In 2022 alone, over 6.46 million crowdfunding campaigns were launched by startups and other businesses worldwide.
Here in Trendscout, we observed ten reasons why a crowdfunding campaign wouldn’t be successful.
What’s sad about it is that many startup founders don’t even know they’re already making these mistakes.
In this article, I’ll be sharing 10 of the most common reasons we observed here in Trendscout why crowdfunding campaigns fail, how to fix these, and how to avoid committing these mistakes in the future.
10 Common Mistakes Startups Make When Launching a Crowdfunding Campaign
1. Launching Too Soon
Renowned marketing author and dotcom entrepreneur Seth Godin once said: “If you wait until you’re ready, it is almost certainly too late.”
This is a quote that many founders would often use as a guiding principle when it comes to deciding when to launch their startup.
Indeed, you don’t need to wait to have a Minimum Viable Product (MVP) in place before launching a crowdfunding campaign. However, you must have something strong and solid to show potential startup investors so they will take notice and show interest in funding your startup.
One way to do this is by providing concrete evidence that there’s not only a market for the product or service you’re offering but there are already people waiting for you to launch it.
This is what Glow Brand Global did when they launched their crowdfunding campaign.
In addition to providing potential startup investors with facts, figures, and financial projections about launching a health and wellness app, they also developed a Minimum Viable Community (MVC) of close to 3,000 users that already expressed their willingness to purchase their app the moment it launches.
So, even though the app still hasn’t yet been launched, the waitlist of potential customers they’ve already gathered before they launched will make their app enticing for startup investors to support.
2. Not Having a Solid Crowdfunding Campaign Plan
One lesson we’ve seen many startup founders learn the hard and painful way is that the saying, “if you build it, they will come”, isn’t true.
A successful crowdfunding campaign has three phases: pre-launch, launch, and post-launch.
This is perhaps the most critical of all three phases because it allows you to build a network of potential equity crowdfunding investors with whom you can promote your crowdfunding campaign from the moment you launch it.
To do this, you’ll need to research the investors you’re potentially targeting carefully. This will help you determine how much to ask from them and how to craft your pitch to convince them to fund your startup.
3. Information on Your Startup Pitch Deck is Too General
No matter how fancy and colourful your startup pitch deck may look, if it doesn’t provide potential equity crowdfunding investors with the information they’re looking for, it won’t help you convince them to write that cheque and invest in your startup.
A common denominator shared by startups that successfully raised through crowdfunding is that their pitch decks share common traits and content.
One of these is the information they include in their pitch decks.
The successful startups also included specific details about their products and services alongside general demographics and figures. By doing this, they provide potential investors with a more concrete image of where this startup intends to go, how they’ll use the funds they’re raising, and the profitability of investing in their startups.
4. Too Much Industry Jargon Used
One distinct difference between raising capital on crowdfunding platforms and through venture capital firms is the background of the investors you’re pitching your startup to.
The investors on crowdfunding platforms are a mix of experience angel investors, financial advisors, and regular people looking for high-yielding investment opportunities.
This diverse mix of potential investors means many aren’t familiar with the jargon and technical terms commonly used within your target niche or the startup environment. They won’t understand what you’re trying to tell them when they encounter these complex terms.
Unfortunately, many of them won’t even bother to take the time to research what these terms mean. They’ll simply opt out and look at the next startup they can invest in.
That said, keep industry jargon at a minimum when writing the copy for your startup’s pitch page or pitch deck. Also, make it a habit to use simple words that are easy to understand.
This is precisely what Luc Mallinger did when he and his team launched a crowdfunding campaign for their cleantech startup, SortFlow.
In a recent interview with him, Mallinger explained how he and his team discovered that launching a crowdfunding campaign required an approach used by Business-to-Customer (B2C) startups. Since they were a Business-to-Business (B2B) startup, they updated their pitch so that even those that don’t know their industry can understand the positive change they want to implement.
As a result, their crowdfunding campaign generated the capital they needed and even got the support of Innovate UK – the government’s innovation agency that supports business innovations in the country.
5. Offering Too Many Options
Most types of crowdfunding campaigns involve you giving investors something in exchange for them investing monies in your startup.
In an equity crowdfunding campaign, for example, you give a certain percentage of your startup’s equity to the investor based on how much they invest.
