by eugene kim
Recently I was chatting with some entrepreneurs who were considering launching an investment crowdfunding offering on NextSeed. I really liked the team. They were smart, organized and diligent. They had a great business that was throwing off cash. And they had already raised a healthy sum but needed a bit more to reach their goal.
Needless to say, I was pumped.
Unfortunately the opportunity fizzled after a few meetings. They had their reasons for walking, most of which I understood. But one piece of feedback took me by surprise.
They thought crowdfunding was only for NEW businesses.
This was puzzling to me. Earlier this year, we had successfully crowdfunded a revenue sharing loan for a popular hair salon that had been around since 2010 and was doing over $1 million in revenue. And after that, we crowdfunded a term loan for a well-respected healthcare practice with projected 2015 revenue of over $4 million. We knew that crowdfunding was not just for startups because we were seeing it day in and day out.
So what happened? I realize now I didn’t do a good job of communicating why these successful businesses were using crowdfunding. By failing to explain this properly, I’d silently endorsed the assumption that you don’t need to crowdfund if you have a proven concept.
Let me be clear – I disagree 100% with this. Startups, food trucks, artists and chicken burrito eaters are NOT the only ones out there who should take advantage of crowdfunding. These days Fortune 500 companies are embracing crowdfunding because of one super important part of doing business – marketing.
Yes, the investment crowdfunding that we do on NextSeed is a little different. But all types of crowdfunding have marketing benefits. Some folks even argue that “crowdfunding as financing” is a side benefit of “crowdfunding as marketing.”
So how can successful brands (small and large alike) use crowdfunding to up their marketing game?
Early-stage companies often use crowdfunding to validate their business models. But what if you’re already established and want to open a new location or move into a new market? As any experienced business owner will tell you, it’s critical to spend on marketing when you expand. Crowdfunding can be a great way to gain exposure outside your geographical comfort zone and test your business concept with a new target audience. What better way to show everyone you’re on the right track than having a horde of investors in your business?
2. CROWDSOURCED FEEDBACK
One of the best things about crowdfunding is connecting with your customers and prospective customers. Imagine having access to a network of dozens (if not hundreds) of marketers, mentors and potential customers who are willing to offer their expertise and support because they have a vested interest in your success. For a lot of businesses, this can be way more helpful than having a handful of “big boy” investors who may see your business as just another way to line their already deep pockets.
3. BRAND ADVOCATES
Feedback is one thing, advocacy is another. Crowdfunding gives customers a reason to play a part in your storyline. They don’t have to sit in the audience anymore because you’ve invited them onstage. The ones who accept your invitation are “early adopters.” They believe so much in your story and your service or product that they’re willing to stake their money on your business’s long-term success.
These early adopters are much more likely to recommend your business to their friends and family and give you shout-outs on social media. You can keep your investors engaged and inspired by providing periodic updates, offering special investor discounts, or sneak previews of your latest service, menu option or product line. Treating them like VIPs is bound to pay dividends down the road.
Crowdfunding doubles as marketing and media exposure for an existing business. Every set of eyeballs on your campaign equals a potential new customer. Even after you’re successfully funded, your campaign will remain visible on most crowdfunding platforms and receive attention from new users. It also gives you another excuse to blog or post on social media, especially if it differentiates you from your competitors.
Keep in mind that crowdfunding (whether the old Kickstarter model or the newer investment crowdfunding model) is just starting to enter the mainstream consciousness. What does this mean for you? Crowdfunding success stories still fall under the “new and interesting” category, which means they often make the news. Think of crowdfunding as one more arrow in your PR quiver.