Digital fundraising: should you do it?
Crowdfunding has been around for a while now but never before has it been as actual as it is now when everyone is encouraged to stay at home. Covid-19 is not the initiator of moving important tasks such as fundraising into the digital world, but it definitely is a great accelerator for it. More and more founders are turning to digital funding and finding great investors. Some of whom they could not find on the streets.
Last week we had a great live panel discussion about fundraising in the digital era with Antony Tikhonov (Seedrs), Kaidi Ruusalepp (Funderbeam), Tommaso Baldissera (CrowdFundMe), and Andrea Orlando (SWG). The experts shared their knowledge and suggestions for founders and investors on how and why they should fundraise digitally. Here’s some key learnings from the panel.
Don’t expect the platforms to do the work for you
Digital crowdfunding is not a walk in the park. You have to put in a good amount of work for your campaigns to fly. For example, using the power of your existing network definitely makes a big difference. People who have a personal connection with you or your business definitely want to see the campaign to succeed.
The biggest mistake is to expect all the work to be done for you. If you want to raise money, you need to put some work in.Antony Tikhonov, Seedrs
Antony Tikhonov from Seedrs noted that startups who come in for fundraising with about a third of the goal already achieved, are more likely to succeed than those who start at ground 0. With that much money already in your pocket, who wouldn’t want to help you fill them to the brim?
Another thing to keep in mind when fundraising digitally is that you need to grab the attention of your investors. In other words – you have to make sure your company is sexy! Be on the right market at the right time, be technologically advanced, have a cool business partner and so on. Both being it, but also making sure to communicate it well. All these factors make for a great personal touch that will likely also catch the attention of non-professional investors. Those, who roam around looking for investment opportunities in the digital world.
What we define, what makes the campaign go or not is: if it’s sexy. Being in the right market at the right time is sexy. So is being technologically advanced or having a cool business partner. All those aspects make investors want to invest.Tommaso Baldissera, CrowdFundMe
It’s certainly important to note that digital fundraising should be quite similar to venture capital in terms of interaction and managing information flow. It requires attention and proper engagement from the founders and top management. You need to introduce yourself and communicate with potential investors the same way as in traditional fundraising.
Digital fundraising – a marketing tool?
Often startups opt for digital fundraising also to gain more attention from their potential target customers and leave a mark in the market. We for sure can say that digital crowdfunding is an excellent marketing tool as well, if used rightly. Kaidi Ruusalep from Funderbeam has noticed that crowdfunding has created close communities, where investors also become mentors to the founders. They discuss important topics, give lots of professional input and celebrate milestones. Ideally, you don’t just find investors, you find people who help develop your business to a whole new level. And if you market your startup properly you might even find customers!
Crowdfunding isn’t only about raising money, it’s also about raising awareness.Kaidi Ruusalepp, FunderBeam
So is digital fundraising the holy grail for startups? The answer probably lies somewhere in the middle. Meaning that it might not be an either/or choice for a startup whether to pursue traditional or digital fundraising. Clearly doing it digitally and via online platforms gives certain additional perks. Best of them being able to reach a larger crowd of investors in one place, and getting some additional buzz around the product or business. The latter might be particularly important in the earlier days of the business.
You should not choose between venture capital OR equity crowdfunding. Be smart, take the best of both worlds: network and expertise of the VC investor, and marketing and customer acquisition opportunity of crowdfunding.Antony Tikhonov, Seedrs
Interested in reading more about investing in the new digital era? Go check out our blog where VC’s give advice to startups.