The common mistake startup founders make here is that they offer too many options to potential investors.
Instead of attracting more investors, as many startup founders hope, many that initially showed some interest end up not investing.
That’s because providing too many options to potential investors leads to analysis paralysis. This happens because the number of options in front of them makes decision-makes it even more difficult for them to choose the best one. Ultimately, these potential investors end up not making any decision at all, resulting in missed opportunities for you to raise the capital you need.
Limiting your options to three can help alleviate this situation for your potential investors. That way, you give enough opportunities to potential investors to choose from without feeling overwhelmed in their decision-making process.
6. Not Providing Information About Your Team
One of the things that angel investors look at when choosing a startup to invest in is the team that founded it.
Since they will be investing their hard-earned money into the startup, they want to ensure that each member of your startup’s executive team possesses the experience and expertise to bring it to fruition.
Investors also know who the people that make up your Board of Advisors are. They want to see if they can provide you with the insights and guidance your startup needs to launch and scale your startup.
Moreover, investors are more likely to fund a startup if they find that a member of your Board of Advisors is someone they know.
In addition to adding high-res, professional-looking headshots of you and your team, include information like your team’s individual professional experience, educational background, and any achievements or milestones they’ve achieved. All these will help show potential investors that you have the right people for the roles they’re holding in your startup.
7. You Don’t Have a Pitch Video
In recent years, video has proven an extremely effective marketing tool across all industries.
Studies show that startups that use pitch videos in their crowdfunding campaigns improve their success rates by up to 105%.
That’s because, on top of providing angel investors with a quick and convenient way to evaluate a startup’s pitch deck, startups can also use their pitch videos to create ads to expand their reach and capture the attention of potential investors on LinkedIn and other social media platforms.
8. Using the Wrong Crowdfunding Platform to Look for Startup Investors
Whilst there are many crowdfunding platforms to choose from, most of them are designed to accept donations for small-scale projects and fundraising efforts for medical reasons.
Equity crowdfunding platforms like Trendscout are specifically designed to help startups of all stages raise the capital they need to launch and scale.
On top of the potential investors visiting the website to look for high-yield investment options, equity crowdfunding platforms provide services like matching and connecting you with angel investors and VC managing partners in their network.
9. No Updates on LinkedIn and Other Social Media Channels
Not all investors you connect with during your crowdfunding campaign may be ready or convinced to fund your startup. Publishing posts on social media about the milestones you’ve achieved as they happen can help them get off the fence and decide to invest in your startup.
Of course, that won’t happen if you’re not regularly updating your social media accounts with these pieces of information.
That’s why creating a social media strategy and incorporating this into your crowdfunding campaign is essential. It’ll guide you and your team on what to post, when to do this, and which social media channels to use.
10. Doing It On Your Own
Launching a successful crowdfunding campaign involves a lot of moving parts.
If your startup is still in the Idea or Pre-Seed stage, you may not have the resources to develop and launch a crowdfunding campaign on your own.
For this reason, many startups that successfully raised through crowdfunding would partner with an equity crowdfunding platform like Trendscout.
On top of personally matching and connecting you with angel investors in their network, Trendscout also has a team of experienced startup mentors and advisors who know exactly what potential investors are looking for in a startup they want to invest in. Their insights remove the guesswork of creating a crowdfunding campaign, especially if you’re doing this for the first time.
Once you’re ready to launch your crowdfunding campaign, Trendscout can help you spread the word about it, further expanding your reach and increasing the chances you’ll connect with investors keen to support you financially.
Done right, crowdfunding campaigns can help startups of all stages raise the capital they need to launch and scale.
If you’re running a crowdfunding campaign, but not getting the desired results, take a moment to evaluate this against the 10 items listed here. If you and your team discover you’ve been committing any of these mistakes, use the tips included in this article to make the necessary adjustments.
On the other hand, if you’re just about to launch your crowdfunding campaign, use the list provided in this article as a litmus test against this. That way, you can increase the chances of reaching the goals you’ve set for your crowdfunding campaign.
And if you’d like to learn more about how Trendscout can help you with your crowdfunding campaign, schedule a call with us today. One of our experienced startup mentors will be happy to help you out.