Scale-ups turn to crowdfunding to give customers a stake in their business

Author

Envestors

17 October 2019

Data from our survey of 200 scale-ups reveals that one of the driving factors for companies – who crowdfund as a method to raise funds – is the ability to transform their customers into part of their community.

 

As we head into 2020, we are seeing the ‘don’t buy from me, join me’ trend becoming increasingly appealing to consumers, indicating that the traditional brand/customer model is evolving into something completely different.  This new connection is born of individual bonds, with a far greater interaction than a customer simply making a purchase; this is particularly pertinent when it comes to raising equity finance. Envestors commissioned a survey in 2019 of 200 companies – that had used crowdfunding as a method to raise finance – and the data supported this concept: of those that had run successful campaigns, 61% ranked the ability to allow their customers to invest and ‘join their tribe’ in their top three reasons to crowdfund. Tellingly, of those who hadn’t met their funding targets, only 32% ranked it as important, further cementing the fact that to give themselves the best chance of success, it’s vital that brands embrace this mentality when raising equity finance.  Here we give our top three tips on how to appeal to your customers and why it’s so crucial:

1 Celebrate your shared values

The highest percentage, of survey respondents who understood the importance of this concept, were those in the green/environmental space, with 75% rating it in their top three reasons to crowdfund. With the danger of climate change dominating the headlines, this is a perfect example of how Greentech companies can grant their community a role in tackling an issue that is truly important to them. Spending decisions are increasingly made by ethical beliefs and when you allow your customers to invest in you, you allow them to support something they believe in – beyond a simple transaction. Nor does your brand value need to be directly linked to your product or service – great examples of this in practice include Nike, who have highlighted the issue of gender inequality in sport and Dove, whose message that traditional, beauty stereotypes are a thing of the past, has truly captured the zeitgeist of the non-judgmental, more inclusive mindset.

2 Cherish your clan

A great way to transform your customers into your investors and clan, is to make them feel special and part of your business. This could be asking for feedback on a new product, inviting them to exclusive events, giving them early VIP views of new product lines or even simple discounts; all of these can go a long way when building that all-important brand loyalty. GiffGaff have their customers/investors write and star in their commercials; Monzo involve theirs in all major corporate decisions. When even Savills, a FTSE 100 estate agent founded in 1855, changes their slogan to ‘What can we do for you?’, you understand that this new landscape is truly here to stay. The more included and involved your customers feel, the greater their loyalty and desire to be your brand ambassadors; this inevitably creates a mutually beneficial partnership, a far deeper relationship that that of the consumer/brand status of the past.

3 Make it easy for your customers to invest in you

You’ve shared your vision and your tribe feel loved; now you need to make it easy for them invest in you. Digital simplifies the whole process, meaning it has never been easier to raise funds through your customers. Crowdfunding is one method, but the market is still dogged by the myth that it’s an easy way to raise finance; the reality is that many sites charge people to invest and the fundraising campaigns are entirely controlled by the facilitator, which includes the amount of time you can be open to accepting finance. This is why scale-ups are increasingly turning to owned platforms, a branded site that they can fully control. In our ‘Amazon culture’ – where we expect instant gratification at the touch of a button – empowering customers to instantly ‘join’ your brand, will soon become the industry standard. As with any relationship, longevity can only be attained with honesty and communication and this also applies to your tribe – you can’t ignore them once they’ve transitioned from mere consumer to investor and they have to be nurtured.  An investor relations portal is key – tell them your news, all of it, whether it’s good or bad.  Be honest, be appreciative and keep the dialogue open; with this new breed of technology, there’s simply no excuse to fall out of love.

 

Want to learn more about how to fundraise through your clan?  Take a look here

 

 

 

 

 

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