Raising and managing money from the crowd is not an easy endeavor but it can be made easier if you follow these 10 secret tips!
1. Set Reasonable Expectations
This goes for you and your investors. Don’t try to bite off more than you can chew. When putting your campaign together make a list of all the pieces that need to be completed (business plan, use of proceeds, valuation, etc). Within each of those break them down and create a schedule for completion. Trying to rush through your financials and documents will lead to a poor outcome, which the crowd will easily pick apart.
These documents will dictate your success or failure in raising capital. Talking to experts, validating assumptions and creating multiple scenarios will lead to better documentation and a stronger plan for both you and your investors.
2. You Work for Your Investors
If and when you get funded your responsibility to your investors begins in earnest. This means keeping in mind that you must report to them. Be diligent in your communication and treat the people who parted with their hard earned dollars with respect. Remember when it comes to your annual report or you are seeking additional capital, your investors will be giving you your performance report!
3. Act in Good Faith and Don’t be Evil
Don’t be a Madoff or an executive who plays fast and loose with the truth. CFI represents a new opportunity and it requires the participation of good actors. If the industry becomes tainted no one wins. That includes entrepreneurs, investors, and the people who will receive jobs from companies that successfully crowdfund. Remember the beauty of social media is its transparency. And that transparency will make it more difficult for fraud to be successful. If that’s not enough, remember securities are a federally regulated market and if you commit fraud you will go to jail.
4. Two Words to Repeat Constantly, “Thank You”
Make sure to thank everyone who helps you raise capital or helps out in other ways. Be grateful for every investment pledge you receive, no matter the size. The best way to engage your crowd for the long-term and build good will is to thank them!
5. Share Credit for Your Success
We all know that it takes a team to do almost anything. Building a company is no different. Make sure to give credit openly and frequently to those people who contribute to your success. Not only will
this make them feel engaged and valued, it shows others (including your
investors) that you understand the importance of teamwork. Showing
appreciation will get the rest of your team to work even harder!
6. When it Comes to Investors Silence is NOT Golden –
Investors never like to be left in the dark. They understand that you are working diligently on their behalf but they also expect you to communicate with them on a predictable basis regarding what you are doing to increase the value of their investment. As you build your fundraising campaign, create an investor communication plan to deliver meaningful information to your investors in a scheduled and predictable way – then execute that plan. Then you can spend 1% of your time on investor relations and 99% of your time on building your business. Set investor expectations regarding how you will be communicating business results and needs with them BEFORE they invest. Leverage the investor relations tools that your funding portal offers to properly engage with your investors on a timely basis. Here’s the bad news, if you aren’t communicating with your investors effectively, you will end up spending more time communicating than on building the business.
7. Engage Your Investors – Don’t have all the answers? That’s one of the best
parts of crowdfund investing. Your crowd comes not only with money but
knowledge, experience and a vast Rolodex. Use it! Your investors have a
vested interest in your success and you should form an informal board of
advisors and establish subgroups for sales, marketing, public relations,
graphics, design, operations, and finance. Ask your investors to join a group
and engage them. Also look for one or two mentors among your investors to
guide you. Confused as to where to keep all their valuable information? Use
Dropbox or Google Drive to store shared information. Use social media to
keep your investors informed and to streamline communication create an email
inbox for questions from your investors.
8. Be Transparent and Ask for Help from Experts – When raising capital you
need to be as open and transparent as possible. After you complete your fund
raising, tap into the experts who are also your investors. Some of your
investors may have valuable experience they can share. Doing so will engage
your investors, benefit from their experience and build trust.
9. Remember Why People Invested in Your Company – Investors put their
money into your company because they shared your vision, believed in your
team, saw a good investment opportunity and believe you have the
wherewithal to do what you say. Never forget that. Let that inspire you.
10. Only Work with People You Like – Life is too short to waste your time or
someone else’s time working with people that do not share your values.
Building a company is hard, so select people that are aligned with your goals.