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Crowdfunding - The Affinity Formula for Raising Money

posted May 29, 2013, 11:03 AM by Andrew Manzo   [ updated Jun 5, 2013, 9:46 AM ]
Let’s say you've developed a new type of stethoscope. 
  • Who should you approach to invest in your company?
    • A local sports star?
    • The owner of a local grocery chain?
    • An executive at a local corporation?
    • A doctor?
Well, if you answered all of the above, you are correct.

    But if you want the best bang for your buck…or the most investment dollars per time you spend raising money, clearly approaching doctors is your best route. 
Doctors would clearly understand the benefits of your new stethoscope and be the most prone to invest in you.

    Targeting doctors to invest in your product is classic affinity marketing, or targeting people based on their established buying patterns or trends. Classic examples of affinity marketing include a university-branded credit card marketed to the university’s alumni. Or an insurance company working with a pet association to offer a pet insurance product.

    You get the point. By targeting customers that have affinities (to their alma maters or pets in the above examples), you target folks that really understand and care about what you are offering.

    In money raising, this is similar to “prospective customer financing,” which is asking your potential future customers to invest in your company now. 

    I'ma huge fan of prospective customer financing, because not only do you gain investors, but loyal customers who also help market your business through positive word of mouth.

So, how do you execute on affinity fundraising or prospective customer financing?

    To begin, the best way to raise this type of money is through Crowdfunding. Crowdfunding has tons of advantages. But in brief, crowdfunding will allow you to raise smaller amounts of money, and because it is neither debt nor equity, you avoid the legal and regulatory issues which will slow you down and cost you a lot of money.

Finally, let me give you some more examples of what to do:

    Let’s say your venture targets the bird market. Well, you should be going on social networks, forums and websites serving this market. Join the conversation. Become a valued member of the community. And then tell other members about your venture, that you are raising money, and how they can contribute.

    Or, let’s say your venture targets accountants. Do the same thing…..Find out where accountants congregate online. What accounting groups are there on LinkedIn? Where can you find them on Facebook? What accounting forums can you join? And once again, join the conversation. Become a trusted and valued member of the community. And then let your new friends know about your venture – something that will directly serve them – and how to contribute.