TLDR:
- Despite challenges in securing investments, retail investors can be a potential source of funding for startups
- Key considerations for raising funds from retail investors include competition with public markets, limited tools for investment, regulatory limitations, and the importance of a compelling narrative
In a recent article, Mila Khrapchenko, the co-founder and co-CEO of Ameetee, highlighted four key considerations for startup founders who are interested in raising funds from retail investors:
Firstly, retail investors have access to public market opportunities and various fintech tools, making it challenging for startups to attract their attention. With an abundance of information at their disposal, founders must focus on convincing retail investors of the value of their startup.
Secondly, the tools available for retail investors to invest in startups are still limited, with platforms like Republic and Wefunder being popular but primarily featuring high-risk investment options. Tokenization, a newer option, holds potential for digitizing shares and offering them as tokens.
Furthermore, attracting retail investors to a private company is subject to regulatory limitations, with legislation protecting retail investors from risky investments. The check size that can be raised through crowdfunding platforms is also restricted, making it unsuitable for late-stage or capital-intensive startups.
Lastly, while venture capitalists focus on numbers and product viability, retail investors often seek a compelling narrative and emotional appeal. Founders should diversify their approach to appeal to different values, especially as Generation Z becomes more active in the business community.
Overall, retail investors present untapped potential for startup funding, but founders must understand the unique characteristics and limitations of this investor segment to maximize fundraising prospects.
