What Are the Top 7 KPIs Metrics of an Equity Crowdfunding Business?

For artisan marketplaces, understanding and tracking key performance indicators (KPIs) is essential for achieving success and growth. In the fast-growing world of equity crowdfunding, having a grasp on industry-specific KPIs can make or break your marketplace's performance. In this blog post, we will delve into seven crucial KPIs that are tailored to artisan marketplaces, offering unique insights and practical tips for small business owners and artisans looking to optimize their marketplace performance. Whether you're a seasoned entrepreneur or just starting out in the world of equity crowdfunding, this post will provide valuable information to help you navigate the complex world of KPIs in artisan marketplaces.

Total Funds Raised

Definition

Total Funds Raised is a key performance indicator that measures the amount of capital accumulated by a business through equity crowdfunding. This KPI is critical to measure as it provides a clear indication of the company's ability to attract investment from individual investors, which is essential for the growth and development of small to medium-sized enterprises. It also reflects the market's confidence in the business and its potential for future success. Monitoring Total Funds Raised is vital in the business context as it directly impacts the financial health, operational capabilities, and expansion opportunities of the company. Additionally, this KPI serves as a significant indicator of the effectiveness of the equity crowdfunding platform in facilitating successful fundraising campaigns for businesses.

How To Calculate

The formula for calculating Total Funds Raised involves summing up the total amount of capital raised by the business through equity crowdfunding. This includes all the individual investments made by the community of investors on the platform. The calculation does not include funds obtained from other sources like traditional financing, loans, or grants. The amount should be aggregated over a specific period of time, typically the duration of the fundraising campaign or a set timeframe determined by the business.

Example

For example, let's consider a growth-stage SME that successfully completed a fundraising campaign on MainStreet Equity's platform. During the 60-day campaign period, the business attracted individual investments from 500 different investors, totaling $750,000. Therefore, the Total Funds Raised by the SME through the equity crowdfunding platform for that specific campaign would be $750,000.

Benefits and Limitations

The advantage of using Total Funds Raised as a KPI lies in its ability to provide a clear and quantifiable measure of investor interest and support for the business. It reflects the capacity of the business to secure capital from the crowd, providing a valuable snapshot of its financial standing and potential for growth. However, it's important to note that Total Funds Raised may not capture the complete investment landscape of the business, as it excludes other forms of financing. Additionally, it does not necessarily reflect the long-term financial sustainability or profitability of the company, so it should be used in conjunction with other financial and performance metrics to provide a comprehensive analysis.

Industry Benchmarks

According to industry data, the typical Total Funds Raised by high-potential startups and growth-stage SMEs through equity crowdfunding in the US ranges from $100,000 to $500,000. Above-average performance would see companies raising between $500,000 to $1 million, while exceptional fundraising efforts could yield over $1 million in total funds raised.

Tips and Tricks

• Implement targeted marketing and communication strategies to raise awareness about the fundraising campaign and attract potential investors.
• Offer attractive incentives or rewards for investors, such as early access to products or personalized experiences, to drive participation in the equity crowdfunding campaign.
• Engage in active investor relations and provide regular updates on the business's progress and milestones achieved to maintain investor confidence and support.
• Collaborate with the equity crowdfunding platform to leverage their marketing packages and featured listings for greater visibility and investor outreach.

Investor Acquisition Rate

Definition

The Investor Acquisition Rate is a key performance indicator that measures the rate at which new investors are brought into an equity crowdfunding platform. This ratio is critical to measure as it directly reflects the platform's ability to attract and engage potential investors, which is fundamental to the success of the businesses seeking funding through the platform.

How To Calculate

The formula for calculating the Investor Acquisition Rate is the total number of new investors acquired over a specific period, divided by the total number of existing investors at the beginning of that period, multiplied by 100 to express it as a percentage. The number of new investors reflects the growth of the investor base, while the existing investors serve as the baseline for comparison.

Example

For example, if an equity crowdfunding platform has acquired 500 new investors over the last quarter, and had a total of 2,000 existing investors at the beginning of the quarter, the Investor Acquisition Rate would be calculated as follows: Investor Acquisition Rate = (500 / 2,000) x 100 = 25% This means that the platform successfully increased its investor base by 25% during the quarter.

Benefits and Limitations

An increasing Investor Acquisition Rate signifies the platform's ability to attract and engage new investors, leading to greater capital influx for businesses raising funds. However, a limitation of this KPI is that it does not account for the quality or size of investments made by new investors, which could impact the overall financial health of the platform.

Industry Benchmarks

Based on industry benchmarks within the equity crowdfunding space, a typical Investor Acquisition Rate for a successful platform falls between 15-30%, with exceptional performers achieving rates of 30% or higher. These benchmarks are reflective of a platform's ability to continuously engage and expand its investor community.

Tips and Tricks

• Implement targeted marketing strategies to reach potential investors in different industries and demographics.
• Engage in investor education and outreach programs to raise awareness and interest in equity crowdfunding.
• Offer incentives or referral programs to encourage existing investors to bring in new members to the platform.

Average Investment Amount

Definition

The Average Investment Amount is a key performance indicator that measures the average size of investments made in a specific equity crowdfunding platform over a certain period of time. This KPI is critical to measure as it provides insight into the amount of capital that individual investors are willing to allocate to businesses through the platform. By understanding the average investment amount, the platform can tailor its marketing strategies to attract businesses that align with investor preferences and expectations, ultimately impacting the success of fundraising campaigns.

