Gone are the days when institutional investors have the advantage in raising capital. 2021 saw a huge spike in online capital raises gaining traction among issuers of varying sizes in many different industries. Combing through the data from the past year and the $1B+ in raised capital powered by our technology, two trends stand out that will define landmark raises in 2022.
The Brand is Boss: Leading Issuers Will Succeed by Building Brands While Raising Capital
Fundamentally, a strong brand inspires trust— it speaks visually and emotionally to an organizations’ core customers and stakeholders.
Traditionally, an existing relationship between an organization’s brand and their ability to raise capital has formed a “one-way” relationship, with firms highlighting the size of their “Recently Closed Series C” to showcase trust and social proof. But in 2021, new offering structures (including Reg A+ and Reg CF) coupled with rapidly evolving technology, enabled organizations to unlock growth capital directly from their customer base. This creates a highly advantageous and cyclical relationship between the value in a growing audience, and the broader trust inspired by a successful capital raise.
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For years, e-commerce marketers have learned and understood the power of brand loyalty to increase a customer’s lifetime value. As online capital raises continue to increase in sophistication, the 2021 data revealed that in a subset of online capital raises across verticals, “repeat” investors increased their original investment by an average of 250%.
Investors like this are influenced by the organizations’ traction and growth, and the trust inspired by a strong brand dramatically increases their lifetime investment value with an immediate impact on the bottom line. This is also prevalent in a brand’s ability to influence net new investor acquisition, where the same subset data revealed that “branded search” (when an investors’ search query directly included the company’s name), resulted in the lowest cost of acquisition and third-highest average ticket size by channel.
Thus, issuers with a strong brand do not need to rely on third-party institutions to raise capital, instead, their following and audience is an untapped source of growth that can create excitement and build customer buy-in.
Cost-Effective Growth Is Dead without Data: Leading Issuers will use Data-Driven Marketing for Investor Acquisition
In the world of retail e-commerce, data-driven marketing approaches are an essential component of cost-effective growth. As more and more established issuers turn to raising capital online, the same sophisticated mechanisms that power leading direct to consumer brands and online stores can be successfully applied to crowd offerings. Simply put, the issuers that succeed in raising $20M+ from the crowd are bringing the same data-driven sophistication as e-commerce giants.
The effect and power of analytical investor acquisition are clear— issuers who forego a digital marketing strategy and fail to build an analytical framework into their investor acquisition raise less than half the capital of their more sophisticated counterparts and are more likely to spend less efficiently (resulting in a lower overall raise at a higher cost). The tools and expertise to build a more sophisticated acquisition process are available, and issuers looking to raise successfully must make use of tried and tested best practices.
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Learnings For 2022 and Beyond
2022 will undoubtedly see the retail capital landscape continue to evolve in scope and sophistication. As retail investors continue to represent increasingly large capital opportunities for forward-thinking issuers, high-growth companies should look to capitalize on their existing communities, leveraging thoughtful and data-driven marketing strategies to raise capital from their audiences while building brand awareness in concert.
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