• jzitek@harborcapitalgroupinc.com
  • +1 612-978-7222
  • Bloomington, MN 55437


Why Do People Invest In Crowdfunded Companies?



People invest in crowdfunding for more reasons than just financial benefit.  In this article, we will break down a few different types of investor motivation. If you are pursuing investment crowdfunding, it is essential to know the mindset of all the types of potential investors and why they may want to invest.   The team at Silicon Prairie has identified about 14 different motivations people have.

We will discuss the most common ones.

Financial Social Tit-for-Tat Identity
Product Employment Money Talks Same Fox-hole

 

Financial

Return on Investment (ROI) and financial gain is an obvious motivation. To satisfy this urge, you will need visible ROI shown in your financials, combined with demonstrations that you are trustworthy, credible, and experience.  The fear of missing out (FOMO) on a tempting long-shot is another common financial motivation. No one wants to miss out on the next Apple, Amazon, Facebook, or Uber. Getting funding is about being able to communicate your vision and size of opportunity passionately.  Financially motivated investors may be looking to diversify their investments. Look for people who have all their eggs in one basket. In this case, highlight how investments in small companies or different industries may complement their portfolio.

Social

Even without an attractive ROI, some people will support you because they want to demonstrate person affection and support. Here you communicate your authentic need and gratitude and clearly express recognition and appreciation. Don’t forget to look outside of your immediate friends and consider people who may be in groups, clubs, or teams with you.

Tit-for-Tat

An overlooked generator of support is a sense of fairness or guilt. Be careful not to abuse the goodwill of your circles; however, if you are a person who always “gives first,” Now is the time to call in the chips. Think about it, do you still buy cookies from the scout-parent in your office? Get called on moving day? Pet sit regularly?

Identity (Sense of Self)

People may invest in personal factors that pull on heart-warming purposes or use their investment to make a statement. Individuals will spend money to buy displays of wealth. Being able to claim, “I invest in several startups in town” or “I invest in real estate” may be enough motivation for some people.

Product

Some people are desperate for a product to exist and will invest just for the ability to purchase a product/solution. They may need it but not have the ability to do it themselves. Some examples include retail stores, equipment, and software.

Employment

Some investors care passionately about small businesses, seeing them as the best source of jobs in the community. They may care about economic growth, demographics, or geography. These investors tend to be community activists, revitalization committees, or workers at the business who are “buying the factory” to keep their job.

Money Talks

Put- up or shut up.”

Supporters may invest if they consider a project important. This supporter will need validation that you share the same beliefs on a topic and want to see behavior that shows your goals are morally aligned. Show how you are “living the Mission” and how things change when your project succeeds.

Same Fox-Hole

These investors have serious overlap between your success and their success. Your suppliers are natural allies. This relationship is in many industries, so keep an open mind to see how this can apply to your business.  Example: If your restaurant doubles capacity, your suppliers could double their sales for you. Secondly, they become investors in a successful business with a solid ROI. Finally, they receive a perk such as pre-paid catering for a discount.

Keep in mind; these are just some of the motivations investors may have. Everyone is different, and it is crucial to figure out their “why” the best you can.

    • What is the mindset of your potential customers?
    • What is your story?
    • Does your story match that mindset?
    • Will your targeted customers believe your story?

Back

You will be more than happy