Equity crowdfunding can give ecommerce businesses a direct way of securing the capital they need to start up or grow; by showcasing their business online to ‘armchair investors’.
By Luke Lang, co-founder of Crowdcube
These invest as much or as little as they like in return for a share in the business, enabling entrepreneurs to bypass traditional hard-to-access sources of support and avoid the associated costs and complexity.
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Here are my top tips for developing a pitch that will get you noticed and engage potential investors.
Make your pitch compelling
Keep it clear and simple, and give investors the information they need to make a decision. Explain what your company does and who for, how the market works, how you’ll use the investment and your exit strategies.
Investors often tell me they wait for opportunities that inspire them, so inject some enthusiasm and life.
When we surveyed our registered investors, more than two-thirds said “being personally moved by the idea” was a leading factor when evaluating a venture, along with market potential and the founder’s experience.
Successful pitcher Emma Watkinson, founder and CEO of SilkFred, adds: “We spent a lot of time preparing our pitch, business plan and financial documents – always thinking about the most compelling way to present our business case. This gave investors confidence in our business and our team.”
Provide detailed business plans and financial forecasts
There are no set templates, but consider including an investor slide pack and case studies.
Get personal
Part of what crowdfunding investors buy into is the entrepreneur’s story; so give them something to relate to.
Tell them about yourself, your history and expertise, and what excites you about your business – many are keen to support businesses that share their values. Use video to get your personality and passion across.
Be ready for a grilling
Interested investors will often ask an entrepreneur questions directly through the website. This forms an important part of the ‘crowd’ ethos as investors bounce comments off each other and discuss the pitch’s merits.
Stay on top of the flow and answer questions quickly, clearly and concisely.
Sign up for tax incentives
Registering your company with Enterprise Investment Scheme (EIS) or Seed Enterprise Investment Scheme (SEIS) gives investors substantial and attractive tax breaks – up to 50 per cent for SEIS and 30 per cent for EIS.
Get real
Don’t be over-ambitious with your target or put people off by overvaluing your business. Ask for only the amount you need, and explain why you need the money. Whatever method you use to value your business, justify your valuation.
Hit the ground running
Getting the first 10 per cent of your target is the hardest part, so start warming up potential investors today – tell your friends, family, customers and suppliers. Early momentum is really important for success; a pitch will attract more interest if it’s already secured a decent chunk of the target.
Hatty Fawcett is the founder of Seek and Adore, which successfully raised £70,000. “We spoke to family, friends and angels who indicated they wanted to support us and asked them to put their pledges onto Crowdcube as quickly as possible after we went live,” she says.
“This built momentum quickly, and investors saw that all-important progress bar getting closer to its target. We went on to overfund in just one month.”
Keep talking
Keep investors and pitch followers (sometimes over 100 people can follow a pitch that they want to track) abreast of developments. Publishing regular updates can be a powerful way of converting interest into investment. Don’t limit yourself to online activity; get out and talk to people face-to-face.
Visit www.crowdcube.com
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