Based on our experience of working with Australian businesses who have successfully raised capital via crowd-sourced funding (CSF), otherwise known as equity crowdfunding, OnMarket has established the five key pillars to successfully achieving funding goals.
To extract the most value from this article, we recommend downloading the five pillars of CSF success worksheet (attached below) and filling in the document as you make your way through this piece.
Let’s get into it!
Pillar #1: Simplicity
This pillar is overlooked and the simplest (pardon the pun) to accomplish. As a founder, you’re passionate about the work you do and the service or product you provide - and rightly so! Unfortunately, because of this passion, many entrepreneurs get carried away when discussing their business and forget who they are speaking to - an audience who (most likely) has minimal understanding of the space you operate in and the problem your company solves.
Keep it simple - when creating marketing collateral, when putting copy together, when speaking to consumers, suppliers, partners, and colleagues. Keep your business messaging simple and concise. Use analogies and images to reduce the explanation time and help your audience visualise your product/service and the opportunity at hand.
Simultaneously, emphasise your messages with impactful data. Say what you need to say in as little words as possible and support your argument with relevant statistics. Consider the marketing messages you currently use and ask yourself 'could a high school student understand this?'. If your answer is no, you probably haven't done your business justice.
Consider this scenario:
You're in a hotel elevator and have 5 floors until the CEO of the world’s biggest VC steps out - what are you going to say? What will convince him to invest in your business?
Is it the size of the market? The demonstrated demand? Your revenue? User feedback?
Take a moment now to answer the questions for pillar #1 in the resource.
Pillar #2: Launch Strategy
Contrary to what one may think, luck has nothing to do with the success of your CSF raise. There's a strategic, diligent process in place for founders to follow which optimises your campaign and amplifies your ability to reach your maximum funding goals.
There are five phases in a CSF campaign. The first is preparation, the next is expression of interest (EOI) where you build a database of interested investors, then you leverage this interest and convert those who expressed interest into investors during the private investment phase, and the last phase during your live offer is the public launch – where you open the investment opportunity to the general public.
Over the last five years of CSF in Australia, a strong pattern has emerged: those who have high expressions of interest, and an engaged audience are more likely to reach their funding target. This is because you have more time to educate those who express their interest and therefore can more easily convert them into a bidder as they are familiar with your business and growth plans – then you can leverage the momentum you build from early investors to the wider public and create FOMO.
Once in EOI, you receive a data-driven dashboard that shows you:
The name and contact details of the investor
Their reason for investing
The amount they may invest
Business and CSF questions they have
You can use this data to build a relationship and improve your marketing initiatives.
Consequently, your preparation phase is the most important and takes 6-10 weeks – this is where you set yourself up for success and strategize your EOI approach. During this period, you must finalise your standard CSF assets (landing page, pitch video, offer document) and create your marketing plan (both paid and organic).
Before launching your EOI campaign, you must know who you can target organically, who you want to target using paid media, how you will reach them and what content will convert them.
Take a moment now to answer the questions for pillar #2 in the resource.
Pillar #3: Killer Content
Crowd-sourced funding is a unique capital raising method because it allows you to seek investment from retail investors (everyday people) and sophisticated investors (high-net-worth or professional investors). Because of the varying target audiences, the marketing of your CSF campaign is content focused – it must be visually appealing, emotive, factual, personal, and engaging.
As mentioned, you will pull together your marketing plan during the preparation phase, but during this phase you will also create the content you need to execute your plan. Content that best converts and attracts investors through a CSF campaign is authentic and genuine, such as BTS footage.
For example, OnMarket raised for Cannatrek in 2020 (a medical cannabis company in VIC) and held an online session where interested investors could attend and see their QLD greenhouse – learning from their producer how the product is planted, grown, extracted and packaged. This resulted in $500k invested and closing the raise early.
This example should highlight the need for quality content (and simplistic messaging).
The best part? The content you create can be used for your campaign but is also essential for the growth of your business. Your potential investors are also your potential customers, therefore you are building brand awareness and reducing your customer acquisition costs whilst marketing your CSF campaign.
Content you could create includes:
BTS footage
Case studies & testimonies
Educational blogs & featured articles
Product/service videos
Partner features
Stakeholder videos
Brand resources
Take a moment now to answer the questions for pillar #3 in the resource.
Pillar #4: An Educated Database
Consumer-focused businesses have begun to dominate the CSF space, with 89% of raises in 2022 being B2C companies. This is because B2C businesses have a database of potential investors… their followers! Their customers, suppliers, partners, and affiliates are all potential investors, making it easier for them to build a strong EOI campaign because they have a marketable, educated database. These audience groups are considered ‘your crowd’ and are extremely influential in how successful your campaign is.
CSF data highlights the importance of educating your database prior to launching your EOI campaign. Educating a database can be achieved through social media, email marketing, PR, third-party databases, referral programs and word of mouth. Leading up to your raise, begin collecting email addresses and increasing your social media posting frequency to build engagement and grow your follower base. Collaborate with industry partners, sponsor or attend events and leverage your website.
As company stakeholders, you must also consider (who in your network) you can market to that will support you in building early momentum, whether it be through investing or sharing your campaign to their friends and family. We like to call these individuals your inner crowd and you must determine who they are prior to the raise so they’re ready to act once your EOI campaign is launched.
Igniting ‘your inner crowd’ and ‘your crowd’ is the key to success – once these engaged groups invest, the general public follows.
Take a moment now to answer the questions for pillar #4 in the resource.
Pillar #5: Momentum
The campaign strategy you develop in your preparation period is executed in the EOI period, which influences the amount of early investment you receive during the private investment period, which influences the strength of your public campaign launch, which ultimately determines much funding you receive in this CSF round.
Each phase is strategic in working to build momentum – it’s like a snowball, it requires maximum effort to get it moving but once it gains momentum it begins rolling on its own.
If you hadn’t realised, the previous four pillars outline the process of building momentum.
Here’s how:
The time you spend simplifying your business model and understanding your point of difference will assist you in developing your launch strategy and pinpointing your ideal target market. Now that you know your marketing messages and who you’re marketing to, you can create the appropriate content you will use to educate and grow your database.
Each pillar is leveraged to support the next and collaboratively works towards generating momentum. Now that you have all the individual pieces prepared, it’s time to put them together and contemplate your campaign strategy.
Take a moment now to answer the questions for pillar #5 in the resource.
Conclusion
Although we can't promise success, as external factors can influence the success of your campaign, if you adhere to the above five pillars you are giving yourself the best possible chance to reach your funding goals and expediting the growth of your business.
If you're interested in learning about CSF eligibility and processes, get in touch with OnMarket here.