Equity Crowdfunding To Build And Engage Your Community

Let me nail my colours to the mast… I am a massive fan of equity crowdfunding! 

And whilst there are always pros and cons to it (this isn’t investment advice by the way…), there is simply no better way for your company to truly engage your customers for the long term, and for new investors to get an inside view and feel part of companies and brands they truly love. 

In truth, equity crowdfunding offers a unique opportunity for businesses and startups to not only raise funds, but also to build and engage a community of supporters that they can hopefully tap into whenever they want, and not just for financial support.

In essence, this powerful and innovative fundraising method involves allowing investors to contribute money to your business in exchange for shares, effectively turning them into shareholders and stakeholders. By opening up the investment process to the public, you are able to foster a sense of shared ownership and commitment, transforming customers into a passionate community. Well – that’s the plan anyway if you put enough time and effort into your promotion, aftercare and long-term customer relationship manager of this valuable investor community.

One reason equity crowdfunding can be so effective at community building is because it allows you to directly involve your audience in your business growth. By offering shares in your company, you’re providing people with a way to buy into your vision and become a part of your story. This sense of ownership and engagement can turn casual customers into dedicated brand ambassadors who actively promote your business and share its successes with their networks. They become invested – both financially and emotionally – in your journey, leading to a stronger sense of loyalty and support. What’s not to like?! 

But to leverage equity crowdfunding for community building, it’s crucial to have a compelling business model, a clear value proposition, and a well-thought-out strategy for engaging your audience before and after your campaign. This includes choosing the right crowdfunding platform, setting realistic funding goals, and staying open and transparent with your communication. By consistently keeping your community informed and involved, you’ll foster trust and enthusiasm that can propel your business and its community to new heights.

I’ve watched (and taken part in many crowdfunding campaigns over the past decade) and the most successful raises are the ones that are thinking about the current campaign, but also about ways to engage the community in the long-term so as that relationship continues to thrive.

If you’ve raised investment from equity crowdfunding, then I would recommend having a highly trusted team member to be in charge of the strategy of keeping this community alive. It will be hugely beneficial when you’re looking to raise a follow-on round again in the future and hopefully engage this band of brand advocates around your product, future campaigns and the secret sauce of word-of-mouth marketing! 

EQUITY CROWDFUNDING BASICS

SO WHAT IS EQUITY CROWDFUNDING? 

Equity crowdfunding is a fundraising method that allows entrepreneurs to raise capital by selling shares or equity in their company to many investors. Unlike traditional funding methods, which rely on a small number of angel investors or venture capitalists, equity crowdfunding harnesses the power of the crowd. By using this approach, businesses and startups can effectively build and engage a community around their brand.

DIFFERENCES BETWEEN EQUITY AND REWARD-BASED CROWDFUNDING

While both equity and reward-based crowdfunding allow businesses to raise funds from the crowd, there is a significant difference between the two. In equity crowdfunding, investors receive shares in the company, becoming part-owners. On the other hand, in rewards-based crowdfunding, backers receive a product or service in exchange for their contributions, without gaining ownership in the company. This makes equity crowdfunding more suitable for businesses looking for long-term investors and community members.

BENEFITS OF EQUITY CROWDFUNDING FOR STARTUPS

Equity crowdfunding can serve as a super effective community-building tool, offering various benefits for startups. Some of these benefits include:

• A wider pool of investors: Equity crowdfunding opens up investment opportunities to a larger audience, increasing the chances of raising funds successfully.
• Community engagement: By involving investors in the company’s growth, startups create a sense of belonging and commitment within the community. This can lead to brand loyalty and valuable feedback from investors.
• Marketing and visibility: Running a crowdfunding campaign can also generate publicity, helping businesses reach a broader audience and increase awareness of their brand.

RISKS AND CHALLENGES OF EQUITY CROWDFUNDING

Despite its benefits, equity crowdfunding comes with its own set of risks and challenges that you should be aware of:

• Equity dilution: By offering shares in your company, you may lose control and decision-making power over time, especially if too much equity is sold to investors.
• Regulations and legal requirements: Equity crowdfunding is subject to financial regulations that may vary by country, so it is crucial to understand and comply with these rules.
• Marketing efforts: Preparing and running a successful equity crowdfunding campaign can be time-consuming and resource-intensive, requiring marketing and promotion efforts to attract investors. Quite often I see entrepreneurs thinking that raising through crowdfunding is the easy option…Let’s be clear, even with a large audience, there are still many challenges to running these campaigns and even if someone has invested £20 with you, they’ll still feel like they can question how you are running your business. 

