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Crowdfunding as a growth/marketing strategy?

Has anyone here had experience with crowdfunding? I recently started generating revenue for my startup and am not hurting for money, but a couple of my users have asked whether they could invest. That got me thinking, if I can get a few hundred or thousand of my users to invest, would that work as a marketing/growth engine? Many users have also asked whether we have a referral program, which I've said not yet. To be honest, I'm worried about a referral program backfiring because right now we're spreading through genuine word of mouth without any ulterior motives. I have this really crazy idea that maybe rather than us paying our users to refer others, we can make them pay us (in the form of investing), so they have skin in the game. Then there's no conflict of interest when they spread the word! And even if people do find out they're investors, it's actually a strong sign that they really believe in the product, rather than them just wanting to earn a few bucks on the referral.Thoughts? Is this a crazy idea or it a really normal reason to crowdfund that I just don't know yet?
I don't have any experiencing in it but thought I'd share this startup crowdfunding platform in case you're interested! https://wefunder.com/
Do you plan on raising from institutional investors? If so crowdfunding might "harm" that in the long run (just because you'd have to do some serious cap table cleaning)
Hi Iynna, I am interested in this also. Just finished mvp and planning to raise seed round in the next 2-3 months. My lined up beta testers and users who have been waiting for the release say that they would like invest also, they are talking about smaller amounts than we would accept from angel investors so I though to launch crowdfunding in parallel. I am completely new to this. Do you think this would harm our round and any future rounds?
That's a great question. Haven't decided yet, but the plan is to bootstrap for now.
+1 echoing Iynna, I've been in early stage where we did use crowdfunding a few times for cash growth (although there are a few ways you can do so, for example convertible funds are not equity now but equity later). We had a product that would easily have our investors be users as onboarding was simple and not complicated. Our product also lets you view your funds immediately so it then became our growth marketing channel. From a cap table point, that was a disaster to manage, but there are also good platforms now that does this for you if you'd be willing to invest it.
What was your product? Curious because you said:Our product also lets you view your funds immediately so it then became our growth marketing channel.
Hi Vivienne, if you’re worried about your cap table getting messy, definitely check out https://republic.co! It’s a crowdinvesting platform and it all ends up just as one line on your cap table as far as I’m aware :) there’s also marketing and campaign support as well!
Thanks! I'm not looking to raise funds immediately but this could be useful down the line. 1 line on cap table sounds good.
I don't think its crazy to think it might back fire, but you've touched a nerve many fintech has recently. Giving them skin to the game makes them your users, which also helps with organic growth. Secondly, once you start getting bigger rounds funding and your valuation is boosted, you can also make use of a secondary market type of arrangement where these early investors can sell their shares. Often, opening up secondary market actually drums up a waiting list of investors as an aftermath.
Can you elaborate what you mean about touching a nerve many fintech has recently?
more fintechs are using crowdfunding as a growth strategy early stage before they go on to series b for example
Are you planning on doing regular crowdfunding (Kickstarter, Indiegogo, etc.) or equity crowdfunding (Republic, Seedinvest, etc.)? They are quite different strategies-- in the first, your users would invest in exchange for certain "perks" or early access to things, while in the second they would invest in exchange for actual equity in your company. If you're thinking about the latter, a messy cap table shouldn't be a concern (most of the major platforms condense your Reg CF round into one line for you) and in my experience most VCs don't view this negatively. Doing an equity crowdfunding round is a lot of work though-- it's almost like a mini "going public" in terms of paperwork and disclosures. "Regular" crowdfunding, while it generally results in smaller amounts of capital raised, would require less work upfront.Republic has a ton more information about this on their website and I've always found their team to be super helpful to startups I've worked with: https://republic.co/startups/raise.
Cool thanks for the info. I'm not actually planning on doing anything right now, I was more curious to just find out whether people do do crowdfunding for the sake of growth/marketing (rather than the sake of getting $$). If I were to do one, it would probably be equity based.
Hey! Julia here from IFundWomen. We have seen many entrepreneurs use our crowdfunding platform in this way. Here are some examples: https://ifundwomen.com/projects/luminaryhttps://ifundwomen.com/projects/covenhttps://ifundwomen.com/projects/listen-barhttps://ifundwomen.com/projects/holdetteIFundWomen is a rewards-based cf platform, not equity so they are not "investing" per se, rather they getting you to a goal amount in exchange for product presales or other rewards. Happy to talk more anytime [email protected]
We did crowdfunding on I Fund Women and it was a good way to raise funds for a specific project (we were already an established company) though the campaign was very labour intensive. But getting funders on a crowdfunding platform is different to getting investors. We also have a referral program and it is great. It will basically accelerate word of mouth. Your idea of having your referees invest instead sounds interesting but it is my understanding that there are regulations around investing, and one day if you are looking for VC funding you may have issues if you have all these super small investors who own fractions of a percent. Worth discussing with an investor, first.
Have you ever had any experience of the referral program backfiring? For example, I came across a YouTube video last night that one of my users made. About halfway through, she was urging people to get the paid version, and she said "I swear, I'm not getting paid anything for saying this", and I thought to myself, that is SUCH a strong referral. If we did have a referral program, no one would be able to say stuff like that. Everyone would have an ulterior motive, even if they would have genuinely recommended the product (without the referral) anyway.
I can imagine how this might be an incentive ("I'm not being paid for this") when it is an influencer, but our referral program is mostly used by customers (we have affiliates for our influencers.) People tend not to tell friends about brands if they don't like them, but they are more likely to tell someone about a brand they love if they get a referral.
Yea what you said about consumers makes a lot of sense. I guess maybe it varies depending on what the product is and who the audience is. In my case, some of my users are mini influencers, I suppose. I'm not selling a brand/product (like shoes) to end users so it's a little different.
I would recommend Republic as equity crowdfundibg platform--many women leaders.Otherwise, ifund women--much higher success rate, good ecosystem and you keep your money in FEMALE economy. Good luck!
If the time comes to raise funds, it could be interesting to do a female-centric one....assuming I haven't crossed over to the male population yet. Right now, my users are 100% female.
Hey Vivienne! Jiwon from XX/Wefunder :) First, it's a huge win if your users are asking to invest. I don't hear this that often! And absolutely yes to using your campaign as a marketing push. The best Wefunder campaigns are done by companies with super passionate customers and fans who are happy to be part of your company. We'll see a lot of cases of startups with investors raving about how they got to invest in their favorite brewery, tech startup, etc. This totally acts like its own referral program because investors are motivated to spread the word about your company (cause if your startup does well then so do they!). This is not a crazy idea, I'd say :) Wefunder's the biggest equity crowdfunding site (we funded over 500+ startups) and we have over 760,000+ users. I'd say if you have a passionate base of customers, you'd get about half of your investments from Wefunder investors. If you have more questions about equity crowdfunding, message me or email me at [email protected] :) Wish I saw this sooner!
Hi Jiwon, thanks for sharing your thoughts and validating this somewhat crazy idea of mine! Will DM you.