A friend asked me recently what I thought will happen with all the niche crowdfunding platforms. It’s a question I’ve thought about a bunch and in this post I predict that equity-based funding portals’ two sets of customers — issuers and investors — will allow portals to successfully focus on niches. [Insert caveats about TONS of regulatory uncertainty here.]
Campaigns will rely on portals to deliver investors interested in specific opportunities
Since issuers will have limited ability to promote their offerings, funding portals will be critical for a campaign’s prospect of being discovered by likely backers. The ability to consistently deliver investors will emerge as a major differentiator among platforms and platforms will be much more than commoditized back offices. Given my sense of likely investor behavior (see below) portals will focus on specific verticals in order to build brands known for delivering critical masses of likely backers to companies in their chosen niches.
Investors will frequent portals that have niche inventory so that they can invest in companies that they understand better than the rest of the market
Without investment banks and armies of analysts working to identify good investment opportunities (at least at the beginning), investors will have to rely much more on their own knowledge when making their investment decisions. Since people can’t have information advantages in everything, they’ll narrow their investment focuses to areas where they think they’ve got a shot at having a good insight: doctors invest in healthcare, locals in companies from their neighborhood, et c. Rather than trolling across several funding portals to find a few companies in their sweet spot, investors will park themselves at the one or two portals that consistently have a good inventory of those companies. (On the other hand, if every investor on a platform has the same information advantage … ?)
So … Funding portals will try to dominate a niche or two.
Niche or not, everyone will still face the challenge of running effective campaigns. Hence … SeizeTheCrowd.