Jan 30

SOCIAL MEDIA ISN'T ENOUGH TO BUILD A CROWD

By Nathan Rose, Assemble Advisory

Do You Have Options? Or Are You Desperate?

The companies with equity crowdfunding aspirations can be split into two groups.

First, there are the ones who could be funded in any number of ways, but choose equity crowdfunding after carefully weighing up the pros and cons. They can expect to have good success – they have built their company to the point where the investment case is compelling, and they know how to surround themselves with good advice.

Second, there are the ones who have tried to get funding from other sources – banks, VCs, government grants… but everyone has turned them down. They hear about crowdfunding, and hope that the power of the internet will finally deliver them the money they have been praying for.

If your situation sounds more like the second group, then I have some bad news. Crowdfunding probably isn’t going to work either.

And it's for exactly the same reason you were turned away by everyone else.

That reason is: you haven’t built a crowd.

If you had gone out and built a crowd – a community of interested customers, partners and others who love what you’re doing – then you probably could have been funded from some of those that had earlier said “no” to you. Or you would simply have so many customers that you wouldn’t need to raise external funding at all.

The Trouble With Social Media

To suggest you can crowdfund with social media alone is analogous to the miracle weight-loss promise – the exercise machine which will see you trim down without breaking a sweat, or the diet pill which will shed the kilos while you continue to eat sugary, fatty foods.

Social media has a similarly seductive promise. That you can build a community without needing to leave your office or co-working space. Put up a few facebook updates, send out a few tweets, create an email sequence. Then watch the money roll in.

As anyone who has tried this course of action will tell you, it’s not that easy.

Put yourself in the shoes of your would-be investors. Would you invest money in a business you had never heard of, just because they popped up, unannounced, in your Twitter, Facebook or LinkedIn feed? Of course not.

Think about who you are talking to, and what you are asking for.

You are talking to people who don't know you. And you are asking for money. Do you know who else does this? People on the street begging for spare change. Sure, they get a few coins thrown into their cup, but they get it out of pity. If you’re seriously contemplating equity crowdfunding, your sights should be set a little higher than that.

Don’t get me wrong – social media is great for communicating with your existing crowd, but there are limits to what it can accomplish when it comes to using it to attract a new crowd.

Shitty Click Throughs, Peak Attention

Taylor Pearson called it The Law of Shitty Click Throughs. Venkatash Rao called it Peak Attention. Whatever you call it, it points to the declining effectiveness of marketing channels as they become more and more crowded.

Television advertising was extremely effective in the early days. Moving pictures demonstrating a product to millions of consumers right in their living room was revolutionary. The ones who mastered television advertising made a fortune, but over time our favourite programs filled up with ads, and they became more annoying than novel.

More recently, Google ads were effective, but then everyone else discovered them and they got expensive, and people installed Ad-Blocker. Facebook began as a way to share pictures with our friends. But as they have got deeper and deeper into their monetisation phase, they’ve become more and more intrusive with their advertising too.

It leads to results like this from my own Twitter account:

By several measures, this tweet does everything right. I created a long-form piece of content, which would be genuinely useful to anyone who read it. It’s got plenty of good hashtags, a short URL (which doesn’t take up too many of the critical 140 characters), accompanied by a bright, bold image. I sent the tweet at a time of day where all of Europe and North America were awake and able to read it.

But out of over 2,500 people who could have read the tweet, just ONE of them did what I wanted them to do and clicked on the link.

As any digital marketer would be quick to point out, the news is even worse than it looks. Clicks don’t put food on the table. Not everyone who clicks on the link will read the article all the way to the end. Only a small percentage will subscribe to the email list (a 5% signup-to-visitor ratio is considered excellent). And an even smaller percentage will end up buying anything.

Why Is This A Problem?

Social media is hard to keep up with. It is difficult enough to learn how to do something, but it’s beyond frustrating when, after spending all that time and energy learning, what you learned stops working altogether.

Imagine being a mechanic who had to deal with cars which were fundamentally redesigned every 24 months. Or being a builder who finds that timber doesn’t hold up a load like it used to. Or a hairdresser who discovers scissors don’t cut hair anymore, no matter how much they are sharpened.

Yet this is the challenge digital marketers are faced with. They must constantly be looking for new tools, as they are constantly finding the old tools are no longer work like they used to.

I’m not saying it’s impossible to master social media – I’m saying it’s damn hard. And it's getting harder every day. When it comes to social media, you can never find a consistent strategy which you can learn and keep doing ad-infinitum.

What To Do Instead?

Throughout the history of marketing and investing, there is one thing which consistently keeps working. Can you guess what it is?

Real, meaningful relationships.

Amid all the noise, with everyone broadcasting to them from every direction, people crave real interaction. You know – the old-fashioned kind, where you talk with another human being. Preferably in-person.

Real, meaningful relationships are at the heart of crowdfunding. It’s very easy to forget as we look at our analytic dashboards that every person on your email list, every click to your website, every person who buys a product from you, is a real human being.

It may sound obvious, but people need to trust you before they’ll invest in you. So instead of social media (which is, by nature, extremely superficial), I suggest you do something else - invite conversations.

These conversations will take time and effort. You will probably need to get on the phone a whole bunch. You’ll probably need to go and meet people. In short, you’ll probably need to do all the things that you had hoped the internet would have excused you from doing.

”That would take forever!”, I hear you cry. But if you could just tweet your way to crowdfunding success, everyone would be doing it. Sometimes, you’ve got to do things that don’t scale.

You also have to build something useful that people actually want. Tim Ferriss, Michael Lewis, and Seth Godin have such massive followings because what they make is actually good. None of them write shitty books and then rely on social media to get people to buy them. People read their stuff, and look forward eagerly to their next books, because what they write is top-notch.

A 9-Step Guide To Crowd Building

If you want to crowdfund, you need to build your community along with your company. Here is a simple blueprint that will get you 90% of the way there.

  1. Find people who might have an interest in what you are offering
  2. Give value
  3. Give value
  4. Give value (seriously)
  5. Ask them what they want
  6. Build it for them
  7. Ask them how it could be better
  8. Listen to them, and go improve it
  9. Repeat steps 1 - 8 (a lot)

Equity crowdfunding is an exercise in community building, not broadcasting. Once you have that community, a fairly basic outreach strategy can turn the community you have built into funds for your business. But social media by itself isn’t enough – you’ve got to build those real, meaningful relationships if you want people to trust you.


Get the very best insights from successful crowdfunders from around the world. My book "Equity Crowdfunding" is out now on Amazon.


Need results fast? You can work with me one-on-one. Whatever stage you are at - investigating crowdfunding as an option, forming your strategy, or even if your campaign is already live, there's a package to suit you and supercharge your results.

About the Author

Nathan Rose is the founder of Assemble Advisory, a consultancy for equity crowdfunding. We help busy company founders get their information memorandums and financial models in order, and provide advice on structuring a successful equity crowdfunding campaign.