“You need to raise most of the round yourself” - Why you’re probably misunderstanding this

It’s a common cry; ‘why would I crowdfund if I have to raise most of the investment myself?’

Spoiler alert: It’s been like that for ages; why are you only just realising this now?

The exceptions aren’t the rule

It’s not hard to find the poster children of crowdfunding. Take a bow, Brewdog, Monzo, Revolut, Chapel Down, and the rest of you. But while there are many such success stories of raising telephone-number investments from anonymous crowdfunding investors, these are in reality the exception and not the rule. The vast majority of crowdfunding campaigns are much more modest, which by the way isn’t in any way a criticism of their success or of this way of raising equity investment.

The basic principles are tried and true

People invest in people, and that’s exactly why most of the investment into your (non-Brewdog) crowdfunding campaign will come from people you know. Here’s the open secret though, by people you know I mean those folks you already know today PLUS people you will come to know as part of your fundraising efforts. And it’s this latter audience where the magic happens. Well, quite a bit of the magic anyway. 

Taking a pinch of salt

So when your mate, a self-professed crowdfunding expert that hasn’t actually done it him/herself, tells you ‘nuh it’s not what it seems, you need to bring X% of the investment to the party yourself’, he/she is partially correct. However, that’s more or less akin to revealing to you that water is wet. What this likely suggests is that they have no idea how fundraising worked during Roman times nor how it does these days, which at its core isn’t really all that different. And yes, I’m fully aware that salt is no longer an acceptable form of dividend payment. 

Every £ counts

FAOD, I’m not for a moment suggesting that the platform investors who do support crowdfunding campaigns aren’t important. Of course, they are. While it’s not especially common for larger ticket investments to come from this audience - but it does occasionally happen - it’s a case of every penny counts and those pennies often still accumulate to bring a reasonable-sized bump to your campaign. And a sidebar, especially for B2C and D2C businesses, these platform investors often become customers and ambassadors for the businesses they invest into. Win-win!

So…?

The takeout from all this is exceptions aside, the most important audience for your crowdfunding campaign could well be friends you haven’t met yet. Simples, right? Well, erm, no. That’s where more magic happens. So if you’re looking for the recipe for the secret sauce of crowdfunding, you need to talk to team ISQ.

Author: Richard Mojel - Commercial Director, ISQ.