Founders are by nature passionate about their company. They often give up more stable and lucrative careers to pursue the passion of getting their product or service to market. A founder has usually found a problem in the world that they care about, and invented a novel solution. Once that solution is invented, it is easy to fall into the trap of believing that everyone else will recognize its utility.
I’ve worked with many companies looking to raise capital through regulation crowdfunding (reg. CF), almost all of them believe that once people see their idea the investments will come flowing in. Unfortunately, this is almost never the case. Money doesn’t rain from the sky, no matter how good your idea is.
When you live 24/7 with your product, the utility of it can seem obvious. But there is an important truth that founders must understand when they start fundraising, especially from the crowd: no one will care about your startup as much as you do.
Founders must also be salesmen. No product or service speaks for itself. In order to be successful, the team trying to raise money must prepare diligently and be prepared to relentlessly pursue investors.
This means that founders should spend a ton of time refining their message, spending weeks or even months getting it right. Don’t believe me? Just look at Techstars, one of the most respected accelerator programs in the world. Techstar’s programs are only three months long, and yet they still dedicate close to two of those months to pitch practice, helping entrepreneurs refine their message.
Once you have your message refined you can move on to step two, creating FOMO (Fear of missing out). The best way to create FOMO is to build momentum around your fundraise.
The easiest way to do this is to get money into your deal early. I have founders all of the time say to me: “I don’t have $10,000 lined up, I don’t think my network can do that.” And trust me, I sympathize, not everyone has a rich uncle, or friends and family with lots of disposable income.
Part of the reason I believe so strongly in regulation crowdfunding as a funding option is that it democratizes access to capital. You no longer need a wealthy network, or access to the old boys club, to raise money. That being said, if you don’t have money lined up, you need a way to manufacture momentum.
Many companies rely on long emails lists. They blast out a message to their network, and then are disappointed when almost nothing happens. In this case, you need to focus on your messaging. Keep it simple, concise, with a clear call to action (in this case, invest). Also, one email is almost never enough, you need to be prepared to repeatedly remind potential investors that they should participate. Additionally, founders have to be constantly searching for new individuals and communities to reach out to.
The world of crowdfunding is filled with stories of “overnight” successes. These successes are, in fact, the result of painstaking and deliberate planning and clear messaging. They don’t happen by accident.
Doing a crowdfunding campaign is a chance to build a tribe, a network of people who believe in you and your product. But they won’t come to you, you need to go out and relentlessly pursue them. This will be hard. At times you will want to quit. It may be embarrassing, you might feel like you are harassing people for money. But at the end of the day it is hard to build something, it is hard to raise capital, and you have to be willing to get out of your comfort zone to be successful.
