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Social media a crucial factor in crowdfunding success

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Social media and the right team seem to be crucial factors in achieving the goal for a crowdfunding campaign, according to a new research report by FundedByMe.

FundedByMe is one of the only full-service crowdfunding platforms offering capital through equity, debt and reward based crowdfunding and has funded some 500 companies from 25 countries. The report analyses such factors as usage of various social media, the background of a company’s team or documents uploaded.

One of the main conclusions is that placing a link to their Facebook or LinkedIn on a company’s pitch page on a crowdfunding platform increases the probability of success more than 30 per cent (31.37 per cent for Facebook and 32.58 per cent for LinkedIn). Furthermore 10 likes on the company profile of any of those social media portals adds additional 6 per cent for the success (6 per cent on LinkedIn and 5.6 per cent on Facebook).

Another important factor is the types of documents delivered to the crowd. Reliable market statistics can help by 27 per cent and an upright financial forecast by even 37.3 per cent.

Lastly entrepreneurs pay attention to the background of team. If a member has a background in management and/or consulting this helps company by 26 per cent. Relevant business education can have an influence on a company’s success by 25 per cent. Surprisingly, possessing a master’s degree or previous entrepreneurial experience is not regarded by investors as something relevant.

“That doesn’t mean that fulfilling only one of the conditions will automatically bring you the relevant amount of money. We analysed a dependent variable binary and checked either successful or unsuccessful outcome. Successful outcome was defined as reaching 80 per cent of the initial funding goal,” say Alina Lundqvist and Michal Gromek from FundedByMe, the authors of the report.

The report was based on the analysis of all equity crowdfunding campaigns from the Nordics, run on the FundedByMe platform since 2012. FundedByMe has 83 per cent of market shares in equity in Nordics. The CAGR in equity crowdfunding at FundedByMe was 449 per cent.

“The average amount raised per campaign is EUR122,706. The average investment amounts EUR5,935. Statistically there are 46 investors in a campaign,”  explain Alina Lundqvist and Michal Gromek.

The European equity crowdfunding market size (excluding UK) was worth EUR82.56 million in 2014. The CAGR for the industry between 2012 and 2014 was 116 per cent.

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