The Founder Series: CF 101 — Pt 3—Backers vs Investors

By November 30, 2016Industry Insider

Crowdfooding is proud to feature a series written by our Founder, Alessio D’Antino, introducing the basics of crowdfunding. This five-part series will highlight the drivers behind the majors decisions to be made in planning your first crowdfunding campaign.

To learn more about how to define your crowdfunding model, you need to know which parties you want to involve and attract to optimize funding.

Let’s start by differentiating between backers versus investors.

Backers are your friends and family, those within your network and early customers. From a psychological point of view, backers give funds to support the business and because they are motivated to engage with them. To appeal to backers, you must clearly and effectively communicate your USP.

Investors are business angels, high net worth individuals, venture capitalists, and corporate investors. These parties are motivated purely from an financial perspective — to ensure and optimize return on investment. To appeal to investors, you must build your prototype and test it in the market before approaching any crowdfunding activity, ensuring investor confidence in returns. Onboarding investors is like a marriage — you can’t fire them so make sure you onboard the ones who can help you build the business by running due diligence.

Tip: engage with investors once you have the right bargaining power, when backers have demonstrated support and investors can take funds through to the final goal. This way, you approach investors not with a plan but solid metrics that prove market validation (e.g. recurring revenue from existing customers, gained some retail distribution, good rotation on the shelf, etc.)

With all of this in mind, we move forward with one unique feature of Crowdfooding, the pre-campaign. Part 4 of this series covers what this is and how to make use of it.

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