Over the past decade, billions of dollars have been raised through crowdfunding, driving companies from all industries to seriously consider this form of financing. To effectively raise money through crowdfunding, businesses need to set themselves up for success. But in such a nascent industry, it’s hard to know where to start or how to do everything correctly. We suggest following best practices that come straight from the mouths of the experts. For that reason, we interviewed Melinda Moore, author of How to Raise Money: The Ultimate Guide to Crowdfunding and founder of crowdfunding marketing agency, Hum Digital, on how companies can prepare themselves to run successful crowdfunding campaigns.
Choose the Right Type of Crowdfunding Campaign
There are two types of crowdfunding campaigns: rewards-based and equity-based. The former entitles contributors to receive a reward for their contributions, while the latter allows contributors to purchase a piece of the company in the form of equity. According to Moore, rewards-based campaigns should be used by “Companies that are looking for market validation,” while “Companies that have already been around and have revenue but need capital for growth” should engage in an equity-based crowdfunding campaign.
Equity-based crowdfunding campaigns are most successful for companies who already have a built-in audience of fans. For companies that don’t yet have an established fan base, doing a rewards-based crowdfunding campaign can be a great strategy for building that list of fans who might be interested investing in your company later.
Pick the Best Video Production Company
Attracting investors starts with creating a winning campaign video. “Hiring a professional that’s good with storytelling” and who knows how to authentically portray the brand is key to an effective campaign video, says Moore. Your crowdfunding campaign video should focus on touching audiences and explaining how the product/service is solving a problem. Companies should consider commissioning much shorter snippets for social media sharing. Here is an example of one of our award-winning equity crowdfunding films, which helped our client, Rayton Solar, raise nearly $3,000,000:
Do Your Research!
Jumping into a crowdfunding campaign can be daunting, so make sure to do your research on every aspect of the process before committing to the venture. There are plenty of educational resources online, including Moore’s book, which
Hire the Right Lawyer
If you’re going to do an equity crowdfunding campaign, hire a lawyer. Don’t just hire any lawyer though, hire one who is especially familiar with all Titles within the Jobs Act and who has experience with crowdfunding campaigns; this will make for smooth operations.
There has never been a better time to get involved in the growing opportunity of raising capital through crowdfunding. Make sure to contact us when you’re ready to invest in a quality suite of videos for your crowdfunding campaign.