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Welcome to this week's Startup Investments Insider by CrowdInvest.

Key Highlights

We have another roundup for you on recent media coverage of fintech news and events. The FCA is revising secondary market mechanisms, and a US modular home builder that has successfully used crowdfunding now aims to raise $1 billion! And there's more.

Though to begin, we explore the importance of marketing for startup founders to successfully raise investment budgets. Numerous articles are easy to find on the topic, though few mention the need to consider a three-step marketing plan.

• A startup has to market itself to the fundraising platform(s) it would like to be hosted on.
• Platforms will want to know how a startup will promote itself to potential investors - they don’t want to do all the work alone.
• Platform owners and potential investors may also want to know how a startup will market itself to build its business among core end-users and customers.

The 3-Step Marketing Strategy to Secure Investment

Just think about it for a moment. Startup founders are asking backers who may have never previously even heard of them to invest personal money to help them grow their business. There will be no dividends paid, and it will likely be years until there is a prospect of seeing a return on their investment. In the meantime, most startups go bust. It is a big mistake for any founder to think all that is required is to post content on a crowdfunding platform and sit back and wait for things to happen. People need to be convinced!

Given there is no shortage of articles written about the importance of marketing activity to support alternative investment projects including equity crowdfunding campaigns, we are not going to add to that list. Except to say a successful equity crowdfunding campaign requires a comprehensive marketing strategy that includes a hard investment in time and money, with a strong focus on social media, email marketing, content marketing, and other initiatives to build awareness and grab attention.

However, have you ever thought that a successful equity #crowdfundingcampaign might require three different marketing strategies and plans?

Step 1. Convince a crowdfunding platform

First, a founder must convince their preferred #crowdfundingplatform to host their fundraise. Platforms only charge fees and make money from successful projects, so they are selective. The first marketing plan requires creating the approach a startup will take to convince a platform that it is going to succeed. 

Platforms want to see a business plan that sets out clear aims and the path to achieve them, and that there are already cornerstone backers who will invest a substantial part of the crowdfunding target. 

Platforms also want to work with startups that have an existing crowd of supporters and followers that it can ask to invest. If a startup does not have a crowd, they will ask “how are you going to build one and how long will it take?” It adds to the marketing requirements and can add months to the fundraising process.

Step 2. Convince investors

The second step of the plan will then set out how a startup business is going to reach out to this crowd, and other potential investors, in a persuasive manner to convince enough of them to invest. There are several key elements to this that a startup can either handle in-house if it has sufficient skills, or with a marketing advisor or agency. It is vital to begin with a strong focus on a coordinated plan using social media and email marketing, with a pipeline of fresh content, images and videos to use. 

These elements of a marketing plan are all about a startup talking about itself. There are also third party opportunities to have other people talk favourably about a startup business. This includes earning media coverage, being talked about by influencers, and gaining the support of affiliated businesses. It can include suppliers and distributors. Paid-for advertising is also a possibility.

Committed involvement from startup founders in crowdfunding marketing is always required. A large proportion of potential backers are going to make a decision to invest, or not, based on whether they believe a founder has the judgement, drive, talent and passion to succeed. They want to see and hear the founder, whether at a live event, on video or in a webinar. This should not be delegated to an alternative spokesperson. 

Founders who run #alternativeinvestment campaigns such as equity crowdfunding therefore have to be available to meet potential important investors, attend pitches and webinars, and be available for interviews. Workloads have to be shared and delegated for the business to continue running and the crowdfunding to succeed at the same time.

Step 3. Convince end-user customers

For startups that have completed the product or service development stage and are ready to go to market, there is a third step, which the crowdfunding platforms and potential investors will want to know details of. It is how a startup is going to market its products or services to its customers and eventual end-users.

This can take different forms, depending on whether a startup is going to operate in the B2B, B2C or D2C sector. Paid-for advertising, whether online or in traditional media, should also be assessed for value and relevance. It may even be possible for B2C and D2C startups that would benefit from a higher public profile to trade some equity with major media owners for values of advertising, such as with Channel 4 Ventures.

Though whichever media channels are decided on, it pays for a startup to have a clear vision, mission and brand image that help to differentiate it from competitors. If you are an investor, be wary of anyone who says “we are unique, we don’t have any competitors.” In terms of other businesses that want some of a startup’s customers’ money, there is no end of competitors.

Now Let's Discuss Latest Updates in Alternative Finance

Maybe while the importance of a multiple-step marketing plan sinks in for a moment, here is a selection of what our team noticed in recent media coverage of fintech matters related to alternative investments. 

Sustainability

• Edinburgh-based #sustainableenergy startup Gravitricity Ltd drops objects down abandoned mines to generate electricity, reported UKTN. It is also working to develop underground storage of green hydrogen. Its fourth round of equity crowdfunding closed recently and raised almost £829,000 from 1,085 backers.

• Plymouth City Council launched Plymouth Connect in April 2023, it is the new name for their sustainable transport network. Working with energy firm Wenea, they are raising money from the public to install a further 150 EV charging points at the council's new mobility hubs. They are using the Abundance Investment crowdfunding platform. We recently took our own look at some UK local authorities that have teamed up with commercial players and have used crowdfunding to accelerate EV charger point installations.
  
  
• CAKE – ridecake.com is a Swedish electric motorcycle startup, founded by a keen hiker who really didn’t like having to hear the noise of petrol-driven bikes while spending peaceful time in the countryside. Since launching the business in 2016, founder Stefan Ytterborn reckons he will have had to raise and spend an estimated $170m before making a profit in 2025. Other electric motorcycle startups are targeting far more modest funding through #crowdfunding. STILRIDE and Savic Motorcycles are included in the link.

Accelerating tech development

• Tech.eu reported Munich-based Testbirds, which crowdsources people to test websites, apps, chatbots, IoT and business applications, has secured a seven-figure investment to fund growth. Its clients already include BMW, Audi, Deutsche Telekom and Allianz.

Secondary markets

• Did you know the Financial Conduct Authority has introduced changes to the mechanisms of equity #secondarymarkets? As part of the Wholesale Market Review the FCA has undertaken alongside the UK government, the changes aim to promote competition and growth.

Fundraising in alternative finance

• Congratulations to Manchester-based fintech startup FROST. Its recent equity crowdfunding round reached £1.87m, beating its £1.725m target, with support from 184 backers. Frost helps users manage their money better, and leverage data to reduce the cost of essential household bills.
  
  
• "When is having a lot of investors a good idea?" There is an answer to this Quora question given by our co-founder Nakul Garg, in which he identifies six benefits.
  
  
• After raising a record $80m in 2022 through equity crowdfunding, U.S. modular home builder BOXABL has set its sights on raising an amazing $1bn to build the world's largest and most technologically advanced factory for turning out production line housing. #Modularhomes can be built with factory precision, with no working hours lost to bad weather, and assembled by a less-skilled workforce than traditional tradespeople. Are they a solution to the #housingcrisis?
  
  
• Sifted recently took a look at 10 funding options available to startups, including VC funding, equity crowdfunding, grants and loans. It was written by their freelance lifestyle writer and editorial assistant Sadia Nowshin.

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