raise is live — be incredibly active on social media. Every eye that sees your business name or learns about your campaign is a potential investor!

4. Understand your business

   • Nail your elevator pitch by being able to articulate the problem and your solution for the current market — clearly and quickly. 

5. Understand your market opportunity

   Complete data-driven market analysis so you have the information you need to impress investors and sell your business.

6. Know the next steps for your business

   Investors will want to know the plans for the business. Make sure you: 

   • Consider your growth plan — scalability, market entry, key dates; and
   • Consider your exit strategy — IPO? Trade sale? (Investors want to see you have given thought to an exit option for them).

7. Create momentum

   Gaining momentum is the key to a successful campaign:

   • Create little pieces of news and announcements that you can release on a weekly basis; and
   • Reach out to online news publications to try and secure any press and media you can around the raise. 

8. Leverage the experience of your intermediary platform

   • Your intermediary platform is in the trenches every day, so lean on them for knowledge and expertise;
   • Anything you’re unsure about, or want advice on, just ask. Do not assume; and
   • Create a list of questions and have them answered to help you strategise.

9. Create a realistic timeline

   • Don’t underestimate the time and effort a successful campaign takes; 
   • Dedicate a certain amount of time daily, weekly, and monthly to your campaign. Schedule focus time by making to-do lists and priority lists; and
   • Create a collaborative management board for all stakeholders (Trello, Monday etc).

10. Do your research

    Most ECF information is public, so be sure to leverage this! Check out what initiatives and tactics other ECF campaigns in your industry have executed.

Although the above checklist may seem daunting, all good things take time and effort. As any personal trainer will say — consistency is key.

If you follow this checklist, you will give yourself every chance of completing a successful raise and support your company with the capital it needs to grow!