BUILDING A COMMUNITY THROUGH A CROWDFUND

THE IMPORTANCE OF COMMUNITY IN CROWDFUNDING

Equity crowdfunding is a unique method that allows startups to raise funds from a crowd of small, individual investors through internet-based platforms that prioritise regulatory and legal compliance. By attracting a group of engaged and invested supporters, you can create a really strong community around your business.

A close-knit community is crucial for the success of your crowdfunding efforts. By connecting with your audience on a deeper level, you can unite them around your vision, passion, or mission, as seen in the case of Brewdog. Their community of ‘Equity Punk’ backers directly contributes to this global brewery business through financial support and indirectly through word-of-mouth and social sharing.

TURNING CUSTOMERS INTO A COMMUNITY

Building a loyal community through equity crowdfunding requires a few key steps. First, identify your ideal investors by considering their demographics, interests, and potential alignment with your industry. Create an engaging narrative around your startup, demonstrating how your product or service adds value to their lives.

Next, use social media, content marketing, and other digital channels to reach out to your target audience and begin nurturing relationships. Encourage interaction and conversation online, allowing customers to feel personally connected and emotionally invested in your business and its success.

As you launch your crowdfunding campaign, maintain open communication with your backers. Keep them informed about the progress of your campaign, share updates on your product development, and solicit feedback. This ongoing dialogue fosters trust and solidarity, ultimately turning customers into a close community of supporters who can offer valuable insight, advice and referrals.

By following these steps, you’ll be able to leverage equity crowdfunding as an effective tool to build and engage a community around your business, driving long-term success and growth.

LET’S BUILD A WINNING COMMUNITY EQUITY STRATEGY

If you’re ready to start your equity crowdfunding campaign, then it’s time to dive into four key strategies to make your raise really pop. 

CREATING A STRONG PITCH

Your first step is to create a compelling pitch that clearly explains your business idea and outlines your goals. Show your passion, demonstrate your expertise, and highlight your unique selling points. Ensure that your pitch is concise and easy to understand.

LEVERAGING SOCIAL MEDIA

Social media is vital in building a community around your equity crowdfunding campaign. Create engaging content, share updates, and showcase behind-the-scenes looks at your business on platforms like Facebook, Twitter, LinkedIn, and Instagram. Encourage your followers to share your campaign with their network. Respond to comments and messages in good time to foster connections and increase your reach.

ENGAGING WITH INFLUENCERS/AMPLIFIERS

Collaborate with influencers within your industry to promote your campaign. These influencers or trusted names can amplify your message and attract potential investors who may have not heard of your company before. Choose influencers whose values align with your brand and have a dedicated following. Remember, it’s about finding partners who can truly help grow your community – pay-to-play or irrelevant ‘celebrity endorsement’ is usually just time and money down the drain. 

OFFERING TAILORED REWARDS

Rewards-based crowdfunding may not be the core of equity crowdfunding, but offering tailored rewards can help attract more investors. Consider non-financial rewards, such as exclusive access to products, services, or events. These rewards can build loyalty, social word of mouth and create lasting connections with your community members, turning them into long-term supporters.

By following these strategies and maintaining a truly casual, relatable tone, your company can successfully use equity crowdfunding to build and engage a vibrant community.

SELECTING THE RIGHT CROWDFUNDING PLATFORM FOR YOU

As a business owner, choosing the right crowdfunding platform is crucial for engaging your community effectively. Popular UK and Europe-based equity crowdfunding platforms include Crowdcube and Seedrs. Republic is the big daddy in the US.

If you’re looking for reward-based crowdfunding, consider Kickstarter and Indiegogo. Research each platform’s features, target audience, and success rate to find the best fit for your business goals.

MAXIMISING PLATFORM FEATURES

Once you’ve chosen a platform, make the most out of its features to build and engage your community. Most platforms provide tools to help you share your campaign, interact with potential investors, and offer rewards to foster loyalty. Use these features to create a compelling narrative and showcase your business vision. Don’t forget to update the community about your progress regularly and respond to their feedback. This will foster trust and keep your audience invested in your journey.

