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Using Social Proof to Raise Capital

At last I’ve found a positive video that witnesses the powerful principle “Social Proof” in action.

We use Social Proof extensively in the operation of the ASSOB Capital Raising Platform.

Watch this video and think about capital raising as you are watching it.

Picture the entrepreneur out there first, eager to get others on board. Note when the first investor arrives and how “Social Proof” is built until it is an avalanche that can hardly be stopped. A good capital raising needs large doses of Social Proof.

The Principle of Social Proof is one of the principles written by Robert B. Cialdini in his Harvard Business Review Article “Harnessing the Science of Persuasion”.

Some examples of Social Proof are:

  • A half full tips jar when you pay the restaurant bill
  • A full car park outside a restaurant you are seeking
  • “The majority of guests you stay in our hotel re-use their towels”
  • “Comment” counts on blog postings
  • “8 out of 10 owners said their cats preferred Whiskas”
  • “Only 567 copies left…hurry book your copy now!”
  • “This is what everyone is renting here in Los Angeles.”
  • The Red Squares for investment to date on ASSOB listings
  • Download counts
  • Movie Box Office takings
  • A guy who is with a celebrity will appear more desirable to both guys and women.

As social beings, human rely heavily on the people around them for getting cues on how to think, feel and act. We have a subconscious urge to belong, to follow the crowd and to do what others are doing; be it buying a product or choosing a restaurant to dine out.

If we had to analyse and process things like which queue to stand in, what restaurant was most popular or which ferry is leaving next … we would never make it. We are continually looking for cue’s to guide our actions. This is the short cut we take when it comes to making decisions were the scenario is confusing or new. The phenomenon is called Social Proof. Social Proof is a powerful psychological mechanism by which we look outside of ourselves to guide our own actions.

If you are seeking to invest in a company currently raising capital one of the best indicators of progress is capital raised to date. This excerpt from the ASSOB Capital Raising Platform shows that the 20 filled in red squares represent 20 investments to date. As can be seen in the third bar below, investors are already active in Round Three.

Other good indicators of Social Proof are:

  • A good “Board of Directors” with members that have good reputations and social standing
  • Sales contracts with major, recognised organisations
  • News articles in the media
  • Limited shares left for purchase
  • Full, vibrant investor meetings
  • Recommendations from highly respected individuals
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