There is No Such Thing as Impulse Investing

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Tip #2 - Busting the Biggest Myth in Equity Crowdfunding: There is No Such Thing as Impulse Investing

Equity crowdfunding has changed the dynamics of capital raising for startups, opening up investment and doors previously strictly reserved for accredited investors and venture capitalists. Amidst all the hype and success stories, there are a number of myths that persist—none so detrimental as the story that investors throw money at crowdfunding campaigns in a senseless frenzy. Fact is, successful equity crowdfunding relies on careful relationship-building and trust.

The Myth of Impulse Investing in Crowdfunding

At first glance, crowdfunding might appear to be an impulsive investment space, fueled by heart-tugging videos, flashy websites, and catchy storytelling. A few entrepreneurs erroneously assume that investors will spontenously commit funds after they view their campaign sites for a split second. Equity crowdfunding is however not as impulsive a decision as buying something at the check-out stand. It's thoughtful investment decision by people motivated by returns, risk assessment, and above all, trust.

In contrast to Kickstarter or Indiegogo—where people might spontaneously invest in neat tech or new products—equity crowdfunding investors become actual stakeholders in your business's future. That kind of long-term commitment necessitates due diligence, research, and a belief in your team's ability to execute.

Why Relationships Trump Impulse

Equity crowdfunding investors are not investing in an idea; they're investing in people. The investor-startup relationship extends far beyond the transaction. Investors must trust the vision, ability, and character of the startup team. It doesn't happen overnight through building these relationships, or by attempting to fake it with fancy marketing tricks. Instead, it's a consistent commitment to sit down, learn, and establish trust with potential investors.

Here's why relationship-building is the game-changer:

1. Credibility & Trust: Investors are risk-averse and discriminatory in equity crowdfunding since their stakes are higher. Such founders who take the time to develop relationships by being transparent in their communication and sending updates on a regular basis create the credibility needed. Being transparent about setbacks and progress actually helps investors build confidence.

2. Community & Engagement: Successful campaigns leverage existing networks, allowing early backers to become influential champions. Investors appreciate personal attention and genuine interaction, which enhances their emotional connection with the company. Performing AMAs (Ask-Me-Anything sessions), live Q&As, and regular communication makes investors feel involved, which translates into increased loyalty.

3. Education & Value Creation Equity crowdfunding investors typically require education in the market, the opportunity, and the competitive advantages your startup has. Startups that invest in educational resources, webinars, and enlightening newsletters provide clarity that serves investors' decision-making. Strategic education builds confidence and positions your startup as a knowledgeable industry pioneer.

Real-World Proof: Relationship-Building in Action

Consider successful equity crowdfunding campaigns. One common thread among high-achievers is their pre-launch phase, where significant energy goes into engaging potential investors, answering questions, and listening to their concerns. Startups that prioritize relationship-building often surpass fundraising goals because they've fostered a community that genuinely believes in their vision.

One such recent example is a technology startup that raised over $2 million in equity crowdfunding. Months, even years, prior to launch, the founders had diligently developed a community by continuously interacting with them, providing educational webinars, newsletters, and individual outreach. Their investors were not jumping into impulsive decisions—they were investing in a startup they believed in due to relationship-building for several months.

Strategies for Successful Relationship-Building in Equity Crowdfunding

If your focus is successful fundraising, shift your focus from attaining immediate notice to establishing lasting relationships:

Early Engagement: Build relationships much in advance of your campaign launch. Provide updates, solicit feedback, and participate in discussions relevant to your audience.

Transparency & Communication: Sustained regular updates build confidence. Clearly communicate your startup's goals, problems, and milestones and keep your investors informed and engaged.

Educational Content Educate investors via blog posts, whitepapers, videos, and webinars on your market, product, and strategy. Make your startup a thought leader in your domain.

Community Involvement: Encourage community involvement through platforms like Discord, Slack, LinkedIn, or closed Facebook groups, giving investors direct access to your team and fellow supporters.

Post-Investment Relationship: Keep in mind, equity crowdfunding is just the start. Building strong investor relationships after the campaign is important, with their continued support, referrals, and important business connections.

Final Thoughts

Impulse investing in equity crowdfunding is a dangerous myth that undermines smart practice in fundraising. True success results from hard work in building relationships, based on trust, honesty, and feeling part of the community. Don't forget investors are not buying a product-they are betting on you and your vision. Prioritize relationship-building, and you'll secure long-term fundraising success.

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