Do your homework!
Startups need to ‘do their homework’ when selecting a crowdfunding platform. With acceptance rates as low as 3% in the first stage of crowdfunding platform applications, selecting the right platform to approach is crucial, and requires indepth knowledge of their community and preferences. Time should be spent researching which platforms specialise in life sciences and, most importantly, what their investor base is interested in, before a business plane is submitted.
Christian Girard offers some tips:
“Startups, when looking for a crowdfunding platform, need to do their homework, identify the platform(s) with a track record in life sciences – which means a follower community with an interest in this industry – and get prepared! An equity crowdfunding campaign is similar to trying to attract VCs’ interest. Of course, they will not conduct the same due diligences as VCs, but they will ask smart questions and your answers will impact their investment decisions. Also, it is important that you do not consider equity crowdfunding as a last resort funding solution after an unsuccessful and depressive VC funds tour.”
Don’t treat crowdfunding platforms like cash machines
To succeed in crowdfunding, startups need to be media-savvy, have high communication skills, and be able to turn their backers into investors. According to Gonçalo de Vasconcelos, proactivity is key:
“The worst mistake any startup can make is to treat crowdfunding like a cash machine. You have to put your back into it; you have to contact the people in your network and get people to build momentum and come in to have a look. You also have to be very proactive in answering any questions that are asked. The companies that fail, invariably, are those that treat crowdfunding platforms as an ATM: they put their business plan up, sit back and say “where is my money?” They wait for the money to roll in, but it doesn’t work like that.”
A high quality team is key
During a recent interview, we asked SyndicateRoom CEO Gonçalo de Vasconcelos which factor, out of management team, business sense, project potential and target market size, he thought was the biggest decider for investors when choosing which start up to back. His response was telling: often it is not a great idea that makes a company attractive to potential investors, so much as the team of people behind it.
“I would say it is mostly the quality of the team – particularly for life sciences – that is the deciding factor for investors. For life sciences the market size tends to be in the billions pretty much all the time, so there’s no issue there. And whilst the business has to make some sense, it’s the experience of the team that is so incredibly important. You might say, ‘surely a great idea is always a great idea, regardless of the quality of the team?’ The response I would offer to that is that the world is full of great ideas.
There aren’t many companies that do something so unique that nobody is copying them. If you think about the major examples of success around the world – Amazon, Google, Facebook, Twitter (well, maybe not Twitter so much now…) – none of these big companies have done anything that cannot be copied: they can be copied and were copied at the beginning – in fact some of them, like Apple, actually copied other companies – the difference was in how they executed it. Execution is key.
A lot of the angels I know, particularly the extraneous ones, say they’d much rather invest in a company that has an amazing team and average idea, rather than an amazing idea with average team. An amazing team will make it happen: they will keep improving the idea and finding solutions, whereas an average team may ruin the execution of an amazing idea.”
Want to understand how equity investment works and why equity crowdfunding is suited to life sciences?
FAR FROM THE MADDING CROWD
Crowdfunding ebook: How equity investment platforms are taking life sciences by storm
This ebook will guide you through the basics of equity crowdfunding, how their models are taking life sciences by storm, and finally offer some advice to startups wishing to explore this route of fundraising, with expert advice from industry leaders Christian Girard, of Orphan Drugs Industry, and Gonçalo de Vasconcelos, of crowdfunding platform SyndicateRoom.
Download the e-book to:
- Know how equity investment works
- Understand why equity crowdfunding is suited to life sciences
- Get some advice for startups