Is Crowdfunding Right for You?

By Darren Balcombe, Deputy CEO of Capital Enterprise


It’s likely that you’ve heard the word crowdfunding thrown around a lot, especially if you’re venturing into a new project or starting a new company. Crowdfunding campaigns can be an outstanding way to raise the capital necessary to transform an idea into a viable and successful business. The question is, is crowdfunding the right fit for you? Below, we look at characteristics of a crowdfunding campaign in order to help you decide if it’s the right way for you to raise.

Darren Balcombe is the Deputy CEO of Capital Enterprise, an organisation dedicated to startup growth. With over 13 years of international experience in start-up advisory, Darren has worked across multiple industries to empower start-up founders and businesses to achieve growth.

Founders’ Characteristics

As a founder, you’re the face of your new company and platform. This means that you’re the figurehead for raising your capital.

Unlike traditional forms of raising investment, crowdfunding is totally public and requires a tonne of interaction. Therefore you have to ensure that you, as a person, have the right approach and the right characteristics for such a public facing role.

Here are a few simple things a founder should ensure that they do or have before launching a crowdfunding campaign:

A perfect pitch
Smart founders that excel in crowdfunding have perfected their pitch. As a crowdfunding platform, your investors don’t have the time or patience to flip through thousands of words, or read through a lengthy business plan - they want something short and concise. Touch on the important points, and provide links to relevant information, giving your customers or investors a clear idea of your business, and the freedom to research more if they wish.

An active social media
This is important. Crowdfunding relies heavily on social media and the ability to reach thousands of people in just one click should definitely interest you. This rapid spread is only possible if you continually use social media, well before you even launch your campaign.

Be a great storyteller
People love stories. Investors love stories. Make sure that you have an interesting and compelling story to tell, whether that be why you created your product, or what prompted you to start your service; make your backers feel like they are part of your story.

Have a large, supportive network
If you already have an enviable degree of support, crowdfunding is definitely the place for you to start. This doesn’t necessarily mean friends and family (although that’s great), it could be supportive colleagues or LinkedIn connections. This can help you immensely to get the word out and ensure that your campaign has the crucial push of momentum at the beginning.

Offer great rewards
Are you offering a rewards-based crowdfunding platform? In that case, make sure that your rewards are genuinely desirable. Unfortunately, the majority of backers won’t support you out of the kindness of their hearts. Rewards come in all shapes and sizes but making sure that they’re compelling. Offer something at the price of a coffee, that people just cannot resist.

The questions you need to ask yourself

If you relate to those characteristics, or think they’re something you could easily work on (like the active social media presence), the following questions will ensure that you’re absolutely making the right decision.

Do you have a solid plan?
Take a hard and critical look at your business plan, and ask yourself, “Would you invest in this?”. If your idea and plan are quite wishy-washy, then the answer will more than likely be “No”.

On the other hand, if you’ve got a great plan, research backing, and statistics, you have great potential. Contributors want to know that they’re giving money to something solid.

Also, once you hit all your financial goals, you don’t want to be left with the embarrassing dilemma of what to do next. This is something that you can absolutely improve if necessary, just keep working on your business plan until it’s perfect. In the meantime, you can also start building up your social media following and working towards ensuring you have all the crowdfunding characteristics.

Will your target market be interested?
Have you researched your target demographic? Are you confident that they can be persuaded to fund your campaign? This could mean ensuring that your rewards are suitable, or that you’ve marketed your platform correctly.

Why would they contribute to you? And do they have a strong incentive to do so? This could also be the best time to consider whether or not your offers are genuinely valuable, and what you can do to make them more appealing or valuable.

Are you willing to invest the time and effort into this?
Here’s the hard truth: crowdfunding takes up a lot of time and effort. Your business won’t be magically transformed into a wildly popular overnight sensation (as much as we wish it could). It doesn’t matter how great or strong your idea is, you’ll still need to put in the work to sell it.

You should be continually interacting with your users, donors, and followers, sharing new content, updates and working with marketing and search engine optimisation to make sure your campaign reaches the relevant people. Crowdfunding takes a lot of time and effort but the benefits can definitely outweigh the negatives.

Do you know about the drawbacks?
There is no rose without thorns. Crowdfunding isn’t as easy as it may appear on the surface, even with help from programmes that make it seem simple. Some platforms don’t release your money until you hit 100% of your target, and so checking this in advance is an absolute must.

Also, some crowdfunding runs on an equity-based approach, which obviously will impact your company going forward. You need to be very aware of these drawbacks and limits, and research everything in advance - including reading all the small print.

Crowdfunding can be a brilliant way to quickly raise both your company’s profile and necessary funds. However, knowing exactly what you’re getting yourself into before you dive in head first is crucial. Make sure that you’ve researched everything from the platforms that you use, to your target market to your own business plan and pitch.

This article was written by an independent third party and the views contained within are not necessarily the views of Barclays. This article is designed to help you with your independent research and business decisions. This page contains [link(s) to third party websites and resources that we (Barclays) are not providing or recommending to you. The information contained in this article is correct at the time of publishing. We recommend that you carry out your own independent research before you make any decisions that will impact your business.

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