GoHenry raised nearly £4m in a record-breaking crowdfunding campaign, but how did they do it?
But last month GoHenry’s crowdfunding campaign exploded. What was intended to be a £2m raise soared to nearly £4m on Crowdcube as people frantically poured money into the business which over 170,000 families use to manage their kid’s pocket money.
After 45 days Crowdcube was forced to put the brakes on Zivoder’s campaign as GoHenry had reached the EU’s legal limit on how much you’re allowed to raise through equity crowdfunding, a cool £3.99m.
But how did Zivoder do it?
Indeed, as he admitted to The Memo, GoHenry spent nothing on PR, marketing or any kind of big campaign. “We didn’t have the time or money to be honest,” he said.
Instead Zivoder says there are five things that made GoHenry’s campaign so outrageously successful:
The most important, Zivoder says, is making sure that you’re doing crowdfunding for the right reasons.
“Why do you want to raise funds, and why from the crowd? It’s not a decision you should take lightly, because it’s not easy, you will be consumed for three months.”
Indeed GoHenry’s actual campaign was supposed to run for a month, but ended up being extended to 45 days, then there were weeks of preparation beforehand (see No.5) as well as a huge amount of admin afterwards.
“There are many ways to raise funds, so why the crowd? If you have an answer to this question that is good for you, then go ahead.”
There are different ways you can run a crowdfunding campaign itself.
The ‘traditional’ method is to open on day 1 with £0 raised and start promoting your campaign on and offline in the hopes that it will gain traction and you’ll reach your target.
But, as we saw in the case of coffee group Pact which earlier this year had to pull the plug on its crowdfunding campaign, starting with £0 raised and a daunting £1m target is a huge mental barrier for early investors.
Instead Zivoder had a different strategy with GoHenry.
Step one, get existing investors to commit to the crowdfunding campaign.
Zivoder went to the angel investors who had already funded the business and asked them to invest in the campaign.
“We told them it’s important you commit as early as possible, it’s so important because for the next stages you’ve got to convince people that you have traction.”
“Look at Pact, one of the reasons they flopped was because the big VCs [venture capital funds] didn’t follow-on, and that sends the wrong signal to the crowd.”
On day 1 GoHenry launched with £1.2m already pledged from existing investors.
Step two, get your existing users involved.
“When we polled our existing customers 80% said they’d be willing to invest in the business, and that was before we told them how much we were raising or what we were planning to do.”
So GoHenry had a 48 hour exclusive window when only their existing users could invest, and 1,200 jumped at the opportunity.
“We had a huge success with those two rounds, so much so that when we opened the public campaign on Monday we were basically already funded, we had £2.1m.”
Step three, open your campaign to the public and cross your fingers
Simply put, don’t count on crowdfunding.
“If you put all your eggs in the crowdfunding basket it’s very risky,” says Zivoder.
“Because until you open that door you don’t know whether there will be a crowd outside who are keen to invest.”
That’s the gamble for many entrepreneurs and businesses considering crowdfunding, they’re obviously excited and passionate about their business, but will anyone else be?
“So you should have [crowdfunding] as an element of the toolkit, but it cannot be the only thing.”
How much money can you raise through crowdfunding? £10,000 or £100,000?
Zivoder says the amount is obviously unique for every business, but it’s important that any crowdfunding target is reachable for a very good reason.
“You need to set the target of the campaign at a level that you are 75% sure you will reach, because if you don’t reach it by even £1 you will be left with nothing, and then you’re in trouble.”
Indeed the rules of most crowdfunding platforms like Crowdcube state that if you don’t reach your target then all the money committed is returned to investors.
But if you reach your goal early, then you can continue to ‘overfund’ and keep raising money from the crowd.
“We set the target of £2m both from a business point of view because we needed that much, but also because it was a figure where we knew we could open the crowdfund with at least 30% already committed, and we actually ended up launching with much more than that.”
Zivoder spoke to a dozen entrepreneurs and businesspeople who had previously crowdfunded or considered crowdfunding, the top advice from everyone he spoke to?
That starts with the actual details of the campaign, having all the necessary documents ready and a well-produced video with good music, and thinking of every question that might be asked by prospective investors during the campaign.
“Before we opened the campaign I had 35 pages of questions and answers prepared. That helped us massively because when someone asked a question we could come back straight away,” says Zivoder.
GoHenry set itself a deadline of answering any question posed on Crowdcube during the campaign within 6 hours, regardless of the time of day.
“If you don’t reply quickly, then the person will come back and ask why you haven’t replied, or another person will come in the middle and ask another question, so managing that dynamic is important.”
“You have to be ready and fast.”
Do all these things and you’ll have the best chance of running a successful campaign.
But, as Zivoder says, when it comes to crowdfunding, there are no guarantees.