Why Do So Many Crowdfund Campaigns Fail?
With the buzz that is being generated and will continue to be generated about Crowdfunding and New Equity Crowdfund platforms, we should take a look at the statistics involved in a crowdfunding campaigns.
Over 70% of Crowdfund campaigns fail to reach their goals on Crowdfunder, Kickstarter and Indiegogo. Yes there are success stories and like the gold rush, everybody wants in. The amount of crowdfunding campaigns is astonishing, from “Crowdfund my trip to Europe”, “Crowdfund my Breast surgery” to the more rational “crowdfund my business”.
The JOBS (JumpStart Our Business Startup) Act was first introduced in 2012 and updated on March 25th, 2015 making it easier for small and mid-sized businesses to raise capital through small public offerings.
Among the most highly anticipated changes mandated by Congress but not yet implemented by the SEC are rules allowing companies to raise small amounts of money from mom-and-pop investors via what are known as online crowdfunding portals. Initially, the SEC was to give that process the green light by the end of 2013; however, the agency has been slow to move on the rule-making process. The SEC put forth proposed rules in October 2013, but it isn’t clear when they will be finalized.
Crowdfunding Reg A Rules:
While the crowdfunding rules, which are outlined in Title III of the JOBS Act, have drawn most of the JOBS Act’s spotlight, the Reg A changes (contained in Title IV of the legislation) will likely have a much more significant impact for certain companies.
So as the new Equity Crowdfund laws being to take hold, your company should be aware of the TRUTH, that just because your set up a crowdfund campaign does not mean you will raise any capital and you may be in a Win or Loose situation. If your campaign fails to reach its goals you do not receive any of the investment capital.
Your Company should have a set agenda and real set of goals. You should have a definite amount of working capital that you company needs to raise and a business plant that you can pitch to investors.
According to the Crowdfund Inc website the reason so many Crowd Raises fail?
- Lack of research and due diligence and understanding of the crowdfund playing field.
- Not understanding this is marketing and needs professionals to help build your campaign and successfully launch
- Handing this responsibility to an Intern or IT guy to promote. Your company is busy trying to do business and you don’t have time to spend on this.
- Not taking the time to review and asses the project from start to finish. You need to know why you are raising capital, the risks to your business, the shares and equity stakes given away in a crowd invest campaign.
- Marketing the wrong way without understanding the Investors mindset. Your business should have a marketing team behind your efforts, your goal is to build confidence and raise capital.
- Just signing up on a crowdfunding platform, placing some information and a goal and going about your business hoping that it will succeed.
- Letting your Intern, office assistant handle your Social Marketing,
- Not taking the approach that this is your Company’s future and it deserves a dedicated and knowledgeable team to help direct leads, deliver SEO, Soical Marketing, Press Releases and Online advertising to help build confidence and loyal following.
The idea is that before any company enters into a crowdfund campaign they should have invested at least a month in preparing and reviewing all aspects of their campaign, knowing their expectations and outcomes.
The company should have all marketing and media pieces and budgets in place. Your business should understand that this is an investment and as such your marketing budget needs to be in direct proportion with your expected ROI.
We all believe and want our company to succeed. We all want people to look at us and want to invest. The problem is that if your company is starting a Crowdfund Raise by not having a budget and plan, it will fail.
“As a serial entrepreneur, I know the feelings, working weekend long nights 80 hr+ weeks to build a company and have it not be a success. What would be worse is if I do all the work for years and then hand the future of my company to an intern or a company who takes no interest in my future taking commissions whether I succeed or fail.” said CEO of Crowdfund Inc