What every founder should know before they crowdfund

Aidan Cramer co-founder at tech firm JobLab discusses making small scale investments via crowdfunding

No one needs to be told that the current investment climate is precarious. The thick mist of uncertainty that surrounds the UK’s departure from the European Union has some people spooked. That’s why fundraising from angel investors is particularly tough—unless you’re a juggernaut such as Revolut.

But this confusion doesn’t seem to have impacted crowdfunding. In fact the appetite for investment on a smaller scale is as big as ever. Individual investors seeking to support (and profit) from financially backing companies but unwilling to take big risks are turning to crowdfunding to meet their ends. And it was this in mind that we launched our latest crowdfunding campaign. We learned a few lessons along the way.

Users and customers make the best investors

Your users know you best. They’re the ones who use your platform or service regularly and know it intimately. They might not be the big-bucks investors who will take your company into orbit, but ultimately they’re the ones who drive your success. Crowdfunding gives these users the chance to be part of a company in which they’re already invested—even if not financially. And what’s more, their investment signals to bigger investors that your company is one worth investing in. In other words, they serve as proof that your business is the real deal.

Embrace the deadline

No one likes a deadline. Or at least they don’t think they do. Try crowdfunding and you’ll find a hard deadline has a way of focusing the mind and ensuring all your efforts are channeled towards the right goal. Crowdfunding shakes out the time-wasters and keeps you to a target; it also makes sure you know when to stop and close the round.

Effort vs. investment

One of the curious things about crowdfunding is that there seems to be an inverse correlation between the size of a cheque and the effort required to get it. You can spend hour upon hour describing your business model in intimate detail to investors only to receive a minimum of investment. And on the flip side, you find that some of your biggest and most engaged investors are people you’ve never met.

It’s public—but that’s a good thing

A crowdfunding campaign is very public, especially if the media is interested in your company. This should drive you rather than concern you. Embrace the spotlight wherever you find it and you can call attention to your company and the vision that underpins it. A lot of investors will draw confidence from your passion and enthusiasm for what you’re doing. The public nature of crowdfunding can only draw attention to this, and if you lack confidence in this area your investors probably will, too.

Be humble, be realistic

All founders have passion for their business almost by definition. But you have to operate on the basis that others don’t share that passion and have every reason to be skeptical. So be humble: empathise with those considering pouring their money into your company and understand their reservations and concerns. And be realistic about your target. Assume the position of an experienced investor and consider how they would value your company.

Crowdfunding is stressful. It comes with risk. And there’s always the fear of failure. But if you stay humble and do it well, it’s incredibly rewarding. And at a time of economic uncertainty, there is perhaps no better way to raise for companies of a certain size with engaged communities.