How does the crowdfunding process work?
Feb 28, 2022
Crowdfunding is a funding method which allows companies to raise investment from a large number of people, each making an individual investment of various sizes. Platforms such as Crowdcube and Seedrs make it easy for everyday investors to back companies in just a few clicks. A company raising investment via crowdfunding will set two targets, a minimum and an overfunding target. If the minimum target is reached, the campaign is successful and can continue taking on new investment until the overfunding target is reached. The overfunding target is decided based on the amount of equity a company is willing to sell.
A campaign can take anywhere from about 8 weeks to 6 months to prepare for - there is a lot of work that needs to be done prior to physically launching on a platform (where your campaign can be live for up to 1 month). The preparation behind the scenes includes fundamentals for a successful campaign like investor document creation, building an online presence, mapping your crowd, creating marketing & comms plans, campaign text and video script prep drafting, and ever so importantly - securing early interest from investors.
When your campaign is publicly live, it becomes all about live campaign management - ensuring you reach your desired target and engaging with potential investors. This includes responding to document requests and questions, and making sure you are actively engaged in your campaign, eg: by posting regular updates about the company and the campaign’s progression. Once you hit your overfunding target, which will have been pre-agreed with the platform, your campaign will automatically close so you don’t give away too much equity. The platform will then commence the closing process; carrying out final due diligence, collecting investment, creating shareholder agreements and then finally transferring the raising company the funds. This process can vary in length - from a week to a month or more.
Are you actively raising funds for your company? Want to do it successfully? Contact our team to see how we can help.
