Your business is strong. Your fanbase is loyal — and growing. It could be time to seek external funding to expand, and equity crowdfunding looks like a viable option. But how do you maximise that potential?
West Australian gin distillery Old Young’s may have the answers, having just closed a $2.7 million funding round on Birchal. The Swan Valley business hit its target in less than 24 hours. Its equity crowdfunding round became the largest in WA to date, and the largest alcohol raise in Australian history.
Speaking with SmartCompany Plus, founder James Young spoke about his experiences leading Old Young’s to crowdfunding success. Here are a few tips your business could consider before seeking fresh funding.
Focus on your ‘Day ones’
Build your storytelling
Teamwork makes the dream work
Bonus: A little luck can help
Behind every successful equity crowdfunding raise is a network of highly engaged fans and consumers.
Learning how to effectively reach those who have backed your business from its earliest days can reap significant rewards.
If you’re seeking investment from hundreds of people through online platforms, you should ensure your enthusiasm resonates with those already supportive of your brand.
Put simply, be certain your business already has a genuine track record of customer trust, respect, and loyalty, before asking them to hand over their hard-earned cash.
Be honest with yourself: using equity crowdfunding to significantly scale up your business is likely to fail if your ‘Day ones’ don’t believe in you.
Old Young’s equity crowdfunding round succeeded, in part, because the brand effectively mobilised investors who knew of the company well before it garnered headlines and international accolades.
“It’s really cool being able to tap into the people who’ve seen what you’ve done over a period of time,” Young said.
“And I think that’s one of the reasons we’ve done well in this.”
“It’s a huge amount of support from people who know and love us” he continued.
“It’s been amazingly gratifying and amazing to see that support from people have been following since day one, and walked in the door and seen me behind the counter from day one.”
Equity crowdfunding also requires a separate skillset to traditional investment pathways.
“It’s different to walking into a room full of high net worth [investors] and saying ‘Hey, this is what we’re doing, this is how we do it,’” Young said of Old Young’s successful round.
Even if you naturally exude passion, traditional pitching often involves reaching people “who are pretty cold usually to what your business has done,” he continued.
“They might have read a deck, but they haven’t seen the passion and energy and innovation and all the things you’ve done for six years.
“You’ve got to put all of that in a 20 minute presentation, and that’s hard.”
Where old-school investors may only care about the hardcore business fundamentals, storytelling is a powerful tool in equity crowdfunding. Make sure you have a good one.
Young admits as much himself. In a pre-investment video, Young said his former life as an advertising professional encouraged him to champion the ‘Old Young’s’ way of doing things, elements of which have trickled into a public manifesto.
“The storytelling aspect of what we do became really key to what we do,” he said.
It may be uncomfortable territory for some business owners, but the Old Young’s raise is proof of how powerful it can be to weave potential investors into your own business story.
Source: Supplied
Sometimes that story can borrow from others, too.
Old Young’s is one of many independent gin distilleries to rise to prominence in the past two decades, with Victoria’s Four Pillars arguably the most well-known of the bunch.
Young had no qualms with likening his brand to one that, on paper, is a fierce competitor in the craft spirits market.
“We took a strong deliberate choice to push the fact we’re a proud West Australian brand. It’s a savvy move… It’s like, ‘I want to get involved in the WA version of Four Pillars’ if you like,” he said of the equity crowdfunding campaign.
Threading local pride into your story can help, too. “That does give you that platform to do well nationally, if you’ve got a strong platform in your own state,” he said.
For all the success Old Young’s has earned with its products, it would not be accurate to say its equity crowdfunding campaign was produced entirely in-house.
Increasingly, medium-sized firms are turning to external experts and consultants on how to maximise the returns of their equity crowdfunding campaigns.
Old Young’s is one of them, having recruited a small but highly capable team to build awareness of its equity crowdfunding activities.
First there were PR experts DL Comms, which helped to bring the distiller’s story to media organisations (including this one).
Then there was Hypnosis Creative, the agency which produced Old Young’s social media assets, initial pitch video, and offer deck.
Subsequently, digital advertising experts Glide Agency helped put those campaign materials in front of potential investors through social media, reportedly garnering 3200 expressions of interest through its online strategy.
Looking at the results, it is easy to see the benefits of those combined efforts.
However, your business should also recognise the significant cost of securing all of that talent.
Should your equity crowdfunding raise not meet its targets, you could be left with an unfulfilled financial goal, and outstanding financial commitments to communications experts.
Consider what your enterprise stands to gain from a dream team of communications and social media experts, but maintain some realism about the potential costs to your business, too.
Old Young’s capitalised on an engaged audience of long-time supporters. It built a compelling story. And it secured the talent to share its raise with the nation.
Yet it would be remiss not to mention the fact Old Young’s also secured Craft Producer of the Year at the international Icons of Gin awards, and became the second Australian distiller after Four Pillars to win Brand Innovator of the Year.
Those accolades came in February, as Old Young’s was gearing up to open its equity crowdfunding round.
“It had an enormous effect,” Young said.
“That second wave that just gives people real confidence that they’re investing in something good… [it] nailed it on.”
Your business should not rely on awards to boost your profile. Even so, Old Young’s story shows that luck, as much as planning and hard work, can contribute to your equity crowdfunding plans.
Senior Business Journalist
Focused on the small business sector, David’s work covers the political, regulatory, and economic issues facing Australian entrepreneurs. Prior to joining SmartCompany, he was a reporter for Business Insider Australia. You can follow him on LinkedIn.
