The most critical asset class every founder should build

How — and why — to build a community of investors

From our partner: Our friends at DealMaker have a new lens on how to jump-start the community your business needs, by starting with the people who most want you to succeed: your investors.

Author: Jon Stidd , president of DealMaker Reach

Today, founders have many digital tools that make starting a business (launching a website, an online store, an ad campaign) easier than ever before. But there’s an equally important trend we’re seeing at the same time: Customer acquisition costs have never been higher.?

To solve that, there’s a critical asset class that we look for in our own work with founders and funders — and that you should be thinking of as you build your own company, your product, your service. It's a community. Followers, fans, or customers — it’s a group of people passionate about what you do.

An important place to start building that community is among your investors. Some of the most successful companies we’ve raised capital for have adopted this “community-first” approach — and seen concrete benefits.?

Recently, DealMaker Reach helped raise over $70M for Miso Robotics , a company that makes robotic tools for restaurants. The company’s first Community Round (also known as “Equity Crowdfunding,” raising capital via the general public through a Reg A exemption) was in 2020, and Miso’s community continues to invest as the company matures. Miso didn’t treat Investor Relations as an afterthought. They focused on building a close relationship with their investor community, and this allowed them to announce the acquisition of major new customers like Chipotle, Jack in the Box, and White Castle directly to them; in turn, they invest (and reinvest) in the company’s growth. I think of this investor community and Miso’s excellent management of it as an asset class that’s vital to the long-term success of their brand.

The new generation of investors craves community?

More and more retail investors (in other words, the general public) are adding startup investing or pre-IPO securities to their investment plan. This is part of a generational shift in mindset for investing: With millennials cynical about the stock market, having seen more than their fair share of crashes, they are looking for alternatives.

Millennials aren’t just looking for a return, though; they want to make an impact. Impact investing is a focus on who you align your money with, versus just focusing on projected returns. Millennials are leading the way here: 34% of investors participate in impact investing, but the vast majority of those investors are millennials (over 64%).?

Although impact investing is a trend that’s about making the world a better place, (via an environmental or social justice startup), the trend of investing with a community in mind bleeds into industries that enjoy an organic built-in fanbase as well. Industries like sports, entertainment, fashion, and cosmetics can see real success by raising capital with fans eager to support a brand they already feel an affinity with.

Gaming, drone racing, space exploration, robotics, Web3: there are built-in fanbases that may want to contribute to building your brand, and they may already share your vision.?

My best advice: Own your investor community — don’t rent it

Of course, investors are only part of the community you’ll want to build -- it also includes your fans, customers, employees, and shareholders. Together, they are the foundation of your brand-building and future-proofing. And in every case, you can rent this asset class, or you can own it. Renting an investor pool would mean you’ve listed your offering on a portal that promises to do the distribution for you. Your deal is listed along with many other offerings, and your startup becomes a commodity — just one of many that the investor can consider. You don’t collect information on those who considered your brand but, for whatever reason, didn’t invest. This is a critical flaw.

If you want to own your investor pool, you would add a capital raise functionality to your own website (much like an eCommerce functionality) and drive prospective investors to your site. You are responsible for the distribution, which requires cost and effort, but in the long run, this is a much higher-value tactic as you collect and manage the information, allowing your brand to stay in touch and create a community of support, whether they invested or not.

For many founders, the cost of marketing their raise is daunting. However, the idea that you can “rent” investors from a funding portal and continue to be successful in raising with the crowd, in my opinion, isn’t a solid approach for the long term. You may see short-term success, in that single raise, but the importance of owning all of the data within your prospective investor funnel cannot be overstated in building capital and runway for the long-term success of your brand.

Short-term cash infusions are OK with a rented investor pool, but are these investors really betting on your company? Average investment and LifeTime Value (LTV) of that investor significantly drop if your brand is renting someone else’s asset class.

Here are three key ways building an authentic investor community benefits your brand:

1. Future-proofs your next raise. A 1:1 relationship with your investor (and prospective investor) community is the only way to ensure you will continue to have access to them.
2. Natural distribution and amplification. A built-in community with a vested interest in your success will amplify your brand authentically.
3. Increased LTV and/or annual recurring revenue (ARR) if customers turn into shareholders. Recency and frequency of purchases naturally increase when fans turn into shareholders.

The 2 vital steps to building an investor community

How can you start building your own community of investors? There are two key tactics:

1. Regular outreach with authenticity. Develop a cadence of sharing news and updates with your investors. Give them sneak peeks into new features or products, or leverage their opinions to beta-test and prioritize roadmap initiatives.?Miso Robotics did a great job with investor relations; both shareholders and prospective investors alike got regular updates about Miso in their inbox. This kept their community excited about the brand’s progress and created a bit of FOMO if they had passed on investing in that round.

2. Social followership is key. Do not sleep on this. Build a community and followers via social channels; join groups and discussions that are cutting-edge in your industry. Establish your brand early and often within your relevant niche. Test all channels to create a fanbase. Even if they don’t turn into investors, they could turn into customers.?

So when considering how you want to raise capital to build not only your business but also your brand, the key competitive difference for successful startups is to focus on building and owning your investor community — your first source of capital and your first source of support. Your investors are a critical asset class to maximize and optimize to ensure long-term success.

Watch a full discussion on The Power of the Community Raise here.

Jonathan Stidd is the president of DealMaker Reach. Jonathan co-founded the leading digital marketing agency for equity crowdfunding, helping their clients raise a collective $450M+. He serves as President, DealMaker Reach after Ridge Growth was acquired by leading capital raise platform DealMaker.