What Drives People to Invest in Equity Crowdfunding?

Motivations of Crowdfunding Investors        

Psychology defines motivation as “the force that initiates, guides and maintains goal oriented behaviors.” Beyond their own motivation to create and drive a business, crowdfund investing issuers should take the time to understand the human side of their investors, the whos and whys of their future crowd. Far from being a “one size fits all” process, this new source of risk capital – equity crowdfunding – combines both financial and non-financial drives for investing. Businesses and online crowdfunding platforms will need to decipher the amalgam of factors that regulate crowdfund investment behavior in order to align their own practices with crowdfunding investors’ motivations and maximize the potential of crowdfund investing.

Know Who You’re Talking To                                                         

In order to understand what drives an investor’s decision to invest, you need to know what is important to them. Social and relationship factors such as family, education, work, aspirations, achievement, social status and fortune all influence crowdfunding investors’ motivations. But how do you access that information before launching your campaign when your estimated crowd will be made up of 300 different individuals? Turn to science. Crowd investing may be new in America, but it has sprouted out a century old model – rewards-based crowdfunding – and is closely related to donation and lending crowdfunding. Although each branch presents different opportunities, a common denominator of all crowdfunding investors’ motivation is the desire to be part of something bigger than themselves. And there is a great deal of free research available online for each of the crowdfunding models.

Crowdfunding Investor Motivation

The three “p”-s of motivation for crowdfunding investors: people, passion and participation.

So, What Makes People Give?

Steven Dresner, author of “Crowdfunding: A Guide to Raising Capital on the Internet,” has some interesting findings conducted on Indiegogo, one of the first perk-based crowdfunding platforms. The research reported in his book has found that people fund campaigns for three main reasons:  people (because they believe in the person or the team running the campaign), passion (because they become passionate about the idea behind the project) and participation (because they want to be a part of something valuable). Some will invest based on the desire to support a friend or family member while others will do it from a sense of identity with the business idea or passion for its products or services. A few may invest motivated by a possible profit, and others will invest driven by a combination of some or all of these types of motivations.

Fundraising from non-accredited investors is expected to unfold with authority, to equal and even surpass the booming growth of donation and rewards-based crowdfunding. Investors are as diverse and varied as their backgrounds and motivations. Unlike any other form of finance, equity crowdfunding opens the door to a long-term outcome – a close bond, a commitment, a social and financial marriage between a company and its investors. Knowing what the crowdfunding investors’ motivations are will motivate you to take a closer look at your crowd, the non-accredited individuals that are somehow motivated to express interest in your offering.

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