What the online shopping boom means for early-stage investing

28 May 2021|Fundraising, Investing, Latest Posts

By Chantelle Arneaud, Envestors. The amount of online shopping rose sharply in 2019 influenced by Covid-19 however, it had been on the rise since 2007. It now accounts for just under 30%[i]of total retail sales in the UK. Importantly this is an irreversible trend.

In the past twelve months we’ve seen the demise of iconic high-street retailers that had been part of the UK’s cultural landscape. Debenhams had over two hundred years of history, while the younger Top Shop was frequently referred to as the ‘jewel of the high street’. Yet both fell into administration.

The way we shop has changed forever.[ii] It’s easy to write this off as consumer behaviour that has nothing to do with early-stage investing. However, the expansion of online shopping is not limited to clothing or everyday consumable. It is an important part of the buying process for all types of buyers for all types of products. As entrepreneurs will be aware, whether you’re buying an enterprise-grade software solution, a house, a bicycle, or equity in a business, the online channel is a crucial part of the journey.

Purchasing decisions start with research online

For both B2B buyers and consumers, the buying process begins with online research. A Google study confirmed that 92% of people begin their buying journey online. That leaves only 8% wholly reliant on other means to investigate purchasing decisions.

Do angel investors fall into the 8%?

A common belief in the early-stage investing space is that High Net Worths (HNW) don’t like to do things online. However, this is proven not to be the case. A PWC study found that 98% use the internet daily[iii]and for up to three hours. Beyond this, a second study by Accenture Consulting[iv]confirmed 83% use digital for financial services. It’s worth pointing out that both of these studies are several years old, and it is reasonable to assume that the use rates of digital have increased since the time of publication.

So, if you’re a network promoting investment opportunities and you’re not using the online channel, you are absolutely missing out on a key phase of the investors’ journey.

Customer loyalty can’t be relied on

Networks which don’t offer the convenience of an online channel to their investors may believe that it doesn’t matter; your investors have been with you for years and are loyal.

Another look at retail proves that there is no such thing as customer loyalty.

The loyal customer base that Debenhams and Top Shop built up, slowly trickled away as new digital-first players came in and offered a better, more tailored experience.

It’s easy to blame the pandemic. But the truth is that Covid-19 was but the last nail in the coffin for these iconic retailers. Both were struggling before Jan 2020. The reason: they weren’t giving their customers what they wanted.

Generations grew up, times changed, new savvier players like Asos, came into the market – and their once-loyal customers left.

Customers are only loyal for as long as it suits them. If something better comes along, they will move on.

What we’re seeing in the early-stage investment market is a number of new digital-first investment clubs like the Envestors Private Investment Club, Angels Den, or Chorus. These next-generation investment networks are the Asos of the investment space. They understand that investors want always-on, self-service access to deals and they are ready to deliver.

Shared interests, experiences and data

Since 2003, when Amazon began its category expansion, all other retailers have struggled to keep up with them. There are myriad reasons for this, but a core one is their mastery of data. A digital-first company, Amazon knows more about its customers than they’d probably be comfortable with.

They collect data from every interaction, and use it alongside trend data from other customers, in order to help users make buying decisions. They are so good at it they often identify you need something before you’ve even realised.

Can angel networks say the same thing?

Do you really know what your investors are interested in without taking advantage of all the options digital has to offer?

Investment networks are reliant on face-to-face interaction and personal relationships. Now, relationships are crucial to early-stage investing. But data can be used to empower your existing relationships.

With online platforms you can collect data on investor interests – both those they state explicitly and those you can infer based on their online behaviour. This data, at both the individual and macro level, can be invaluable to you in catering to their needs.

Take the case of an investor who has told you they are interested in B2B SaaS, but through data analysis you see they’ve begun browsing deals in the cleantech space.

Perhaps they’ve decided they want to add some companies in this industry to their portfolio, or perhaps the interest is latent and they themselves are unaware of it. You might decide to introduce them to other investors experienced in the space or even hold a forum to discuss trends or specific deals. This little insight can very easily be used to deepen engagement among your audience.

Another application is in deal selection. With data on which deals are getting the most engagement you can start to look for similar deals to bring to your investors.

Change is inevitable

The early-stage investment space is a traditional one – for now. But as we saw in the retail example, traditions can be supplanted as quickly as a Prime delivery.

Needs have undoubtedly changed. We are at a point where people expect an always-on, personalised service. They like to be empowered to do their own research and to drive their own agenda and without a digital offering they have to wait. Given this, traditional networks need to move ahead. If not, they’ll fall behind the new players who are catering to the needs of the modern investor.

ABOUT THE AUTHOR

Chantelle Arneaud is from Envestors. The company’s digital investment platform brings together entrepreneurs and investors across geographies, communities and sectors – creating the single marketplace for early stage investment in the UK.

Envestors partners with accelerators, incubators and angel networks to provide a white-label platform empowering them to promote deals, engage investors and connect to other networks.

Founded in 2004, Envestors has helped more than 200 high growth businesses raise more than £100m through its own private investment club.

Envestors is authorised and regulated by the Financial Conduct Authority.