Note: The following is a guest post from Wefunder’s Jonny Price and does not reflect the viewpoint or opinion of KingsCrowd.
When a great VC invests in a startup, the founders get so much more than money. They get world class expertise and advice, connections to the right lawyers, customer development, etc. etc. Social capital as well as financial capital.
And similarly, our vision at Wefunder has always been that when our crowd invests in a startup, the founders are receiving benefits beyond the money – customers, brand ambassadors and supporters.
To put this theory to the test, we partnered with Neurohacker, a startup that has now run three Regulation Crowdfunding campaigns on the Wefunder platform, to analyze their sales data. Because they are a consumer-facing business that sells predominantly online, Neurohacker’s sales data was well-suited to the conduction of this analysis.
We were extremely encouraged by the results we found.
This blog post highlights two ways in which Neurohacker’s Wefunder campaigns and investors have clearly driven revenue for the business:
(1) New customers driven by the Wefunder campaigns;
(2) Increased engagement among existing Neurohacker customers who invested.
We ran these results by the Neurohacker team, and they agreed with our conclusions. In the words of Neurohacker’s CEO James Schmachtenberger, “we decided to raise capital through the Wefunder platform for a number of reasons, but one of the key ones was to grow our customer base and increase our customer engagement. It’s great to see this Wefunder analysis, which 100% accords with the intuition we already had, and validates our decision.”
New customers driven by the Wefunder campaigns
There were 156 people who made an investment in Neurohacker through Wefunder, and then went on to make their first Neurohacker purchase. These new Neurohacker customers were almost certainly acquired due to the Wefunder crowdfunding campaign.
Since they invested, these customers have already spent $66K with Neurohacker, and this number will obviously continue to grow over time.
The chart below shows how much these new-customer-investors have spent with Neurohacker per month. It is encouraging that this revenue is continuing to build over time. Interestingly, none of these 156 people made a Neurohacker purchase in June 2017 – the first month of their first Wefunder campaign. This is probably because most of the initial Neurohacker investors were existing Neurohacker customers. But over the course of their Wefunder campaign, as the campaign got more visibility with Wefunder investors (and through external marketing channels), people began to invest who were outside of the existing Neurohacker network. This is exactly what we would expect, and a big part of the Wefunder value proposition for founders.
Increased engagement among existing Neurohacker customers who invested
The first point above focused on 156 new Neurohacker customers, driven by their Wefunder campaigns. This second point focuses on 284 people who were existing Neurohacker customers, and then went on to invest in the company through Wefunder. (Note, there were 219 people who invested in Neurohacker through Wefunder, who have not yet made a Neurohacker purchase).
Looking at the 284 existing Neurohacker customers who invested in the company through Wefunder, before they invested, they spent $80 with Neurohacker per 30 days. After they invested, they spent $52 per 30 days. At first glance, this doesn’t look too interesting – it’s a decline of 35%.
But then consider the behavior of existing Neurohacker customers who did not invest in the company through Wefunder. Before July 1, 2018, these customers spent an average of $38 with Neurohacker per 38 days. But after July 1, 2018, this dropped to only $10 per 30 days – a decline of 73%.
Assuming these two groups would have otherwise had a similar decline (which is, admittedly, a big assumption), that’s a 38% increase in engagement caused by the existing customer becoming an investor in Neurohacker. And of course, this would accord with what you would expect – if I am an investor in a company, I am probably going to be more loyal to that company vs. its competitors.
Putting a numerical value to the revenue impact of this increase in engagement, these 284 existing customers who invested have spent $267K with Neurohacker since their investments. If they had declined at a similar rate to existing customers who did not invest, they would have only spent $111K with Neurohacker in that same time period – so that’s additional revenue of $156K caused by increasing the loyalty and engagement of existing customers, by recruiting them as investors.
Even if you’re the founder of a B2B business, we on the Wefunder team firmly believe there can be significant benefits that you derive from your crowd of investors (including revenue benefits).
But especially if you’re a consumer-facing business, this analysis is dynamite.
By raising on Wefunder, not only can you raise more capital more quickly – by enabling yourself to tap into unaccredited as well as accredited investors, publicly promote your capital raise, and get in front of Wefunder’s growing network of 550K+ investors –, but you can also drive revenue through the marketing that accompanies your crowdfunding campaign, recruit new customers, and increase loyalty and engagement among your existing customers.
We’re pretty biased, but we believe that every early-stage B2C company should at least seriously consider running a crowdfunding campaign on Wefunder to raise capital and recruit customers. You can learn more and apply here: Wefunder.com/raise-money.
Wall Street has Morningstar, S&P, and Bloomberg
The equity crowdfunding market has KingsCrowd.
About: Jonny Price
Jonny is originally from the UK, where he started his career in strategy consulting with Oliver Wyman. He has also spent time at non-profit Kiva.org as the Founder and Director of Kiva Zip, and joined Wefunder in early 2018 as Director of Business Development. Jonny also serves on the Board of Directors of AEO, and the Federal Reserve Board's Community Advisory Council. He has a degree in History from the University of Cambridge.