Preparation process

As mentioned before, none of the major participating companies had any prior experience in crowdfunding. Most of them looked for the information on the concept in the Internet and gath- ered insights from friends and acquaintances. Going through examples of successful crowd- funding campaigns also helped to understand the concept and kinds of projects that are the most appropriate and likely to become funded.

As the most important steps before launching the campaign they mentioned creating a powerful marketing plan, a clear and compelling pitch, developing content and video. All of the compa- nies considered a strong marketing plan as an absolute necessity and formulated it before the beginning of campaign, company A even re-wrote it once during the process. This subchapter intends to take a closer look on preparatory activities before the campaign, try to estimate the perfect timing for it and resources that are serve as a fundamental for a success.

Identifying potential investors

Interviewee E was the only participant who stressed the importance of identifying the potential investors. Equity-based crowdfunding platforms usually assist companies and provide legal, financial, marketing and often even strategic advice. Just like the goal setting, this process of analyzing potential investors eventually shapes the development of campaign. Three main is- sues should be addressed while identifying the target audience of a crowdfunding campaign:

1. Why should the investor be interested in the project?

A deep insight on crowdfunders’ motivations was presented in the theoretical framework of this study. However, the theoretical part mainly focuses on motivations in RCF, as most of the latest studies focus on this model. Interviewee E confirmed those motivations, explaining that in RCF the strongest catalysts usually are: being part of a community, helping others or collect- ing an alluring reward. During the interview it was disclosed that in ECF the motivations differ significantly. Investors who seek participation in ECF might never consider trying RCF due to differences in primary investor objectives.

Major motivations for crowdfunders in ECF are: • Financial return and portfolio diversification

Unlike in RCF, a huge chunk of backers in ECF have some business and financial back- ground and are seeking for a business to invest in. In this sense ECF investors are some- what similar to Angel Investors.

• Personal relationship with the entrepreneur • Sharing the same values

Analysis and identification of motives and goals of company’s potential investors has a great impact of further development of the campaign and communications process.

2. Why should the company be interested in them?

The resources provided by the crowdfunders to the company are normally represented by cap- ital. However, in both ECF and RCF cases investors can also bring some experience and exper- tise to the company, as well as increase its visibility and endorsement. In ECF case the advice that might be given to the company usually is more professional due to different nature of in- vestors. They might provide more entrepreneurial consulting and even contacts.

3. How can the investor and company work together?

After estimating who the potential investors might be and what can they bring in the company, it is crucial to estimate how can the company reach them. What is more, previous analysis will support the process of contacting the investors, as the company will know which motivations to invoke to.

Interviewee E stated that before starting the campaign and planning, the company should eval- uate its target audience, motivations, age, location and how to reach them in order to plan the communications process accordingly.

Timeframe

Time is money. During this research it occurred that in most of the cases new to crowdfund- ing entrepreneurs dramatically underestimate the amount of time that a proper preparation re- quires.

‘The preparation takes surprising lot of time’ (Interviewee C)

Three out of four companies reported spending too little time on preparation. What makes it even more demanding is that usually the participants had to ‘learn by doing’, so it was some- times hard to avoid mistakes and took a lot of efforts to overcome some obstacles. Common conclusion from all the companies was that 6-8 weeks should be the perfect amount of time for preparing, writing the pitch and developing a powerful marketing plan.

Considering the length of the campaign itself it is important to mention its strong correlation to the model of crowdfunding. For reward-based platforms common time of a campaign is re- ported to be 6-8 weeks, depending on the project. Whereas equity-based crowdfunding models imply a longer campaign period - around 11-12 weeks on average.

TABLE 6. Timeframe for the preparation stage and the campaign Preparation Campaign

A 6 weeks 6 weeks

B around 5 months 8 weeks

C 2 weeks 3 months

The table above illustrates the time limits for each company. It’s worth mentioning that some of the companies (B, D) started preparation without officially declaring it by creating and de- veloping their content and strategy. Company A stated that their preparation was very intense and it felt like one or two extra weeks could result into a better campaign. Company C under- estimated the amount of time needed for preparation due to insufficient knowledge of minimum campaign requirements, and in the end failed.

Human capital

Due to the novelty of crowdfunding concept and sometimes controversial or at least different data available on the Internet, it was important to evaluate how companies are assigning re- sponsible for the project employees. What is more, it was crucial to find out if the companies outsourced or turned for help from any people from outside the company.

The research showed that most of the respondents assigned a responsible team member, whilst the majority of the crew was also contributing to the process of preparation and implementation. This is typical for small start-up companies with low-hierarchy structure of organization. Simply put, it means that the whole team is working towards a common goal and constantly interacting and supporting each other. In terms of crowdfunding it is considered to be somewhat ineffective as it implies that ‘none of the members is actually fully responsible for the results of

the campaign’ (Intrviewee C). However, most companies tend to assign one member that would

be dedicated solely to the campaign. Company A employed and assigned a full-time intern to uphold the process together with their marketing manager who spent half of the working time on the campaign activities. Interviewee A also believes that when deciding on hiring new peo- ple into the company it is important to estimate the overall marketing experience of members in the company.

‘You have to have a dedicated project manager who has to work full time, espe- cially during the preparation phase. Whether you should hire an outsider depends on your overall experience on marketing, social media and whether you have the people who’d be able to produce quality copywriting and text for the campaign’. (Interviewee C)

While discussing outsourced resources the three companies mentioned that they hired a profes- sional agency for shooting the video. Furthermore, company A stated that they turned to the outside specialist for a copywriting advice, as it was considered to be vital for entering the US market.

The role of prior networking

‘Nobody eats in an empty restaurant.’ (Interviewee D)

An extremely important issue to contemplate before starting the campaign is company’s net- work of potential customers. An essential idea to keep in mind here is the 30% rule. As stated in the theoretical framework, it’s statistically proven that campaigns that manage to receive 30% of their fundraising goal during the first week are well-situated to reach the 100%. As stated in CrowdClan (Djekic, 2013):

● Projects having 20% experienced a 80% chance of success

● Projects starting with 35% or more completed their goals in every instance

The question for the companies to answer was: has the company got an established network of potential clients and backers before the beginning of campaign? All of the companies have more or less fulfilled this criteria. Generally, minimum that was done by everyone is contacting as many friends and acquaintances as possible and asking for support. By participating in dif- ferent kinds of programs that assisted new businesses and taking part in various conferences, companies A, B and D collected a base of contacts and potential backers that helped to boost and heighten their funding during the first week of the campaign. Company C had already grown a 600 members fan base on Facebook prior to the beginning of the campaign. This com- munity unlike in cases of other companies also included their old customers. However, they explained that it was clearly not enough and they didn’t manage to utilize their networks at a maximum capacity.

TABLE 7: Sources of potential backers before the launch

Conferences Accelerator/support programmes Old customers A

B C D

Furthermore, company A and B stated that they collected pre-orders before launching the cam- paign and this proved to be especially effective. Company A managed obtaining 400 pre-orders.

‘We had gathered pre-orders before launching the campaign, and when we launched, we let these people know about it and they were the initial backers in the campaign. This was very-very important.’ (Interviewee B)