Now, more than ever, he says, we need an innovation eco-system that is constantly running experiments to keep pace with our ever-changing world, but the traditional funding system has been reluctant to invest in totally new ideas that have no guarantee of success. Like elusive angel investors, crowdfunding provides “risk-tolerant capital” to these projects that would otherwise never get off the ground.
Dawkins argues that crowdfunding is essentially an outreach activity that offers entrepreneurs a completely new way to connect directly to a pool of engaged investors. “The people who succeed understand that the platform is a tool that they’re using to raise money – not the source of money, and they have to use those tools and go out there and sell their project, pitch themselves and build a community,” he says. “Your story is only as useful as your ability to pair it with the right audience.”
On target
When DC Power Co launched its equity crowdfunding campaign in February 2018, chairman Nic Frances Gilley had a specific market in mind: the two million Australian households with rooftop solar panels that were being underserved by the current energy model that caters for the eight million that don’t.
Gilley and his co-founders set out to disrupt the current energy retail model, creating a much-needed alternative that better serves solar users and, crucially, reduces their bills.
For a small monthly fee, DC Power Co offers consumers wholesale pricing when they buy or sell energy, as well as system and performance updates, assistance with maintenance, and benchmarking. Importantly, the business is owned by its customers through the equity crowd-sourced funding campaign. “It allows us to be in the same space as them,” he says. “When I’m considering the needs of my business, I’m also considering the needs of my consumers.”
Part of the growing movement of smaller, community-based start-ups tackling real world problems for local communities, DC Power Co raised $2.2 million from 12,500 investors in its first round of funding. “That was our seed capital to get the company going,” says Gilley.
It was considerably less than the campaign’s $5 million target, he concedes, but “it was successful in the sense that we built an extraordinary base of people, 10,000 of them who have solar, who have put money on the line to say we will help you build this business.”
Crowdfunding allowed DC Power Co to create a community of highly engaged investors committed to participating in the company’s growth. “It’s not about the money, it’s that each customer has a stake,” says Gilley.
Tips to entrepreneurs planning a crowdfunding campaign:
- Do plenty of research, attend workshops and seminars, and talk to other entrepreneurs to increase your expertise. Allow at least six months to plan and execute your campaign.
- Identify your target market and focus your crowdfunding pitch on that audience. Be intentional, says Dawkins. “Not everyone cares equally about everything.”
- Stay true to your original vision. “Don’t let thoughts of money get in the way of what you’re trying to do, and that is promote what you’ve developed,” says Stu Anderson.
