Alex Tynion and Peter Thomson from our Marketing Team sat down recently to talk about the things that we’ve learned from helping companies to promote their online capital raising rounds.
What do companies need to know about marketing a Regulation A or Title III capital raising to their customers?
The most exciting thing about equity crowdfunding is the ability for a company to turn their customers into investors. Companies that are customer centered and really care about their users seem to love the idea of deepening their relationship with their customers by allowing them to invest. Owning shares in a company is the most effective brand loyalty program ever created. Companies that put a high priority on building long-term customer relationships, and a high priority on word-of-mouth, want to build long-term customer relationships. Allowing their customers to become investors deepens the customer’s relationship with the brand.
For Regulation A and Title III, we look for companies that have a large customer base, a straightforward consumer-facing business model, and an easy to understand technology base. There a number of other things that we look for in a company that will do well with this type of capital raising (with both accredited and non-accredited investors), but the most important thing that I personally look for is companies that are customer-centered, and in particular companies that thrive on word-of-mouth.
If you have good word-of-mouth, then it means that people are talking about your company, it means that they like your products, and that they like your products enough to tell other people about them. In turn, that probably means that some of those customers like your company enough to actually want to own a part of it. They may want to own a part of what you are building, to share in your success, and to invest their own money into being part of it.
What sorts of companies are a good fit for Regulation A and Title III equity crowdfunding?
I think that this type of capital raising tends to suit companies where users are highly engaged with the product. If it’s something that you use every day, then you’re more likely to have a relationship with the product and to feel like you have a relationship with the company. Good examples include clothing and food. Products that go in or on your body, or that you’re in constant physical contact with, are very intimate. Those are very personal things, things that you wear, things that you carry with you every day. Those tend to be the sorts of products and brands that you feel strongly about.
For example, someone’s wristwatch can be a key part of their identity and a key part of how they communicate that identity to other people. Most people’s cellphone is in constant use every day and they tend to stick to a few favorite apps. These are the sorts of products that we tend to form deep relationships with. I think those types of products can make for very strong brand relationships, and companies that care about nurturing these types of relationships can build fanatically loyal customer bases. Those are the sorts of companies that I think will do very well in raising money online from their customers.