Investor Aggregation, Capital Raising and Equity Crowdfunding

In any equity crowdfunding platform raise there are number of aspects.

1. An investment opportunity must be captured by the platform and built to be investor ready.
2. Prospective investors need to be gathered and aggregated.
3. The raise is kept compliant
4. Gathered prospective investors need to be nurtured and welcomed as investors.

 

Both issuers (fundraisers) and platform operators often believe the mantra “build it and they will come“. Meaning put the raise up on the internet and people by serendipity will find it and invest. Or worse still, the expectation that … massive mail blasts, others mailing lists and social media sharings will seduce investors not already part of the raise process or investor aggregation exercise.

This is because “Crowd” with both reward and equity crowdfunding is generally believed to be people in the world at large. However if you listen to  Slava Rubin of IndieGoGo or other leading reward platforms participants, they all maintain that there is no point putting up the project unless you know where 40% of your funders come from straight up. The rest of the funding is hoped to be generated by additional marketing efforts.

Slava Rubin … ” Some people want to believe that there are leprechauns with buckets of gold that just start jumping around from campaign to campaign and they just fill your baskets with gold. Now that’s not to say that you can’t get a stranger that you’ve never met to give you money. That happens all the time.  But what you need to do is move that snowball down the hill. You need to get that first 30 or 40% through your own effort or your own work and lots of contacting people”.

Which means that the investor aggregation part of equity crowdfunding is not a lot different. Before the capital raising goes live in the equity crowdfunding platform you should know where at least 40% of the investment is coming from. One way to achieve this is to obtain commitments in the form of either convertible notes or prefilled  share application forms before the raise goes live. That means when the raise goes live the social proof associated with 40% of the slots taken will substantially lift the credibility of the raise.

The days of fingering through a Rolodex to fill an investment offering are gone for most investment opportunities that are not in the top right of the diagram below.

Investor aggregation is paramount because of two very strong trends,

1. Technical Disruption: The Entrance of the Internet into the capital raising area
2. Cultural Disruption: A desire for investors to connect more meaningfully with the things investors buy, the things investors do, and the things they invest in.

 

Investor Aggregation needs to be systematic and planned and begins long before the raise goes live on the equity crowdfunding platform.

Over the years I’ve built a seven step process to make capital raise success more certain.

Five of these steps relate to investor aggregation. Thirty five actions that aggregate and nurture prospective investors. This is a long way from the “build it and they will come mindset”.

Each of these 35 actions has a multiple of implementation levels.

Investor aggregation is essential but is much more than flicking through a Rolodex or selecting names from an excel spreadsheet. If I can assist you to implement a formal investor aggregation process for your platform or capital raising please drop me a line.