When it comes to Crowdfunding, is being realistic a crime?
We recently received an offer to have our crowdfunding campaign reviewed by CrowdRating. It was an interesting experience and I have to say I was really impressed with their professionalism. It doesn't hurt that the review was largely positive too!
One thing that came back from the review was that our growth projections were quite modest and that would naturally affect an investor's potential returns. As you would expect, we did our homework when we were preparing our campaign and one thing I'd spotted was that most financial projections were incredibly optimistic. Optimistic and in some cases verging on ridiculous.
For example, one campaign we looked at went from virtually a standing start to a value of £78 million in around three years. They were successful in raising funding. I'm not sure how they doing now but I'd be incredibly surprised if there were on track for that level of growth. They probably would be too.
When we put together our figures, we resisted the temptation to do the same and inflate them. We decided that it was better to present more realistic and perhaps even conservative figures. That way we could demonstrate that with even modest sales growth we still have a viable and profitable business. And if we're fortunate enough for the business to fly higher then we can be ready for that too.
If all you've got to base your investment decision on are figures showing you the absolute best case scenario, how do you know if the business could potentially weather a less optimistic (but probably more realistic) outcome? Yet despite this I can't help but feel we're being penalised or simply overlooked for our realism.
I'd be interested to know how many seeded businesses meet their projections, particularly the more 'enthusiastic' ones.
You can view the report via the CrowdRating website when it's released in a few days.
April 28, 2016
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