Is Your Capital-Raising Platform Competing Against You?

Raising capital is a critical step for any founder looking to scale their business. With the rise of online capital raising, the platform you choose to host your raise can significantly impact your success. While marketplace-style crowdfunding portals may seem appealing at first, they often do not operate in the best interests of their issuers. In fact, they can even compete against their own customers in several ways. Here’s why it’s crucial to select the right platform for your capital raise, and how some marketplace portals might be working against you.

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Introduction: The Importance of Choosing the Right Platform

Selecting the appropriate platform for your capital raise can make or break your fundraising efforts. The right platform will support your goals, protect your interests, and enhance your chances of success. However, marketplace-style crowdfunding portals may not provide the level of support and exclusivity you need. Here are three major reasons why these portals might not be the best choice:

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1. Your Marketing Efforts Benefit Other Offerings

When you raise capital online, a significant portion of your success relies on effective marketing. You’ll spend time and resources driving traffic to your raise, but on a marketplace-style portal, these efforts can benefit other offerings as much as yours.

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Marketplace portals host numerous campaigns simultaneously. Every dollar you spend on marketing drives prospects to a marketplace filled with other investment opportunities. As a result, your potential investors are exposed to multiple offerings, diluting your messaging and your brand. This competition for attention can significantly reduce your conversion rates, making your marketing less effective and more expensive.

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2. Your Ad Spend Builds THEIR Audience

One of the most critical aspects of a successful capital raise is having control over your investor data. Data ownership provides a significant advantage, allowing you to make informed decisions quickly, optimize your efforts continuously, and engage with investors more effectively.

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Unfortunately, marketplace portals often retain full ownership of your investors’ information. There are two main problems with this:

• Limited Access to Data: While these platforms might allow you to export data on completed investors at the end of your campaign, they often withhold information (including email addresses) on leads, prospects, and incomplete investments. This means you lose out on troves of valuable audience data that could help you prepare for future campaigns—sometimes as many as tens of thousands of names.
• Building Their Audience, Not Yours: Every potential investor who enters their email address on the platform becomes part of the portal’s audience, whether they invest in your offering or not. In other words, the audience you drive to the platform with your marketing efforts becomes a resource for the portal rather than for your own business.

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3. You have no control over what the portal sends your list

Effective communication with your leads, followers, and investors is crucial for maintaining interest and ensuring successful investments. However, marketplace portals can make it extremely difficult to plan strategic comms and can even interfere with the process. Here’s how:

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The minute one of your leads enters their email address on a marketplace portal, they’re added to an email audience—and the portal’s marketing emails start immediately (sometimes even the same day!). Effective communication with your leads, followers, and investors is crucial for maintaining interest and ensuring successful investments. However, marketplace portals can interfere with this process:

• Competing Emails: The minute one of your leads enters their email address on a marketplace portal, they’re added to an email audience—and the portal’s marketing emails start immediately (sometimes even the same day!). Most often, these emails feature other offerings on the portal besides yours; portals want each investor to participate in as many deals as possible, as quickly as possible.
• Hindered Nurturing Efforts: Your efforts to nurture and communicate with your leads and investors are often hindered by the portal’s marketing activities. While some investors commit capital the moment they see a company they like, it’s also quite common for investors to require multiple touchpoints first. It’s incredibly difficult to execute a balanced, well-timed marketing campaign when your list is simultaneously being barraged with other information.

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Portals Raising Capital for Themselves

When you're raising capital for your business, you expect your platform to be an ally, not a rival. Unfortunately, this isn't always the case. Some popular platforms actively compete with their clients by raising funds for themselves on their own platform.

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At first glance, this might not seem like a big deal. After all, these platforms are businesses too, right? However, this practice introduces a significant conflict of interest that can have far-reaching consequences for companies trying to raise capital. When a funding portal is also raising capital for itself, it inevitably leads to divided attention and resources. Think about it: the platform has to split its focus between supporting its clients (like you) and promoting its own capital raising efforts.

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This division can manifest in various ways. The platform might allocate its best personnel to its own campaign, leaving less experienced staff to handle client campaigns. Marketing resources might be disproportionately directed towards the platform's own efforts. Even the development of new features or improvements to the platform might be influenced more by what benefits the platform's own capital raising rather than what would best serve its clients.

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For example, StartEngine raised $60 million for themselves on their own platform, which is more than 10% of the total amount ever raised on their marketplace. That's a significant chunk of capital that could have gone to other companies using the platform. As an entrepreneur, you want to be confident that your capital raising partner is fully committed to your success, not potentially undermining it.

