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How to Attract Investment Through Crowdfunding

business crowwdfunding

It is crucial, as a new business owner that you acquire funding to bankroll operations, but banks are traditionally reluctant to lend to small companies, due to high risk factors. Instead, consider turning to alternative financing options, such as Crowdfunding, which can be far easier to obtain. Helping you utilise this financing method, Turner Little explains how to attract investment through crowdfunding.

What is crowdfunding?

Crowdfunding involves raising money, through small donations from a large amount of people, to fund a new venture, often online. It is easy to set up your own crowdfund account on popular platforms like Indiegogo, Kickstarter, Seedrs and CrowdCube and donations typically start from as little as £10.

With crowdfunding, you harness consumer passion for your business model. The main advantage this strategy brings, is that it creates a ready-made market for your products and services, filled with consumers who have a vested interest in your success. It also serves as an effective marketing tool, as your investors will have the incentive to promote your business to like-minded consumers. We would advise you to take the following pointers into consideration to ensure you can reap these benefits.

Promote the campaign

It is essential that you raise awareness of your campaign, to attract investors. This can take a long time, as you are operating in a crowded marketplace, where entrepreneurs are constantly vying for investor attention. Comprehensive social media outreach is key when it comes to launching a new product through crowdfunding, as it allows you to target a large audience with minimal investment.

Position your pitch

The success of your campaign depends on the pitch that you use to sell it to investors. Create a compelling pitch, which appeals to investors’ emotions, so you capture their imaginations and simply explain how the project will generate money, showing that your business model is viable. Answer any potential questions that may arise and state your contact details clearly in your pitch, so interested parties can put any additional queries straight to you, allowing you to allay any concerns.

Word of mouth marketing

We suggest that you test your pitch out to family and friends, before taking it online. These people want you to succeed, so they will be happy to supply you with the feedback required to fine-tune your pitch, allowing you to hammer out any kinks which could turn away investors. With this strategy, your friends and family can also spread word of your campaign for you, generating more interest.

Select good platforms

The platform you choose can impact your campaign’s success. Each has a different focus, funding guidelines and target audience, so choose the portal that’s right for your circumstances. The majority allow investors to give donations, in exchange for a small reward. Yet there are platforms which allow you to receive funding in exchange for handing investors a stake in your firm, while some let you contact investors directly. These can be advantageous, because they allow you to connect with investors who possess industry experience, so they can help you navigate the hurdles which often come with setting up a business.

State spending plans

The average investor will ask you how you are planning to spend any funds they provide, so they are assured that their money will be put to good use in building a strong business. Investors on crowdfunding platforms hold similar expectations, so state your spending plans clearly in your pitch. This should ideally range from set up and materials costs to your hiring and expansion plans.

Manage your money

Crowdfunding can be a very effective money raising strategy. Scottish craft beer firm Brewdog, for example, gathered £4.25m via crowdfunding, by providing shares in exchange for lifetime discounts at their online shop and bars. It is key, therefore, that you develop robust financial infrastructure at your firm, to manage all the capital you receive from crowdfunding. As registered bank intermediaries, Turner Little can advise you on UK banking matters, so you can manage these funds effectively.

Turner Little

Turner Little was founded in 1998 and it has since become a well-established UK based professional Company Registration Agent, Registered Bank Intermediaries and Business Consultants, as well as Trust provider. You can receive our monthly newsletter by signing up using the form below.

Turner Little and its affiliates do not provide tax, legal or accounting advice. Material on this page has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.