SVP Digital Strategy, Digital Niche Agency (DNA), testing, optimizing, and scaling data-driven campaigns for growth-oriented companies.
If you’re looking to raise capital, you should be exploring equity crowdfunding strategies and ambassadorship from your existing user base.
In our experience with clients, we see a stronger return on advertising spend and lifetime value (LTV) from investors who convert from the offering page. Brands are seeing more value from an equity crowdfunding marketing funnel than a traditional landing page route toward an e-commerce initiative.
What is equity crowdfunding?
Equity crowdfunding is raising capital from high volumes of everyday or nonaccredited investors. This became available with Regulation A+ raises in 2015 and even more with Regulation CF raises in 2016.
Reg A+ allows stock issuers to raise up to $50 million in shares for each 12-month filing but requires extensive resources for financial and legal requirements. During a Reg CF, startups can raise up to $1.07 million through a streamlined process to set up fixed terms for all investors around the valuation. As of March 2021, Reg A+ caps will increase to $75 million, and Reg CF will allow for $5 million in capital, which will lead to larger organizations and investor pools. This long-awaited update is set to transform the landscape for founders, industry professionals and investors.
Equity crowdfunding is becoming more commonplace.
I’ve watched experts talk about the future of equity crowdfunding for years, and I’ve run live equity crowdfunding campaigns since their inception. At the same time, I’ve witnessed adoption rates ramp up over the past 18 months for various reasons, including Covid-19. The volume of retail or “Robinhood” investors that have entered the marketplace, as seen with recent events in the public markets (such as WallStreetBets’ community promotion of GameStop), is unlike anything we’ve ever seen. Some would point to casinos being closed, others would say it occurred because of office closures or just more time to focus on financial vehicles, but the investor audience has grown, and they are now interested in early stage opportunities for potentially high returns.
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The industry has seen month-over-month growth in total raise amounts since the shutdowns in March. Over 400 brands collectively raise over $20 million per month on some of the top FINRA-regulated portals.
Analysts point to contrasts between the 2008 recession and emergence of reward-based crowdfunding sites, like Kickstarter and Indiegogo, and the 2020 rise of equity crowdfunding in their utility by entrepreneurs and innovative marketers alike.
Use equity crowdfunding to drive new investors and users.
Firsthand, I’m seeing brands launch capital raises as a marketing function to grow their customer base while raising capital and hitting success rates like never before. Simultaneous with other industry experts performing legal and financial audits and setting up an offering page on one of the portals, my team works on a marketing strategy similar to a brand launch plan.
This consists of fundamental digital marketing practices based on a content marketing funnel (because conversions still require seven or more touch points) and scalable traffic sources, such as ads and direct outreach. Some of the top campaigns create social proof from prospective investors by leveraging influencers, publishers and various types of strategic partnerships in their promotions and overall offering page.
In many cases, we see the top-performing audiences from the same target as a brand’s user or client acquisition campaigns, but with household income, net worth or investor behavior data filters.
Since 2015, I’ve only discussed investor marketing with brands that are en route to launching a campaign on a Reg CF portal. Out of commitment to maximizing marketing returns, I now find my team recommending these mechanisms to all brands because of the consistent marketing value available compared to other routes.
Beyond the first investment conversion, we’re seeing massive LTV from the Reg CF backers. Investments followed by other transactions from people with the same last name or town within the following days are common during these raises. We watch investors become active customers, often beginning with the utilization of Reg CF product perks, and continuing at a higher frequency than B2C or B2B consumers from other channels.
Ambassadors develop on social channels, where it’s important to monitor announcements being shared across posts from this cohort. Production groups, funds, accelerators and various organizations launch campaigns for lists of companies in their community and drive participation from past investors upon the initial announcement of the round. The LTV of this audience is a dream because it typically encompasses peer-to-peer recommendations, monthly active product usage, social sharing and repeat conversions at outstanding rates.
Multiple raises are valuable because issuers can reinitiate the investor pool on each future round and ultimately extend the LTV.
Consider equity crowdfunding.
Whether you’re a prelaunch startup or later-stage corporation seeking new audiences, whiteboard out ideas of an equity and reflecting marketing strategy that could make sense. As a high-level recommendation, from the outset, keep average performance levels in mind, and project a large audience built from scalable traffic sources that progress into more committed stages before completing their investment. We worked with a B2B marketing group with the idea to build a marketing funnel (email, social media and Zoom webinars) to raise money for their own brand. This drove over 50,000 visitors to their page and saw over 1,000 investors participate in the offering within two months. This is the type of mindset you want to approach planning with, along with ideas on how to pivot the campaign to success. Furthermore, my entire philosophy toward investor acquisition marketing can be summarized in three words: Test. Optimize. Scale.
Speak with some of the portals to understand the process to go live. Leverage lead investors and influencers in the early days of your campaign to anchor the round and validate the deal. Then, activate traffic sources to your content marketing funnel to prospects and retarget target audiences to partners. Scale well-performing channels.
From there, your brand has a much deeper connection with that premium audience than virtually any other marketing activation that is widely offered, and the funds raised are added value.
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Author: Jason Fishman, Forbes Councils Member