Affinity and Cause Investors
Affinity investors are individuals who are either enthusiastic about the company’s products or services, or are connected and inspired by the company’s mission—or both.
Companies suitable for affinity and cause investors are those with a specialized and unique niche product or service, or are cause-based. These companies have great potential to raise money by targeting consumers that are passionate, loyal or inspired around interesting products or services, or by companies that are contributing in ways beyond simple profit, (i.e, Green, Sustainable or Triple Bottom Line companies).
If you also happen to sell products or services that fit the affinity- or cause-based investor category, you are sitting on a goldmine of fundraising potential.
INVESTMENT MOTIVES
Cause investors’ main motivation for investing is the story, idea or cause behind the product. These investors care about the essential aspect of WHY you do business, and also HOW you operate. Affinity investors already have a natural affinity or appreciation for your company or how you’re doing business. Focus on these aspects of your product to bring these investors out.
Investor’s Inner Voice
“This is about more than just making money—I believe in it!”
MARKETING AND SALES STRATEGIES
Affinity investors are often already familiar with your products, so that is an excellent place to start marketing your offering. Many companies in our case histories have had great success putting advertisements directly on their products. If you have a retail location, this can be another great resource. If you are aligned with a specific cause or industry, there are many industry specific publications and mailing lists you can make use of.
See case history examples: Annie’s Homegrown, Ben & Jerry’s,
Mirenco Inc., Portland Brewing, Real Goods, Zap Power Systems
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Customer Direct Funding
A well known secret is that your customers make the best investors. In fact, thousands of successful entrepreneurs have raised hundreds of millions of dollars directly through their customers.
“If I like the product, I buy the stock.”
–Peter Lynch
The fund manager who raised Fidelity’s Magellan fund
to the most successful mutual fund in history, describes
his stock picking strategy.
“Selling to people who know and like the company is the most successful selling strategy we have found in reviewing the performance of almost 2,000 Direct Public Offerings.”
–Stewart Gordon
The Founder Of the SCOR report, the exclusive monitoring
and tracking company for Direct Public Offerings.
INVESTMENT MOTIVES
Customers are excited at having an opportunity to invest in something they believe in, while sharing in your company’s growth and prosperity. Employees, suppliers, consultants and distributors are also highly receptive potential investors.
Investor’s Inner Voice
“I know you, I like your products, and I know where you live!”
MARKETING AND SALES STRATEGIES
There are two ways to market your offering to your customers.
The first, and extremely effective, method (assuming you have a customer data base), is marketing your offering directly to your customers though an email or direct mail campaign. I have personally raised over $7 million in numerous offerings using this exact formula.
Examples of companies using this approach include: catalogue companies, direct sales organizations, internet-based companies, banks, golf courses, membership companies, etc.
See case history examples: Cornerstone Bank, Costco Warehouse,
Real Goods, Red Rose Collection
The second approach is often used by companies that have customers, but do not have a database of customer e-mail or physical addresses. If you are selling products or services through face to face contact, reps can talk about the offering exclusively to the company’s customers and hand out information, direct them to a website with offering information, or directly invite the customer to an investor preview evening. Other forms of promotions are also commonly used.
Examples of businesses using this approach include specialty and consumer product companies, including clothing, and various specialty food and beverage businesses (including wine, beer, coffee, and tea companies).
See case history examples: Blue Fish Clothing, Mendicino Brewing Company, Z-Tech, Spring Street Brewery, Tully’s Coffee, Original Beverage Corporation
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Adventure Investors
There are over 20 million individual investors who invest in higher risk micro-cap stocks. These investors typically invest in Story Stock (also know as lottery stocks—high risk but with potential for high returns) These stocks trade on three exchanges:
- NASDAQ small cap
- Over-the-Counter Bulletin Board (OTCBB)
- The Pink Sheets
Adventure investors are prime targets because they are looking for the next big hit and are willing to invest a small portion of their investment portfolio on a “swing for the fences” opportunity. They are ideal candidates for private companies with a compelling story and high upside potential.
The industries suited for adventure investors are diverse, including B2C and B2B companies in a variety of diverse product and service industries such as technology, consumer products, traditional software and cloud/SaaS-based software, mobile software apps, real estate, etc.
INVESTMENT MOTIVES
His investor type enjoys the challenge of identifying winners at the earliest possible stage and is excited by ground floor opportunities.
Investor’s Inner Voice
“This is interesting, I like the feel of it and it could be big—I’m in!”
MARKETING AND SALES STRATEGIES
Adventure investors are easily identified and can be targeted by state or nationally through select mail and email lists.
Once you have the lists, two types of direct mail approaches offer the best results: either a standard direct mail piece or a post card mailer. In addition, advertisements in the financial section of newspapers are another excellent way to get their attention.
See case history examples: AeroGrow, Jomy, Lazor Lock, Mentor Cap
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Financially Secure Investors
Financially secure investors include doctors, dentists, veterinarians, self-made millionaires, and wealthy retirees.
Before Direct Public Offerings, you could only fantasize what it would be like to advertise your investment opportunity directly to doctors or dentists. There are an average of over twenty thousand doctors and dentists per state, which is two to three times as many people you need to target for a sizable DPO.
Doctors and dentists are considered the most responsive of all investors to private companies (except for affinity- or customer-based investors). Wealthy retirees and self-made millionaires are the next most responsive type.
INVESTMENT MOTIVES
Like adventure investors, financially secure investors respond easily to the adventurous aspect of the investment.
Because of their financial stability, they can easily afford a 15K to 25K or more investment without compromising their investment objectives. Investing in your company will offer them an interesting alternative with far higher upside potential than their traditional portfolio, and offer the fun and excitement of a ground floor opportunity to boot.
Investor’s Inner Voice
“I can afford the loss and the upside is huge!”
MARKETING AND SALES STRATEGIES
Lists of financially secure investors are readily available to businesses through specialized mailing lists. Similar to Adventure Investors once the lists are rented, using direct mail, postcards or e-mail campaigns are the most effective.
In addition, targeted advertisements in doctor or dentist trade publications is another approach but typically these have longer lead times.
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Virgin Investors
Virgin investors are individuals who have never before received a mailing, or seen an ad in the paper, offering them an opportunity to invest in a local company that has a compelling story. These are the homeowners down the street, who may never have considered investing in a company before receiving your direct mail piece or seeing your ad. Although, as stated above, there are 30 million new investors that make up these groups, this particular type of investor could easily outnumber all the rest combined.
INVESTMENT MOTIVES
This new type of investor (based on case histories) has shown a high readiness to invest in local companies with compelling stories. They also want to support their community and find comfort knowing their money is close to home and the business can be checked in on should they desire.
Getting in on the ground floor is also very appealing to virgin investors, since they’ve seldom ever been given the opportunity to invest in private companies with high upside potential.
Investor’s Inner Voice
“I have never been given the chance to get in on the ground floor of companies I knew would take off—here’s my chance! ”
MARKETING AND SALES STRATEGIES
Direct mail to neighborhoods with home values of a certain size, newspaper ads and radio spots are very effective for reaching and motivating these investors to come to an investor preview meeting in person or online. Another great way to reach them is through referrals from your current investors.
See case history examples: Aerogrow, Ben & Jerry’s, Mendocino Brewing,
Portland Brewing, Tulley’s, Z-Tech
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