Legal Aspects of Tokenization Featured

Choosing the right investor audience: 5 main principles to navigate.

Gene Deyev

Jan 1, 2022 • 7 min read

No matter how a fundraising campaign is conducted, be it a security token offering or any other instrument, it may be either a highly rewarding or highly frustrating experience for the company's management. Sometimes you achieve excellent feedback from people who are fascinated by the STO or NFT marketing campaign conducted, which brings new investors and eventually leads a business to a successful round closing. In other cases, it feels like a waste of breath backed by a feeling of uselessness. The difference between the two cases lies not even in the team or product nuances. Instead, it is rather about whose team has managed to successfully identify the right target audience of investors with a further choice of a proper message while conducting digital marketing for their NFT or STO.

Why identifying the right target audience is important?

1. A chance to offer a specific product. The same company and token can be represented in a myriad of ways: for instance, you can give investors more extensive participation in stocks, which will be a riskier and more profitable solution, or you can stick with a fixed income with or without additional risk protection. Of course, in the latter case, the revenue will be smaller. The investor audience choice depends on the type of product they would be interested in. This is why it's crucial to understand its preferences: possessing this knowledge will help you present a financial instruments question in an appropriate wrapping.

2. Sending correct messages. A rather sophisticated audience enables you to make an accent on a risk-return profile or any numerical characteristics of the investment in question. Accordingly, a less sophisticated audience requires simplified wording and more understandable messages.

Different audiences care more or less about risks, whereas a social impact might also be another decisive criterion. This is why understanding an audience defines the messages used in an STO marketing strategy.

3. Determines the marketing channels that are to be used. The proper channels of reaching an investor largely depend on the type of audience you are targeting. Generation Z investors will probably be accessible on social media platforms like Twitter, TikTok, or Instagram (surprisingly, not even Facebook). On the contrary, the audience consisting of funds requires a different approach like reaching out by email or via LinkedIn or even visiting offline events to network.

Main criteria for categorizing investors

Sticking with one type of audience isn't a must ― provided that the appropriate campaign and messages will be developed, targeting several types is an entirely sound solution. Making different financial instruments for diverse audiences in case the latter's demands are drastically different is also a possible scenario. This way, you can also test which audience is more perceptive to certain messages.

There are 11 criteria determining how exactly the audiences differ. Each of them will help you understand which one is the right fit for your product.

1. Risk appetite determines whether an audience chooses more or less risky investments. As bigger risk equals bigger income, it also corresponds to how high profitability does the audience in question expect. Still, it's also a good evaluation of their psychological needs. Particular investments may, in their principle, be close to gambling and the gambler's excitement, or vice versa ― these people may require stability. This is why the risk appetite criterion is both rational and irrational.

2. Expected returns criterion is close to the risk appetite. Although the risk usually correlates with returns, some investors might not be aware of this connection. Be prepared that some of them will be expecting high returns at moderate or even low risk.

3. Institutional or individual. Although the fourth criterion is cut and dry, it matters because the way the business receives funding from a fund completely differs from how the individuals, even the richest ones, are investing.

If your company targets institutional investors, you must understand the type of institution you are working with. It may be private equity, venture, crypto or hedge fund, or even something more traditional like a pension fund, or a mutual fund ― the exact type, of course, to be known precisely.

4. Industry preferences. Many investors don't have such preferences, but there are a lot of people among institutional and simply more sophisticated ones specializing in a particular field like, for example, real estate or manufacturing or Web-3 investments. You can achieve a much higher conversion rate by targeting people particularly interested in your industry.

5. Degree of investment or financial sophistication is the next criterion you should mind. It determines how good your investors are at the investments math and how capable they are of conducting due diligence on their investment opportunities, assembling a portfolio, and so on.

6. Degree of technical sophistication measures how much your investors keep up with technologies, how easy the process of token purchase will go for them, how much additional support they require, and how complicated your vocabulary can be while conducting the marketing campaign aimed at these people.

