At first crowdfunding sounds great – you tell the story about your business, say how much you want to raise, post it and then sit back and the crowdfunding platform does the rest until you’re 200% oversubscribed and have all that new money to spend.
It’s not quite like that.
Before your crowdfunding campaign starts, you need to have pledges for anything between 1/3 and 2/3 of the total investment you’re seeking. It’s called the cornerstone and it’s your job to find those pledges. The reason you need a cornerstone is because crowdfunding is about creating excitement around your business – encouraging herd behaviour.
And as a potential investor there’s nothing more exciting than seeing other investors jumping in. Your cornerstone is the device you use to create excitement.
When your crowdfunding campaign starts you quickly drip some or all of your cornerstone into the visible pledges seen on the crowdfunding platform. If potential investors can see you’ve raised a quarter, or even half of your target in a couple of days they are more likely to jump in themselves. The more excitement you generate the more likely you are to be oversubscribed – to sail past your target and go for an even bigger number.
That’s why so many crowdfunding campaigns get off to a roaring start – because the pledges are already there.
In my experience a good cornerstone strategy is to start by feeding 2/3 of your pledges into your campaign over the first few days, and make sure you widely promote on social media and to your email contacts. You hope this encourages more investors to come on board as the herd instinct gathers pace. The remaining 1/3 pledges can be used, hopefully, towards the end of your campaign to get a second wave of excitement as you countdown the last few days before no more investors will be accepted. These last few days can often be decisive.
Your cornerstone is very important and your crowdfunding campaign will not succeed without it. It means you need pledges from family, friends, angels, anyone to get you started.
It’s better to think of crowdfunding as boosting a potential investment than being the vehicle to raise the entire investment you’re looking for. Getting pledges of say £100K could see you double or treble that amount through your crowdfunding campaign.
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