By John Auckland, TribeFirst
Equity crowdfunding presents a fantastic opportunity for early and growth stage companies to gain essential funding, raise awareness amongst the investor community and gain a tribe of loyal supporters.
To unfamiliar eyes, it might look like companies simply post their pitch on an equity crowdfunding platform, such as Seedrs and Crowdcube, and gain investment. However, that’s not the full story – there is a rigorous vetting process before the platform will allow a company to pitch an opportunity to investors.
Many companies fail due diligence and end up significantly delaying their campaign. Here are a few tips to give your company the best chance of getting past the crucial due diligence stage and speeding up what can sometimes be a glacial process:
Team bios – be prepared to evidence your team’s credentials
When investors are deciding whether to back your company, they pay close attention to your team’s credentials. For this reason, team bios are an essential part of any equity crowdfunding pitch.
We’ve found the claims made in team bios often delay the due diligence process more than any other section of the pitch. If any of the bios cite “20 years’ experience in marketing” or “spent two decades working as an accountant”, be expected to be asked for evidence going back 20 years to demonstrate this, including tax returns and payslips.
A better approach can be to use examples of concrete, provable achievements they made during their tenure at previous companies. Again, these will have to be evidenced, and you can’t use LinkedIn or a CV!
For example, a green technology company claiming that someone worked for the Environment Agency may need to show a contract or an email from the employer stating that they worked there, how long for, and what role they played.
Former employers tend to take ages to get back so chasie them up before you’ve submitted your pitch page.
Check your numbers, know your market
Investors will want to see numbers to give them an idea of how your company is performing, a picture of the overall market, and how you can further tap into it.
It might sound impressive that you made 12,000 sales last month, or achieved a 250% sales growth in one year, but can you demonstrate it? For claims like this, you’ll have to offer the platform a complete list of your sales and show your working.
If your company is not yet profitable, you’ll need to prove that there’s interest in your product or service in your market. Finding reputable stats which show that X% of consumers complain about a problem that you have a solution to, can prove very useful.
It’s worth locating original source industry figures which show how big your market is, including the current and projected future trends. Identifying and naming your competition in any documents you’re presenting to investors, and certainly in any docs you’ll be attaching to your pitch page, is another must.
Videos are not exempt
A key part of any pitch, your pitch video will allow you to communicate the opportunity you’re offering, the character of your brand and the expertise of your team in a few minutes. Just like any other document you’ll include in your pitch your video will have to pass due diligence.
Unless you’re confident that you can evidence every claim, it’s best to hold fire on making a video before you begin due diligence. This way you can write the script, show it to the platform, and ensure that they have no qualms with what you’ll be communicating to investors.
Remember to highlight any claims that will feature as on-screen graphics in your script when you show it to the platform.
The due diligence process can be tough. It’s a crash course in how to get your house in order and hone your knowledge of your business and market. Trust me, it’s the perfect training – you’ll be vetted all over again by inquisitive investors once your campaign is live!
Best of luck with this vital stage!
ABOUT THE AUTHOR
John Auckland is a crowdfunding specialist and founder of TribeFirst, a global equity crowdfunding communications agency that has helped raise in excess of £17m for over 50 companies on major equity crowdfunding platforms, with a greater than 90% success rate. TribeFirst is the world’s first dedicated marketing communications agency to support equity crowdfunding campaigns and the first in the UK to provide PR and Marketing campaigns on a mainly risk/reward basis.
John is also Virgin StartUp’s crowdfunding trainer and consultant, helping them to run branded workshops, webinars and programmes on crowdfunding. John is passionate about working with start-ups and sees crowdfunding as more than just raising funds; it’s an opportunity to build a loyal tribe of lifelong customers.