7. ESG-preferences (environmental and social governance). It's a trend in investing that cultivates investing in companies who aren't simply making money but also treat the environment and social problems responsibly and aim to impact those spheres.

8. Check size. This is about an average sum of investment you expect to get. It may be $500, $5000, or $100,000. All of the possible figures stand for different groups of investors who conduct due diligence within a particular (different) time and whose main attraction channels differ.

9. Investment horizon points out how quickly investors expect to get their returns or make an exit. Smaller (or more aggressive) investors will rather go for short-term investments, while risk-averse investors will set a goal of maintaining and steadily increasing their capital.

10. Demographic profile suggests paying attention to their age and gender. If, for instance, you own a woman-led business, you can expect to have an impact on female investors and launch a respective marketing campaign. Following the same principle, take geography into account: firstly, it determines the language you'll be using. Secondly, it's about the messages that may or may not be acceptable in a specific culture. What also matters is that particular investors prefer giving their money to their domestic businesses first thing in order to raise their country's economy, just as some may want to work with foreign offshores to achieve better diversification.

11. Psychological needs satisfied by the investment is the last and the most complicated thing on this list. People make investments not with a sole reason to earn money ― what they also aim to do is feel some impact and fulfill specific psychological needs. It may be a need for a status, which may be fulfilled by investing in something luxurious or exclusive, or even a mere fact of investing. For some people, this psychological need is affiliation and the desire to become a part of the community; some people value the feeling of making a difference and making the world a better place to live in, which usually are people with a G-preference. Some investors just need to differ from their surroundings ― in this case, the investment is a type of self-expression. A desire to go hand-in-hand with technology and innovation is also a tangible psychological incentive.

A psychological motivation to invest may come out of various incentives. Understanding the psychological needs of your investors will allow picking more explicit messages, as it will allow aiming in the bull's eye.

Obviously, these characteristics correlate with each other: for example, aging usually goes along with reducing the risk appetite. The bigger the check, the more sophisticated you can expect an investor to be too. Sometimes, such a correlation makes it easier to complete a full ideal investor profile.

How to choose the right audience?

There are five rules you can navigate by while taking a pick on whom you would like to make a product for.

1. Think about what kind of product the business can offer. If the offer is a good old-fashioned rental and real estate investment that promises a 5% annual return, it won't make sense to target risk-hungry investors. Although the product can indeed be modified ― which in the case of real estate can be combined with metaverse, for instance ― it won't change the business in its essence.

2. Know your fundraising goal and the regulation you are working under. If you want to raise $50 million without registering your offering with any regulator, you would have to target accredited or even institutional investors because you wouldn't be able to raise this figure legally otherwise.

3. Determine the kind ofinvestors you as a person and your team are comfortable targeting. Although this rule is the least obvious, building a marketing campaign off your marketer's skills is one of the good tactics in STO marketing. If the main thing you love about your company is its innovative narrative, and you strongly feel that it's the key selling point, you should go for it. It's easier and always more efficient to sell or offer something you will be talking about with great passion. Or, in the other case, you may possess a marketing team skillful in B2B or B2C marketing, which makes it easier to target individual or institutional investors thanks to already having a bunch of ready-to-use channels and creatives.

4. Mind your existing community's profile if you have it. Provided that it most likely will be your primary target audience, you have to pick the messages that will not alienate it at the very least and help it expand as a best-case scenario.

5. Take the results of the marketing tests into account. Likely, you will first choose several audiences of a desirable target that will potentially work for you. After this, you should hold several ad campaigns to see which one will give the highest ad spend, which audience will like the offering better, which eventually will provide you with the idea of which exact audience is your best pick.

Although investment marketing is complicated, it eventually turns out to be a gratifying experience that will introduce a company to many beautiful people willing to support your dream project. Stobox, along with a network of its marketing partners, is ready to give you a hand in your journey of searching for an ideal investor. If you are prepared to begin, feel free to book a complimentary 30-minute consultation with Stobox specialists by filling in the form on our website.