Scott Haughton, COO, Envestors offers tips on how FDs and the c-suite can navigate the new world of millennial customer-investors and turn them into brand evangelists
Who are today’s investors? Traditionally, the image you’d conjure up would be a business angel, a family office, a venture capital fund or maybe just a ‘suit in the city’. The 2019 investor, however, is a very different creature. I recently attended a pitching event and was surprised at how many young entrepreneurs were in the audience as they vastly outnumbered the investors – and then I realised that these were the investors.
The advent of crowdfunding has democratised investing in early-stage businesses and the group who has embraced it the most readily is the millennial. The data shows that the number of 18 – 24 year olds investing through crowdfunding sites has quadrupled in the last couple of years – a surge not seen in any other age group – with some sites reporting that up to 80% of their investors are under the age of 50. This new breed of investors are not solely driven by the desire to make money either; instead, they are savvy, switched on and glad to be green, so if a brand has captured the zeitgeist and shares their vision, ethics and ideology, they’ll want to join its community, become part of its ‘tribe’ and investing into the business is a huge part of that.
So, how does a business engage this new breed of customer-investors? Here are our top four tips:
1 Think of your customers as potential investors
Trends indicate that today’s millennial no longer identifies purely as a customer and companies need to be aware that they are looking for a deeper relationship with a brand, one borne of closer bonds and greater interaction, than simply a transaction. What better way is there to be part of a brand than by investing in it? The wave of customer-investors represents a big shift from the traditional fundraising methods; companies are used to targeting professional investors, but now many start-ups are beginning to understand the importance of engaging with their customers as potential investors.
The first step to engaging in this new way is to change the internal mindset. Communicating with customers is no longer just about driving transaction; it has to be about deepening the relationship based on shared values. It can be easy for some brands to feel discouraged by this approach. Communicating on shared values seems easy if you’re a green brand or a social enterprise, but it absolutely applies across sectors and categories. Focus on the things your customers love about you. Do you make their lives easier? Save them time? With that established, the next step is to look at your CRM programme. Ensure you’re communicating your values during acquisition and then monitor engagement and for those that are responsive – invite them to engage further. This can be via an exclusive group or as a brand ambassador. As with all marketing, a test and learn approach is vital, but the trick is not to ask for too much too soon. This needs to be a dialogue, not a cold request for cash.
2 Make it easy for them to invest
The regulation surrounding fundraising and investing make it a minefield for the inexperienced. There are strict rules around the number of people companies can promote their investment opportunity to, specific language required around risk warnings and limits on how much ‘regular people’ are allowed to invest. The job of top management is to make the process of investing as easy as checking out on Amazon. Using an off-the-shelf fundraising platform – like Envestry for Scale-ups- designed specifically for this purpose, is the best way to achieve this.
3 Share all the news, good or bad
It doesn’t matter whether your shareholders are experienced angels, VCs or customer-investors – your investor relations strategy cannot be limited to sharing just the good news; they need to know all the news, honestly and consistently. Not only does this keep the community engaged, it can benefit everybody. These people are your supporters and cheerleaders: if the news is good, they’ll talk about it and they’ll tell their friends. If the news is bad, who knows, maybe they’ll be able to help. Fintech app Revolut, for example, has faced off accusations of fabricating data, money laundering and most recently misplacing a £70,000 money transfer. Pity their investors, however, as they had to read about it in the press. Open, honest dialogue creates a culture that engenders trust and, above all, deepens relationships.
4 Treat investors like they’re part of your company (because they are)
Since customer-investors have signed on to be part of your brand, invite them to help you evolve it. These highly-engaged investors will welcome opportunities to participate in decision making. For example, a beverage company looking to expand their product line could ask for input on potential flavours, package design or even invite investors in for taste tests. Offering customer-investors a real chance to be a part of your business, while supporting your decision-making process is a win-win situation.
So ultimately, what’s the lesson here?
Although maintaining honest, open fundraising and investor relations strategies has always been important, with the millennial mindset being more socially swayed and community minded than ever before, it’s now crucial to understand that the 2019 investor is more likely to fund you through the sense of belonging, rather than just potential return-on-investment. If you look at the Brewdog ‘Punks’ campaigns – which invite their customers to become a true part of their brand – or Monzo, who had a queue of customers wanting to invest, you’ll appreciate that the future of fundraising and investing is all about inclusion, community and shared ideologies.
Envestors is a fintech company that connects investors and scale-up companies through its r fundraising platform Envestry for Scale-ups.
Pictured: Scott Haughton, COO Envestors.