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The Importance of a Dedicated, Non-Competing Platform

Given these challenges, it becomes clear why choosing a dedicated, non-competing capital raising platform is crucial. This is where DealMaker stands out from other platforms. DealMaker is committed to being a true partner in your capital-raising journey, not a competitor. Here's how our approach differs:

1. Complete Control Over Marketing: When you host your own capital raise, all your marketing efforts directly benefit your campaign without the risk of losing attention to other offerings.
2. Ownership of Investor Data: You maintain complete control over your investor data, allowing you to capture and nurture every lead, prospect, and completed investor. This data is invaluable for future fundraising efforts and building lasting relationships with your investors.
3. Focused Communication: With a self-hosted offering, you control all communications with your investors. This ensures that your messaging is clear, consistent, and free from the noise of competing campaigns.
4. Undivided Attention: All of the platform's resources and focus are directed towards helping its clients succeed. There's no internal competition for attention or resources.
5. Trust and Transparency: When your capital-raising platform shares the same incentives as you, you can trust that the platform is truly working in your best interests.
6. Specialized Expertise: A platform focused solely on helping others raise capital can develop deep, specialized expertise in this area, rather than splitting its focus between facilitating and competing.

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Benefits of a Platform Focused Solely on Client Success

Choosing a platform like DealMaker that's focused solely on client success can yield numerous benefits:

1. Maximized Exposure: Without competing campaigns from the platform itself, your offering gets maximum exposure to potential investors.
2. Tailored Support: The platform can offer more personalized, attentive support when it's not juggling its own capital raising needs.
3. Faster Innovation: With all development efforts focused on improving the client experience, you benefit from faster, more relevant platform innovations.
4. Higher Trust: Knowing that the platform's interests are fully aligned with yours builds trust and allows for a more collaborative relationship.
5. Better Results: Ultimately, all of these factors contribute to better outcomes for clients raising capital.

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Case Study: A Company's Experience Switching to a Non-Competing Platform

To illustrate the real-world impact of choosing a non-competing platform, let's look at the experience of EnergyX, a lithium extraction and refinery company leading the charge towards sustainable energy.

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EnergyX’s first online capital raise was hosted by a typical marketplace-style crowdfunding portal. The raise went well, but founder and CEO Teague Egan sensed that the offering had much more potential:

“I realized that being on an aggregator site like that was watering down our brand. I wanted to stand alone, not be next to these other less legitimate companies. Ultimately, we made the decision that if we were to do another crowdfunding offering, it would need to be a white-labeled service run through the EnergyX website.”

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The team’s search for the right platform was exhaustive, according to CMO Kellee Khalil:

“We went through a full deep dive on the entire industry. Spoke to every single provider in detail, analyzing their platform, their capabilities, their fees, their solutions. A lot of them offered comarketing and all these things that were attractive to us—but ultimately the driver, or key for the brand, was that we wanted full creative control, we wanted to be able to tell our story in a way that really resonated with us, and we wanted to own our data. That was a big challenge with a lot of other platforms—not being able to own your data fully. When you want sophisticated retargeting and remarketing, that is a big consideration.”

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After months of research. EnergyX decided to switch to DealMaker. The difference was immediate and significant:

“It was night and day for us. For the business it was ultimately better. One of the key reasons, besides the white-label aspect, is that DealMaker listens to customer feedback. When we were considering doing our second offering and talking to [our old portal] about that, they didn’t want to make it white-labeled for us. They didn’t want to let us own our data and investors. They didn’t want to let us customize the checkout flow. With DealMaker, we really had nothing but the most enjoyable experience.” – Teague Egan

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Armed with DealMaker’s sophisticated communications tools, full data ownership, and a dedicated offering page free of competing deals, EnergyX raised over $55 million. The team had an incredibly different experience raising capital on a platform that felt like a true partner:

“Something that made a world of difference: the customer service was phenomenal, available at all times—really, truly first-class service. You guys work with us at a one-to-one relationship level. To be able to pick up the phone and have someone there to answer it, and to respond to your email so quickly, has really made a huge impact on the success of our campaign and is something you don’t find with a lot of companies. Having worked with other platforms, this is a big differentiator [DealMaker] offers.”

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Conclusion: Choosing a Platform that Prioritizes Your Success

Choosing the right platform for your capital raise is essential for maximizing your success. Marketplace-style crowdfunding portals may seem convenient, but it’s essential to look beyond brand recognition and consider the underlying dynamics at play—ultimately, they may be incentivized to work against your best interests.

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Remember, in the world of startup capital raising, every advantage counts. A platform that competes with its own clients introduces unnecessary challenges and conflicts of interest into an already complex process. Why start off on the back foot by choosing a platform that's both your facilitator and your competitor? With DealMaker, you get a true partner – one that succeeds when you succeed, and is dedicated to making that happen.

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By understanding the potential pitfalls and opting for a self-hosted offering, you can ensure that your marketing efforts, investor data, and communication strategies are fully aligned with your goals. Take control of your capital raise and set your business up for success by choosing a platform that truly supports your vision and ambitions.

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Your capital-raising campaign is too important to be undermined by platform conflicts. Choose a platform that puts your success first.