UNDERSTANDING PLATFORM FEES

It’s essential to understand the platform fees involved in your chosen crowdfunding platform. These fees could include a percentage of the total funds raised, payment processing fees, or even a fixed listing fee. Ensure you’re aware of any additional charges that may apply, such as a success fee if your campaign reaches its target, before launching your campaign. By understanding the fees associated with your chosen platform, you can develop a budget and funding strategy without any unpleasant surprises.

Leveraging these platforms’ tools and understanding their fee structure can contribute to your crowdfunding campaign’s overall success. Remember to research your options, make the most of the features offered, and keep your audience updated throughout the campaign.

REGULATIONS AND LEGALITIES OF EQUITY CROWDFUNDING

OVERVIEW OF EQUITY CROWDFUNDING REGULATIONS

Equity crowdfunding allows businesses and startups to raise capital by offering company securities to potential investors in exchange for financing. With this method, it’s essential to be aware of the regulations and legalities surrounding it. In the UK and Europe, for example, regulatory bodies work to ensure that your crowdfunding business complies with a set of base rules and won’t harm the financial state of investors and fundraisers using your crowdfunding platform.

DUE DILIGENCE FOR ENTREPRENEURS

As an entrepreneur, you’ll need to conduct due diligence before launching an equity crowdfunding campaign. This means thoroughly researching and understanding the legal aspects to prevent any mistakes during the process. Familiarize yourself with securities laws, investor disclosure requirements, and fundraising limits to ensure a smooth and successful campaign. Additionally, closely review the terms and conditions of the crowdfunding platform you plan to use as they may have their own specific requirements and constraints.

FINANCIAL CONDUCT AUTHORITY GUIDELINES

In the UK, the Financial Conduct Authority (FCA) is responsible for regulating equity crowdfunding. They outline rules for both loan-based crowdfunding (peer-to-peer lending) and investment-based crowdfunding (direct or indirect investment in businesses). Familiarizing yourself with the FCA’s guidelines is crucial to ensure your campaign is carried out in a legally compliant manner.

When using equity crowdfunding to build and engage a community, it’s critical to understand and adhere to the regulations and legalities involved. Conducting proper due diligence and following the guidelines set forth by governing bodies like the FCA will create a solid foundation for your crowdfunding venture and contribute to trust and credibility with your investors and the community you’re building.

SUCCESSFUL EQUITY CROWDFUNDING TIPS

LEVERAGING EQUITY CROWDFUNDING FOR BUSINESS GROWTH

One way to build a community through equity crowdfunding is by being transparent with your funding goals. Share your vision for the company’s growth and how the funds will be used to achieve these goals. This helps investors understand your expectations and feel more connected to the project. Additionally, frequent updates (literally the most important aspect in my mind) on progress keep your community engaged and informed and can help you maintain and strengthen the relationship with your investors.

ACHIEVING FUNDING GOALS THROUGH CLEAR COMMUNICATION

Constant community engagement plays a critical role in the success of equity crowdfunding campaigns. When your community feels connected to your business, they are more likely to support your fundraising goals and spread the word to their networks. There are various ways you can engage your community to help you achieve your funding goals:

• Share your honest story: Use the campaign to share the journey of your startup, its purpose, and your unique value proposition. This creates a connection between your brand and your community.
• Offer exclusive opportunities: Provide investors with unique experiences, such as early access to products, exclusive events, or behind-the-scenes updates. This encourages investors to become long-term supporters and advocates for your brand.
• Encourage open communication: Build trust by maintaining open lines of communication with your investors. Respond to questions, address concerns, and engage with your community on social media and other platforms.
• Request feedback: Ask your community for their input on important decisions or new ideas, which can help build a sense of ownership and enhance loyalty. This will help you achieve Community Market Fit in record time! 

TO WRAP UP

FUTURE TRENDS IN EQUITY CROWDFUNDING

As the business landscape evolves, you’ll likely see even more startups leveraging equity crowdfunding to engage their target audience and create a loyal community.

The future of equity crowdfunding is expected to be more casual and user-friendly, making it easier for startups to effectively communicate their vision and plans. Expect to see innovative platforms that make the process of investing and sharing information more seamless. This will enable you to build a loyal brand community that is united around your vision, passion, and mission. 

