Capital financing thru crowdfunding can only be marginally successful via the systemic application of crowdfunding marketing and advertising to support the subscription sales process; hard stop, period the end.
Probability of Success?
The probability of success for crowdfunding capital financing is controlled by YOU and YOU, alone. Why is that? The probability of success in any endeavor increases with the frequency in which the endeavor is executed. This is the impact of Large Number Theory on everything in business.
If you are seeking capital financing, odds are you are not going to obtain all the capital you require (on terms you will find acceptable) with your first pitch presentation. You have to do it over and over. Why? Because the more times you make contacts and communicate your message, the more likely you are to beat the odds. So, what are the odds?
Historically, your probability of success odds were 1 in 5.55 – not exactly attractive. In fact, a legitimate argument could be made that you would have better luck funding your project playing $5 scratch-off lottery tickets as they have a probability of 1 in 3.78 of a successful outcome, yet our entire economy has been propelled to being the greatest on the planet in spite of those 1 in 5.55 odds. As is the case with the lottery, there will always be winners, but 82% will be losers. Crowdfunding gives you the opportunity to change the probability of success from 1 in 5.55 to as low as 1 in 1.47 – almost as good as the 1 in 1.34 odds of the traditional IPO.
We created two different models for the purposes of generating this presentation. The first model utilized a series of Monte Carlo simulations as is commonly used in the financial markets for the purposes of determining which securities an investment fund may buy or sell. The second model was based upon advertising industry metrics and empirical assumptions that are commonly used by the industry to build advertising campaigns for businesses seeking to sell products or services.
In both cases, the underlying assumption was the average (or expected) campaign length of approximately 15 to 17 weeks being the result that would be likely to sell-out a crowdfunding offering, with 11 weeks being the minimum expectation and 22 weeks being the maximum expectation. This isn’t a guarantee of success – the analysis tells you what the probable outcome will be, all other things being equal, time in and time out. There will always be outliers and there will always be ones that sell-out quicker and ones that do not sell at all. For more information on this topic and how you can create a crowdfunding raise of up to $75 million for your project or business, please contact our offices.