Your crowdfunding campaign was a success, and you can finally get your startup off the ground. Now what do you do?
Whether your business was backed by equity crowdfunders or potential customers on a site like Kickstarter, you owe it to your investors to keep them in the loop about your company as it grows. After all, a business that says "good riddance" to the people who got it where it is now likely won't get very far.
While the Securities and Exchange Commission (SEC) does require annual financial reports from an equity crowdfunded business, maintaining real, genuine relationships with your backers goes beyond showing them the numbers.
"A key success factor for crowdfunded companies is the recognition of and delivery to the needs of its investors, who want to be connected to the company and feel like they are part of the entrepreneurial team bringing a new business to life," said Ron Miller, CEO of small business accelerator StartEngine. "It is important to build and keep strong relations with investors to engage them as brand ambassadors to promote the company."
Rowan Gormley, CEO of customer-funded winery NakedWines.com, noted that strong investor relationships can also be a company's saving grace during a crisis, especially when your business is backed by customers. [Crowdfunding Challenges Most Startups Don't Expect]
"When you have a great relationship with the [backers], they support you when things go wrong," Gormley told Business News Daily.
If you want to create and maintain good relationships with your crowdfunding investors long after your campaign ends, here are a few best practices to keep in mind.
Communicate consistently. If your only post-campaign contact with your investors is an annual financial report, they'll likely feel disconnected from your business. Judd Hollas, CEO of equity crowdfunding platform EquityNet, advised consistent communication (at least once per quarter) to keep backers informed about how your company is doing.
"Updating and engaging your investors will help to extract more value from their experience and mentoring," Hollas said. "Most importantly for a young business, [it will] engender better investor confidence and familiarity with the business, which can lead to additional investments and mentoring support by investors."
Take advantage of social media. Most modern companies know that social media is now a necessary tool for success. If you're able to establish strong relationships with your backers by communicating and engaging with them via social media, they in turn can become brand advocates for your company.
"As conventional media including print, broadcast and even Internet banner advertising becomes less effective, social media will become the most powerful means by which millennials gather information and form beliefs about products and brands," Miller said. "The ability of a crowdfunded company to engage the social media networks of its investors gives a crowdfunded company a clear, competitive advantage in marketing and brand awareness."
Be honest and upfront. Honesty is always the best policy, and this is especially true of crowdfunded businesses. Making promises you can't keep is bad enough when you're dealing with a couple of investors, but letting down hundreds of backers who put their faith and their money behind you can ruin your company. Sometimes your business doesn't always take the path you planned, and it's not always your fault, but in either case, don't try to cover it up.
"Customers only fund projects that they believe in, and that deliver what they say," Gormley said. "If you try to pull the wool over people's eyes, you lose their trust and then you lose their business."
Originally published on Business News Daily.