PROMISING OPPORTUNITIES FOR STARTUPS WITH EQUITY CROWDFUNDING

As a business owner, you can take advantage of the promising opportunities offered by equity crowdfunding. By identifying your ideal investors and building a community around your startup before launching your campaign, you’ll be in a better position to attract the right kind of support and grow your business successfully.

To do this, think about your target audience’s demographics, interests, and potential alignment with your industry. Then, use a mix of techniques such as social media, email newsletters, and offline events to engage with them. Take advantage of the two-way communication capabilities of equity crowdfunding platforms to gather feedback, respond to queries, and further engage with your customer community.

By employing the right strategies with equity crowdfunding, you can foster a strong sense of community that drives devotion, interaction, and feedback between your company and its customers. This will ultimately help your startup thrive and succeed in an increasingly competitive market.

FREQUENTLY ASKED QUESTIONS

WHAT IS EQUITY CROWDFUNDING AND HOW DOES IT WORK?

Equity crowdfunding is a method of raising funds from a large number of people, who each contribute a relatively small amount of money in exchange for shares in your business or startup. In this process, you pitch your idea to potential investors through online crowdfunding platforms, inviting them to support your project in return for equity in your company.

WHY IS CROWDFUNDING AN EFFECTIVE WAY TO BUILD A COMMUNITY?

Crowdfunding engages potential investors who not only invest financially but also emotionally in the success of your business. By involving a large group of people, you create a sense of collective ownership, which can result in long-term advocates and supporters. Moreover, crowdfunding helps you target a specific audience that shares common interests and values, facilitating genuine connections and providing a strong foundation for a supportive community.

WHAT ARE THE BEST PRACTICES FOR A SUCCESSFUL EQUITY CROWDFUNDING CAMPAIGN?

To ensure success in equity crowdfunding, you should:

1. Clearly define your target audience, considering their demographics, interests, and potential alignment with your industry.
2. Build a community around your business before launching your campaign by engaging with potential investors through social media, events, and other networking opportunities.
3. Plan a strategic marketing campaign to showcase your idea, demonstrate your expertise, and provide regular updates on your progress.
4. Ensure your pitch is compelling and illustrates the benefits of investing in your business.
5. Set achievable funding goals and offer attractive equity offers to investors.

HOW CAN STARTUPS LEVERAGE AN EQUITY CROWDFUND TO CREATE STRONG CONNECTIONS WITH CUSTOMERS?

Through equity crowdfunding, startups can turn their customers into investors by offering them a stake in the company. This transforms a simple transaction into a more profound connection, as both parties share a mutual interest in the success of the business. By keeping your investors informed and involved in the decision-making process, you strengthen relationships and foster a sense of belonging among your community members.

WHAT ARE THE PROS AND CONS OF EQUITY CROWDFUNDING?

Pros:

• Access to a larger pool of potential investors
• Building and engaging a community of supporters
• Boosting public visibility and brand awareness
• Attracting additional funding from other sources

Cons:

• Regulatory requirements and legal obligations
• Potential dilution of ownership for existing shareholders
• Dependence on successful marketing and communication efforts
• The challenge in managing a large group of investors

CAN YOU SHARE SOME EXAMPLES OF SUCCESSFUL CROWDFUNDING CAMPAIGNS?

Sure, we’ve got you covered! Some examples of successful crowdfunding campaigns include:

1. BrewDog: A craft beer company that has raised millions through multiple crowdfunding campaigns and has built a vibrant community of over 200,000 supporters worldwide.
2. Monzo: A digital bank that raised millions in crowdfunding from their customers, helping them not only fund their growth but also engage their clients as brand ambassadors.
3. Elio Motors: A vehicle manufacturer that used equity crowdfunding to raise funds and engage supporters, turning customers into investors who are now invested in the company’s future success.

By exploring these successful campaigns, you can gather ideas and inspiration for your own equity crowdfunding journey while learning how to build and engage a passionate community.

NEED FURTHER SUPPORT?

Here at Community Rocket, we’ve supported a number of startups, businesses and communities with their equity crowdfunding campaigns. Whether it’s planning the perfect campaign, supporting your running of the campaign or you have questions on your post-raise community engagement strategy, get in touch and see how we can help!