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Raising investment from both the emotional and the rational investor

An 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.

  1. Did not actively target their own “networks”
  2. Another that did target their own “networks”

The one that did target their own networks raised ten times more than the other.

In the following diagram we can see that when seeking capital capital raisers have three levels of people that can be attracted to the capital raising matter. Each level though has a different connection that can be a mixture of emotional and rational decision making. The weaker the connection the more rational the decision to invest usually is. A further group of contacts are “Affinities”. That is, people that are passionate about a subject, niche, technology, company, person or space. They are offen the ones that can influence the momentum of a campaign and increase its velocity.

EmotionialRationalInvestors

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.

However in general 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.

100

 

 

 

 

 

 

 

 

 

 

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% 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.

1179

 

 

 

 

 

 

 

 

 

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 Sponsorship” . As seen in the examples above, momentum at Third-Level Sponsorship is only achieved once there is a vibrant collection of friends, family, fans and followers.

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