Raising Investment from Both the Emotional and Rational Investor
By Paul Niederer, CEO of the equity crowdfunding
platform Australian
Small Scale Offerings Board (ASSOB)
A Crowdfunding article mentioning Kevin Berg Kartaszewicz-Grell from
Crowdsourcing.org got me thinking about investors and where they come
from. Is there a material difference between campaigns that
rely on our 24,000
investor base and campaigns that actively and passionately engage
their friends, family, fans and followers.
Looking back through recent raises I found two that
had striking contrasts.
- Did not actively target their own “networks”
- Another that did target their own “networks”
The one that did target their own
networks raised ten times more than the other.
Here are two diagrams. The round one is ours, and the
rectangular one is in the Crowdsourcing.org article.
Both tell the same story. As a raise progresses, the
gathering of participants moves from friends and family to people and groups
the campaign owner has no affiliation with. In other words, no connection. However,
the platform facilitating the funding may have a connection with them as they
may have been involved on a previous raise for another entity. Depending on the
outcome of that experience, they may look at this new opportunity as an
emotional decision, rational decision, or a mixture of both.
Related:
In general, however, the more removed the prospective
investor is from the Campaign owner, the more it needs to “stack up” when the
investment opportunity is looked at objectively.
Now lets look at the stats from the two campaigns I
mentioned above.
Did not actively target
their own “networks”
With this raise 100 people actually reached the
company’s profile page compared to an average of 1988 for the same time period
for a typical ASSOB raise. Of these 100 only 24 were curious enough to download
details, 15 elected to become followers so that they could receive more
information and in the end one follower invested.
Did target their own “networks” (Ten times
more raised)
With this raise, nearly 1200 visited the company’s
profile page which, while still below the ASSOB average of 1988, worked in this
case. Around 10 percent became followers, and 18 invested. The engagement of
people 1, 2 and 3 degrees out from the followers brought in investors from both
the emotional and the rational with virtually all coming from the campaign
owners own network and friends of those in the network.
While there are always other factors involved (like
the quality of the offering, its team, etc.), our experience gained from
hundreds of raises has shown us that unless there is a solid base of “friends
and family” and “friends of friends,” it is virtually impossible to get
investors that have no connection to the owner at the time the campaign starts.
Crowdsourcing.org call this “Third-Level Survivorship”. As seen
in the examples above, momentum at Third-Level Survivorship is only achieved
once there is a vibrant collection of friends, family, fans and followers.
At first published and copyright: crowdsourcing.org, 2013
