The client, or potential client, as a crowdfunding investor

The hottest topic for entrepreneurs entering online capital raising is the crowdfunding investor sketch. The most pressing question is "where do I find investors for my startup or project?" The ill-concealed doubt, often, is "but why would a stranger invest online in my company?".

Here's the problem: Entrepreneurs approaching crowdfunding often approach the issue of finding investors from the wrong points of view. Both the bold one who thinks the web is just waiting for his or her crowdfunding campaign to invest money and the skeptical one who considers it impossible for a company without a reputation to attract online investors are mistaken. Especially when it comes to equity crowdfunding, because the latter does not possess the attractiveness of the higher or lower interest rate that in lending crowdfunding can serve as leverage towards general investors.

This is shown by the data on equity crowdfunding investments reconfirmed year after year by the report of the Crowdinvesting Observatory of the Politecnico di Milano: crowd investors are not hiding in the anonymous multitude of the web nor in the ranks of institutional finance, yet they exist (there were almost 38,000 last year for equity crowdfunding). They are the customers, or potential customers, of the bidding companies themselves.

There are no serial investors

The first illusion to be abandoned is that of the existence of "serial" investors, that is, lurking on crowdfunding platforms waiting for campaigns to invest in, one after another. This illusion goes hand in hand with the idea of a "circle of investors" organizing en masse to invest in such and such a campaign and then in another, acting as a united and unanimous body: this is called a "club deal" and is a different thing from crowdfunding.

The latest Polytechnic report cited above shows that 28,758 of the nearly 38,000 equity investors surveyed in 2023 invested in one campaign, another 6,530 in two or three campaigns, and only 451 investors participated in ten or more campaigns, with the other few thousand scattered in between.

It is apparent that the vast majority of investors arrive on crowdfunding portals having already clear in mind their goal, which is the campaign in which to invest.

Serial investors are very few, and they alone will not make virtually any crowdfunding campaign successful. Same with institutional investors: they may be good opportunities to significantly plump up the fundraising, but they are not the foundation of it.

Otherwise, we would not be talking about crowdfunding: we have to go in search of a "crowd."

The customer as investor

The entrepreneur who wonders why strangers should decide to invest in his online project is right: there is no sensible reason. But if crowd investors are neither big or serial investors nor strangers, where should one go to get them?

Closer than you might think: among the company's customers and those who are on target to be potential customers.

If there is someone who is interested in a company's product/service and in its continued existence and prosperity, it is its customer. Someone who has a need that that product or service meets or could meet. 

Targeting the best crowd investors in customers or potential customers brings a number of benefits, as well as being instrumental to the success of the campaign:

• you already have a database of contacts or the tools to create it through targeting;
• you don't have to start from scratch with communication, because you're talking to someone who either already knows you or may have an idea of what you're about; 
• you kill two birds with one stone, because you find investors and new (or more loyal) customers together, saving time and optimizing marketing and sales spend;
• you build a hard core of supporters who will spread the word.

It would be too optimistic, however, to think that a company's customers and potential such will invest in it just to make sure it continues to produce what they need or for sentimental value.

But then how to convince customers or potential such to become crowd investors? With rewards!

Rewards for turning customers into investors

We devoted an ad hoc article to rewards and their use, but let's pick up the basics here.

A reward is, literally, a "prize," a reward given in return for investing in the crowdfunding campaign, which serves to provide a concrete, immediate and exclusive return to an action that would otherwise see its results after a long time. What's more, a crowdfunding investment-as and more than any investment-has a significant component of risk and uncertainty, so the investor is faced with the possibility of losing his or her capital and receiving nothing in return: the safe and immediate reward serves to mitigate this risk.

The characteristics that the reward must have in order to be sufficiently attractive to potential investors are as follows:

• connection to the company's product/service (so as to interest customers and potential customers)
• exclusivity (it must be something that cannot be obtained in any other way than through crowd investment)
• time deadline (the reward must be valid only if the investment is made within a certain period of time, to create urgency).

This last point needs to be replicated several times, in what can be called the "reward matrix": a first, more valuable, tier of rewards needs to be set up for those who show interest already during the manifesta interesse già durante la fase di precrowd phase (and then, of course, invest), a second, less rich, tier for those who invest at the beginning of the campaign, and finally a third, more modest tier to stimulate latecomers, while maintaining the feeling of exclusivity for all those who have invested before.

Although we have said that for lending crowdfunding all the reasoning done so far is less relevant, there is still a great advantage to using rewards: it is a marketing strategy to engage not general investors, but people who are commercially and professionally interesting to the company.

Rewards can be of three types, which can be combined within the same campaign:

• product/service
• experiential
• economic.

A textbook example of the application of this winning equity crowdfunding strategy is the case of BrewDog, a Scottish craft brewery that has come to be worth several billion thanks to the Equity for Punks campaigns and the whole narrative and reward complex that the two founders have been able to build around it: we analyzed their successful case in a dedicated article.