How to Pass Due Diligence and Get Listed for Equity Crowdfunding

If your business is in the early or growth stage equity crowdfunding provides an excellent way to bring you to the attention of the investor community and gain the funding you need.

However, there’re important steps to go through to get listed on equity crowdfunding platforms such as Crowdcube and Seedrs.

Investors know that giving their financial backing to any company comes with a risk, but they take comfort in the fact that platforms apply their own due diligence process to every prospective campaign. It’s only after this rigorous vetting that platforms allow a company to pitch an opportunity to investors.

Let me share some tips to help your company get through the vital due diligence stage:

Presenting the team

When investors are deciding whether to back your company, they pay close attention to your team’s credentials. For this reason, team bios are an essential part of any equity crowdfunding pitch.

We’ve found the claims made in team bios often delay the due diligence process. You have to evidence every claim you make – including your team’s career history. If any of the bios cite “two decades in marketing” or “spent 25 years working as an accountant”, expected to be asked for evidence to demonstrate this, including tax returns and payslips.

Ideally, pull out actual examples of companies your team members have worked for or concrete, provable achievements they made during their tenure. You’ll need evidence, and you can’t use LinkedIn or a CV!

For example, a green technology company claiming that someone worked for the Environment Agency may need to show a contract or an email from the employer stating that they worked there, for how long and in which role.  

As the platform will definitely ask you for these references, it’s worth chasing previous employers up before you’ve even submitted your pitch page.

Evidence for every number

It won’t surprise you that investors will want to see some numbers to give them an idea of how your company is performing, a picture of the overall market, and how you can further tap into it.

It might sound impressive that you made 10,000 sales last month, or achieved a 300% sales growth in just one year, but can you demonstrate it? If you’re making claims like this, you’ll have to offer the platform a complete list of your sales and show your working.

As such, it’s important to keep your numbers in order. Even if your company is not yet profitable, you’ll need to prove that there’s interest in your product or service amongst your market. Finding reputable stats which show that X% of consumers complain about a problem you have a solution to can prove very useful.

It’s also worth locating original source industry figures which show how big your market is, including the current and projected future trends. Identifying and naming your competition in any documents you’re presenting to investors, and certainly in any docs you’ll be attaching to your pitch page, is another must.

Claiming that you have a one of a kind product or service when there’s competition out there will suggest that you either haven’t done your research or are trying to pretend that you don’t have any competitors.

Your pitch video will be checked

A key part of any pitch, your pitch video will allow you to communicate the opportunity you’re offering, the character of your brand and the expertise of your team in just a few minutes. Of course, many claims can be made in a short time, and just like any other document you’ll include in your pitch, your video will have to get past due diligence.

Companies that have made their videos in advance of the due diligence process can often fall into trouble. Any claims they can’t prove must be cut, and if they are many, the video will have to be redone, wasting time and money.

Unless you’re confident that you can evidence every claim, then it’s best to hold fire on making a video before you begin due diligence. This way you can write the script, show it to the platform, and ensure that they have no qualms with what you’ll be communicating to investors.

For obvious reasons, you’ll need to highlight any claims that will feature as on-screen graphics in your script when you show it to the platform, too.

So, make sure you treat your script like any other text you’ll be submitting to the platform. Analyse it line by line, have the clear evidence to hand, and you should be able to breeze through due diligence.

Going through this due diligence is tough but it’s worthwhile. Apart from helping you achieve your listing on the platform it makes sure you have all your fact, figures and evidence at your fingertips.  You’ll be more than ready to handle questions from potential investors.

ABOUT THE AUTHOR:

John Auckland is a crowdfunding specialist and founder of TribeFirst, a global equity crowdfunding communications agency that has helped raise in excess of £17m for over 50 companies on major equity crowdfunding platforms, with a greater than 90% success rate. TribeFirst is the world’s first dedicated marketing communications agency to support equity crowdfunding campaigns and the first in the UK to provide PR and Marketing campaigns on a mainly risk/reward basis. 

John is also Virgin StartUp’s crowdfunding trainer and consultant, helping them to run branded workshops, webinars and programmes on crowdfunding. John is passionate about working with start-ups and sees crowdfunding as more than just raising funds; it’s an opportunity to build a loyal tribe of lifelong customers.