Regulation Crowdfunding thrives on fresh capital. See why new investor acquisition is the smartest strategy for Reg CF campaigns.
The crowdfunding industry is an exciting but noisy space. I’ve seen it all in my 13+ years operating here, and I certainly make it noisy at times.
Every few months, a new tool or service emerges, promising issuers the magic bullet for campaign success. Some vendors peddle investor lists, others market slick CRMs that scrape data from live campaigns, while a few go so far as to package and resell investor details as though they were a holy grail. The uncomfortable truth? These lists rarely deliver. If everyone has access to the same database, or worse, if it’s being circulated freely on LinkedIn it quickly loses its edge. And when it comes to retail investors who’ve already backed other campaigns, their repeat value is often overstated.
Scraping data? I’m all for it. But the magic isn’t in hoarding numbers, it’s in picking the right ones, decoding them, and acting on them. That’s the edge we’re sharpening at Smart Crowdfunding with the proprietary tech developed over at XseedR.
First-Time Investors Dominate the Field
In the decade since Regulation Crowdfunding (Reg CF) came into effect, the capital formation landscape for startups and small businesses has transformed. Thousands of ventures have raised over a billion dollars collectively, tapping into the financial firepower of ordinary people who, until 2016, were largely locked out of early-stage investing. But amidst this surge of capital and opportunity, one key question lingers: how many investors come back for seconds?
The answer is both surprising and sobering: not nearly as many as one might think. And that reality carries big implications for founders planning their first, or even their second crowdfunding campaign.
Data from Global Markets
To understand Reg CF’s dynamics, it helps to look abroad where more research is available. A European study covering equity crowdfunding in 2022 revealed that 79.4% of backers were first-time contributors, while only 20.6% were repeat backers. This cut across multiple platforms and business models, and not just regulated securities crowdfunding, but the takeaway is clear: repeat investors in equity crowdfunding are relatively rare.
Globally, the numbers paint a similar picture. Research indicates that roughly 70% of equity crowdfunding investors worldwide are first-timers, suggesting that only about 30% are repeat participants. Again, while not Reg CF-specific, these figures underscore the broader reality that crowdfunding ecosystems thrive mainly on newcomers rather than seasoned backers.
Why Repeat Investors Are Hard to Capture
Why don’t more investors come back for round two? The reasons are structural as much as they are psychological:
- One-and-Done Mindset: Many Reg CF backers invest because they believe in a single idea, not because they view themselves as professional angel investors. Once that campaign ends, their appetite for more deals often fades.
- Risk Perception: Startups are risky. Even if a backer loves the founder, they know the odds of failure are high. That awareness keeps many from committing to multiple deals.
- Lack of Liquidity: Until secondary markets mature, Reg CF investments are typically locked up for years. For small investors, tying up even a few hundred dollars indefinitely doesn’t encourage frequent repeat plays.
- Platform Fragmentation: Investors who discover a deal on Wefunder may not browse StartEngine or Republic. Without cross-platform stickiness, repeat behavior is harder to encourage.
What This Means for Founders
If you’re planning a Reg CF campaign, here’s the blunt truth: counting on repeat investors to fund your round is a losing strategy. You need to approach the market as though every dollar you raise will come from someone seeing your company for the very first time.
That means:
- Build your own crowd. Your personal and professional network, your customers, your email list, and your social media following are far more likely to convert than the anonymous pool of prior Reg CF investors floating around on platforms.
- Treat the platform as a stage, not a source. Wefunder, StartEngine, and Republic have investor bases, yes, but they don’t guarantee those investors will flock to you. Think of the platform as a showcase—you still need to bring your own audience to fill the seats.
- Tell a compelling story. Repeat investors look for traction and financial metrics. First-time investors, by contrast, respond emotionally. They invest because they resonate with the founder’s vision, the problem being solved, or the potential impact.
- Expect to educate. Many first-time backers won’t know how Reg CF works, what it means to own securities in a startup, or how risky it is. Your campaign has to double as an investor education tool.
The Opportunity Hidden in the Challenge
While the dominance of first-time investors might seem like a weakness, it’s actually one of Reg CF’s greatest strengths. Unlike traditional fundraising channels, which rely on a tiny club of insiders, Reg CF continually recruits fresh capital from the broader public. Every campaign expands the pool of people who’ve had their first taste of startup investing.
And here’s the kicker: while only 20–30% may come back, that group grows every year. Over time, the repeat investor base compounds, creating a slowly expanding core of more experienced backers. These are the people who could one day form the bedrock of a mature, liquid equity crowdfunding market.
How to Balance New vs. Repeat Targeting
So how should founders split their energy? Think of it as a 70/30 mix:
- 70% focus: New investor acquisition. Invest in digital ads, PR campaigns, influencer outreach, and customer engagement to bring first-timers into your deal.
- 30% focus: Platform and repeat investors. Craft campaign updates and deal terms that appeal to those who’ve backed before. They may be few, but they’re more likely to invest larger sums.
This approach ensures you don’t miss out on the repeat crowd, but you don’t delude yourself into thinking they’ll carry your raise.
Lessons from the Platforms
Some platforms have recognized this dynamic and designed features to encourage investor stickiness. StartEngine, for instance, runs a membership program (“StartEngine Owners Bonus”) that rewards repeat investors with perks. Republic has leaned into community-building, giving backers a sense of belonging that can encourage future participation. Wefunder emphasizes its mission-driven storytelling, attracting investors who return for the social impact as much as the potential returns.
But even with these efforts, the fundamental math doesn’t change: most campaigns live or die on their ability to attract newcomers.
The Long Game
If Reg CF is to fulfill its promise of democratizing investment, the repeat investor issue will need addressing. Secondary markets that offer liquidity, better investor education, and more transparent outcomes (including exits) could all help transform first-time dabblers into repeat players.
For now, however, founders must play the game as it exists, not as they wish it to be. That means leaning into storytelling, outreach, and community-building to activate first-time investors while treating repeat investors as a bonus, not a backbone.
Reg CF is not about harvesting a pool of seasoned backers who return to campaign after campaign. It’s about opening the gates to new investors, thousands of them every year, who want to take a chance on a story they believe in. If you’re raising, your job is to make your story the one that captures their imagination.
Retail investors tend to make decisions quickly and emotionally rather than through deep financial analysis. Capturing their interest requires a tailored approach and one that leans on psychology, storytelling, and timing rather than hard numbers alone.
