Successful Campaign Initiator companies have 4 main characteristics. Companies are not required to meet all of them, but one should make the best effort to comply with these aspects.
- Historical performance (traction, validation): Early-phase companies are rarely able to raise capital right at their start. For such projects the donation-based or reward-based campaigns are more suitable. Investment in the business model becomes attractive when there is evidence of the market demand for the product, the company has clients, sales and followers, which implies a history of at least 1 year. In specific cases though, the idea or the team is so attractive, or the fanbase, the media attention or the reputation of the company is so large that it already validates the product. In such cases of early-phase investments, usually a higher stake in the company should be offered to investors.
- Business model, growth potential and/or impact: According to an often cited phrase, the attention of crowd investors can be raised by technological solutions with great potential for growth. However, more and more successful campaigns are implemented by social impact ventures or companies from the food industry. Usually, it is easier to be successful with B2C campaigns (which target the end-user), but there are more and more B2B companies implementing successful equity-based crowdfunding campaigns.
- Presence, involving the crowd, local investors: In case of equity-based crowdfunding, the majority of investments originate from the vicinity of the Campaign Initiator company. Besides the online communication, it is also essential to be involved in the local ecosystem and be present in person. No wonder crowdfunding is sometimes called capital raising through social media, and for this purpose, one should build a community. A campaign with a large number of followers and active users is more likely to become successful than those with low activity.
- Investment structure: equity-based crowdfunding might be even more powerful if combined with other forms of financing: besides the crowdfunded capital, the companies often seek direct investment from a lead investor, or take a loan or a grant. Numerous success stories have been built upon the efficient funding structure and good communication.