Thinking About Crowdfunding? Here's How To Do It Right

Choosing the right partner is critical to meeting your equity crowdfunding goal under Regulation A+.

Thinking About Crowdfunding? Here's How To Do It Right

Posted Thursday June 01st, 2017 by in Analysis + Strategy.

This article originally appeared in Peter Kozodoy's Inc. column.

Choosing the right partner is critical to meeting your equity crowdfunding goal under Regulation A+.

In the world of crowdfunding, there's an emerging source of funding that has piqued the interest of thousands of businesses with dreams of going public.

Thanks to a recent change in financial regulations, it is now possible to raise capital through equity crowdfunding under what's commonly known as a Regulation A+ IPO. Whereas a traditional IPO is usually only available to a select number of accredited and institutional investors, a Regulation A+ IPO is more accessible to any individual who wants to become an official shareholder on the ground floor of a (typically) smaller company.

The trouble is, no company can raise millions of dollars from the public in an IPO unless the public knows who the company is in the first place, which of course presents a sizable marketing challenge.

To meet this challenge, companies going public under Regulation A+ have turned to a wide variety of marketing agencies -- from the one-person consultancy to the multinational advertising agency. Since equity crowdfunding under Regulation A+ is relatively new, many about-to-go-public companies are scrambling to figure out the differences between marketing partners, especially when proposals can come in with wildly divergent services and prices.

In working with a few Regulation A+ IPOs as the selected marketing partner, we've gotten to see some other agency proposals and been shocked at the sheer range of services offered -- from PR only, to social media only, to digital marketing only, to somewhere in between. We've also seen prices ranging from a mere $7,000 per month to many hundreds of thousands of dollars plus equity, making it difficult for any crowdfunding company to compare apples to apples.

If you're thinking about using equity crowdfunding to fund your company, keep in mind that, like all things in life, you get what you pay for. If everyone could spend $7,000 to raise $20 million dollars, wouldn't everyone do it? And yet, countless companies make the mistake of hiring an agency that is too small or provides too few services to achieve the fundraising goal.

Most importantly, missing the goal isn't just bad for the bottom line; it's also bad for the company's public relations and its future fundraising efforts.

On the other hand, if you're raising money through any means, you should always try to avoid giving away too much of your funding to marketing activities.

So, how do you know how much is too much? Well, the marketing partner you choose should be able to use data to inform both the scope and the budget. Throughout the duration of your campaign, your agency should be developing hypotheses about who your best investor prototypes are, testing those prototypes in the market with paid media, and developing the ROI equation that shows you exactly what it's going to take to achieve your goal -- no more, and no less.

But that's just one of many traits you should look for as you seek an equity crowdfunding marketing agency. If you're thinking about equity crowdfunding under Regulation A+, here's how to do it right by finding and vetting an agency with the following skills and resources that can get you to your goal.

1. The agency is full-service, especially in digital marketing.

When it comes to equity crowdfunding marketing, there typically isn't a large enough budget to justify traditional media. Therefore, an integrated digital plan is the most efficient way to take your brand from near-zero visibility to seeming like it's everywhere in a short amount of time. We call this approach the "Storm of Awareness," and it's how we make our marketing campaigns successful.

Given the importance of an integrated digital campaign, your agency should have deep experience in social media marketing, native advertising, display advertising, email marketing, landing page creation and more. When you launch your IPO, the last thing you want is a college Sophomore running your Facebook page!

Furthermore, a full-service agency should always include a dedicated public relations department. Going public is newsworthy, but only if your story is packaged and distributed correctly -- not with one press release, but with a dedicated PR effort that includes custom media pitches, influencer marketing and more, all of which help boost the agency's digital marketing efforts.

2. The agency's core strategy is based on data, not creativity.

Our test campaigns run for three to four weeks, throughout which we split test creative and monitor the results closely. By the end of the test run, we know exactly which campaigns in which markets produced what levels of investment, and we can work backwards to produce a precise return-on-investment calculation to achieve the fundraising goal.

That way, we spend the majority of the media budget on targets we know will convert, making the campaign much more precise and efficient overall. Although creative storytelling will be a component of the overall scope of work, the core strategy must be based on the mathematical calculation that is necessary to your IPO's success.

3. The agency thinks BIG.

You're going public, which means you have a big idea. Big ideas need big legs to run on. Is your agency recommending a simple press release? Or, is it planning a satellite media tour where you appear in twenty markets in one day? Is your agency planning a few Facebook posts and Tweets? Or, is it running a sophisticated native advertising campaign in multiple markets with split testing and constant analysis? Going public is a big deal, so make sure you're ready to go big with your marketing efforts, too.

Going public is a once-in-a-lifetime experience for most, and this is your opportunity to shine. No matter what industry you're in, you can use these guidelines to help you find the right fit in a marketing partner and avoid costly mistakes. In fact, cultural fit should be a key component of how you choose an agency, after they satisfy these more specific characteristics.

In other words, if you feel like the agency loves your dream as much as you do and gets excited when you talk about it, you know you have a winner.

Here's to going public!


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