Why Digital Funding Works: One Kerry Start-up’s Successful Story
When you dream of setting up your own company, securing the necessary funding is probably not part of the fantasy. You may have a brilliant idea for a new product or service that the world really needs, but without adequate financial support, your start-up is going to fall flat fairly fast.
Assuming you don’t have a trust fund to tap into, how do you go about getting enough money to build your business? A traditional first step is to draw up a business plan and navigate the bureaucracy required to access government grants and other public funds. You might also be eligible to avail of the government Credit Guarantee Scheme or a microfinance loan.
However, if your product requires a lot of cash just to get off the ground, traditional sources of funding just might not be enough. Given that traditional banks tend to be slow to lend money to start-ups, businesses looking to raise substantial funds fast need to look elsewhere.
How Crua Kickstarted its Funding Adventure
There are alternative options, and one company with considerable experience in the area is KerrySciTech member Crua Outdoors. Founded by Derek O’Sullivan after a fruitless quest to find a tent equal to the challenge of a cold, damp Irish night, Crua Outdoors offers a range of recreational and industrial tents with patent-protected Thermo Tent insulation.
The quality of Crua’s product was never in doubt, but that didn’t mean investors were queuing up to throw money at the company. Once Crua’s founders had drained their own savings, it was time to look for funding. They explored traditional options such as small business loans, venture capital, and angel investors, but they were either turned down or put on the long finger.
That’s when digital funding entered the picture. Crua started out with rewards-based funding from Kickstarter in 2015. Rewards-based platforms are ideal for start-ups with products they can offer in return for pre-orders. Crua’s first round of funding raised €50,891 from 175 backers. It has now staged seven successful rounds on Kickstarter and is planning a new round for March 2021. It has also progressed to equity-based funding.
Moving On: Equity-Based Crowdfunding
The UK is the global centre of crowdfunding, and Seedrs is the equity-based crowdfunding platform Crua chose, raising £70,000 in their first round of funding. As of March 2020, the company had generated more than £1.7 million from Seedrs over five years. Derek describes the process involved as pretty straightforward. “Once the hard work is done and you prepare properly before the campaign, fulfilling all due diligence requirements, the process after the raise is pretty seamless from an admin point of view.”
Because Crua’s products are highly visual, they have proved an attractive option for digital funding. More conceptual products with a less tangible product to advertise could find the process more challenging. The important thing is to do your research and make sure that the funding vehicle you use suits your product.
The Advantages of Crowdfunding:
- With crowdfunding, the entrepreneur has far more control than they would with more traditional sources of financing. You design your campaign and put your products in front of potential investors, so you are not depending on others for meetings and approvals. It empowers you to be proactive, and demonstrating that you are proactive will attract other investors.
- It is a far quicker route to finance than many of the more conventional funding avenues. With no waiting around for meetings and decisions, start-ups can move forward much faster.
- Digital funding also opens up access to a much wider audience of potential investors. “There is a much quicker turnaround and a wider audience and possibilities,” says Derek. However, he warns that the public nature of the platform means that you also have to be prepared for greater visibility if things go wrong.
10 Tips to Successful Crowdfunding:
Preparation is key for successful crowdfunding. “Pre-launch is critical.” Derek points out that, even at Crua’s stage of maturity and with all of their experience of the process, the company is already preparing for the next round of rewards-based crowdfunding—in March 2021.
- Marketing is key; don’t skimp on the video you use in your pitch. Make sure it is professionally shot, and get to the point by stating what problem you solve within the first 20 seconds. After that, the video can be as long as it needs to be, but don’t waste those initial moments.
- This is not a question of build it and they will come: You must build your own audience. Facebook is the most effective direct marketing platform for promotion.
- For your first campaign, set your target amount relatively low, so that you hit your target as quickly as possible. Initial success breeds more success.
- Get testimonials from users. Satisfied customers are your best advertising.
- Ensure your product is something people want. Prelaunch, create a landing page built exclusively around the product, and ask people to submit their email addresses if they are interested. Promote your landing page using Facebook to get the widest possible coverage.
- Make sure your product is as good as it can be before you look for crowdfunding.
- Be clear about what you will use the money for. Backers want to know specifics.
- Keep communicating with your backers, especially if the goal you have specified takes time to reach.
- Familiarise yourself with the process. Study how your chosen platform works and make sure you use all of the beneficial features.
- Visual products with a strong technical element (e.g., Crua tents with patent-protected ThermoTent insulation) work better than exclusively tech products (e.g., apps).
Are you an entrepreneur (or a would-be entrepreneur) interested in alternative funding sources?
Good news! This is the first in a series of features in which we explore the different ways you can access the finance you need to launch your venture – and keep it afloat.
Next up: Angel investors.