Ok, so there seems to be quite an important distinction here between Community Shares and Crowdfuning, which is probably good to know!
Can you tell us perhaps what the common pitfalls are when people are looking at setting up both of these types of fund raising projects?
And maybe your top tips for success?
I’ll leave the common pitfalls to Si, as Crowdfunder’s experience of projects is pretty immense. The main pitfall with a community share issue is:
– Groups don’t have the right legal structure to issue shares
– Groups don’t have a business plan for how they show to their potential investors that they know what to spend the money on, and how it will transform things. If the money you raise covers the next year’s revenues and that’s it, then that’s not as compelling as (say) buying the freehold of a building to enable long-term decisions to be made in which you’re in control of your destiny
– Groups haven’t done enough engagement in advance. You can’t fatten the cow on market day, and you can’t do a share issue for a community which doesn’t really understand who you are, what difference you’ll make etc, and hasn’t had a chance to get to know you and see that you’re credible. More geographically-specific groups can fare better here, as it’s highly unlikely they ever get to the stage of doing a share issue without a series of public events which do a lot of the heavy lifting.
My top tips are:
– Always check with your crowd what you’re doing, and that they’re aware of what you’re doing. Everyone is busy inside a group trying to make things happen, but you have to prioritise communication with the people you hope to give you their hard-earned cash.
– Always have a group. Individuals are central and can be the drivers of a project, but if a project has real legs to stand the test of time, it has to be a team effort. One-person bands eventually hit a ceiling about what they can do and who they can convince, because people sense that the entire project is one bout of flu away from collapse.
– Excite people. Not everyone thinks a building, or a pub, might be worth saving as it stands, but they are excited by how it could be different. They’ll be more excited if they’ve been able to help shape that new future themselves.
– Your crowd are also your marketing. People back things people like them are backing, so once people have supported you, get them to tell their friends about it so those friends do the same. This is where Crowdfunder’s platform really makes such a massive difference and really helped Positive News, for example.