Hope is the emotional state which promotes the belief in a positive outcome related to events and circumstances in one\’s life. Wikipedia
When people send in money to a Crowdfunding campaign, be it $80 or $30,000 “hope” is in play
- They hope that the $80 they pay for a watch will result in them receiving a watch
- They hope that the $30,000 they invest in your company will return many fold
The hope for the $80 pledge is the fairly “instant” gratification of receiving a watch.
But what about the investor who obtains equity investment in the company as their reward.
The attractive share or stock certificate is not enough.
The Stock Certificate by itself isnt enough to satisfy the investors “hope”. Once the investors money is invested the custodians of the funds have to get to work and use the funds according to the plans they shared about how they intended to grow the business with this capital injection.
But that takes time.
So in this case the hope is not based on receiving a clearly defined reward that is easily understood by the investor but a the hope that the equity they get for say one dollar a share will be worth many times one dollar further down the track.
In the diagram above it broadly shows that pledge crowdfunding “hope” is expected to be “satisfied” within around 9 months. Once a reward has stretched out to 9 months the pledgers will start getting itchy feet and customer support issues will compound.
Ethan Mollick, a professor of management at University of Pennsylvania, released a study in July, that found that more than 75 percent of entrepreneurs on crowdfunding sites despatch their products later than expected.
But relative to the timescale above we are talking in months not years. With equity or investor crowdfunding it is nearly always years before the promised “reward” has a chance to be delivered. That means that the “hope” of investors needs to be respected and managed.
- Regular updates on how the business is going (probably 3 monthly)
- Annual accounts most probably audited
- Legally required lodgements up to date
- Share register kept up to date is accurate
Eventually a day of reckoning will come (or just drift into oblivion and not be remembered) and the investor will be able to assess the outcome relative to the hope they future paced.