How To Calculate

The formula for calculating the Average Investment Amount is the total sum of investments made divided by the number of investors. This provides a clear and concise understanding of the average size of investments being made on the platform. The total sum of investments represents the overall capital raised, while the number of investors indicates the total participation in investment activities.

Example

For example, if a crowdfunding platform raised a total of $1,000,000 from 100 investors, the calculation of the Average Investment Amount would be $1,000,000 ÷ 100 = $10,000. This means that the average investment made by individual investors on the platform is $10,000.

Benefits and Limitations

Effectively measuring the Average Investment Amount can help the platform understand investor behavior and preferences, allowing for targeted marketing and campaign strategies. However, it's important to note that this KPI may be influenced by outlier investments, potentially skewing the average.

Industry Benchmarks

In the US context, industry benchmarks for the Average Investment Amount in equity crowdfunding platforms can vary significantly. Typically, average investment amounts can range from $1,000 to $50,000, with exceptional performance levels reaching above $100,000.

Tips and Tricks

- Encourage participation in the platform through personalized investment opportunities - Provide clear and transparent information about potential returns and risks - Highlight success stories of businesses funded through the platform - Offer investment diversification options to accommodate varying investment capabilities - Leverage social proof and investor testimonials to build trust and credibility.

Campaign Success Rate

Definition

The Campaign Success Rate KPI measures the percentage of fundraising campaigns that meet or exceed their target funding goals. This ratio is critical to measure because it provides insight into the effectiveness of the platform in helping businesses secure the necessary capital for their growth. For MainStreet Equity, tracking this KPI is essential as it reflects the platform's ability to attract investors and support businesses in achieving their fundraising objectives.

How To Calculate

The formula for calculating the Campaign Success Rate KPI is as follows:

This formula requires counting the number of campaigns that successfully reach their funding goals and dividing it by the total number of campaigns, then multiplying the result by 100 to express it as a percentage.

Example

For example, if MainStreet Equity hosted 50 fundraising campaigns in a given period and 40 of them successfully met or exceeded their funding targets, the Campaign Success Rate KPI would be calculated as [(40/50) x 100] = 80%. This means that 80% of the campaigns achieved their funding goals, indicating a relatively high success rate for the platform.

Benefits and Limitations

The advantage of tracking the Campaign Success Rate KPI is that it provides a clear indication of the platform's effectiveness in supporting businesses to secure the necessary capital. However, a potential limitation is that this KPI does not account for the size of the funding goals or the extent of investor participation, which may impact the overall success of the campaigns.

Industry Benchmarks

In the US context, the industry benchmark for Campaign Success Rate varies by sector. For equity crowdfunding platforms, a typical benchmark ranges from 70% to 80%, with above-average performance reaching 85% and exceptional performance exceeding 90%.

Tips and Tricks

• Provide comprehensive guidance to businesses in setting realistic funding goals for their campaigns
• Engage in targeted marketing efforts to attract a larger pool of potential investors
• Facilitate networking opportunities for businesses and potential investors to build trust and confidence in the platform

Equity Retention Rate for SMEs

Definition

The Equity Retention Rate for SMEs is a key performance indicator that measures the percentage of ownership retained by the original founders or business owners after raising funds through equity crowdfunding. This ratio is critical to measure as it demonstrates the ability of a company to maintain control and ownership over its operations, products, and intellectual property. In the business context, a high equity retention rate signifies that the founders and owners maintain significant control and stake in the company's success, which is essential for long-term strategic decision-making and maintaining alignment with the interests of investors.

How To Calculate

The Equity Retention Rate for SMEs can be calculated by dividing the total equity owned by the founders by the total equity raised from crowdfunding and then multiplying the result by 100 to express the ratio as a percentage. The total equity owned by founders includes any pre-existing ownership stake before the crowdfunding campaign and any additional equity acquired through subsequent fundraising rounds. The total equity raised from crowdfunding represents the sum of all equity shares purchased by investors through the crowdfunding platform.

Example

For example, if a startup company initially owned 60% of the equity in the business and then raised an additional 40% through an equity crowdfunding campaign, the equity retention rate for SMEs would be calculated as follows: Equity Retention Rate for SMEs = (60% / 100%) x 100 = 60%. This demonstrates that the original founders retain a 60% ownership stake after the crowdfunding round.

Benefits and Limitations

The high Equity Retention Rate for SMEs indicates a strong level of control and ownership maintained by the founders, which can lead to more consistent and long-term decision-making, aligning with the company's original vision, and protecting the interests of employees, customers and investors. However, a potential limitation is that a very high equity retention rate can sometimes signal an unwillingness to dilute ownership, which may restrict the company's ability to raise additional capital in the future.

Industry Benchmarks

According to industry benchmarks, the typical Equity Retention Rate for SMEs in the US falls between 50% to 70%, with above-average performance levels reaching up to 80%. Exceptional companies often maintain an equity retention rate of 90% or higher, demonstrating a strong commitment to retaining ownership and control.

Tips and Tricks

• Regularly assess the equity retention rate to ensure it aligns with the long-term strategic vision of the company.
• Consider strategic partnerships and alternative funding sources to maintain control while still raising necessary capital.
• Communicate openly with investors and clearly articulate the reasons behind decisions related to equity retention.

Investor ROI (Return on Investment)

Definition

Investor ROI, or Return on Investment, is a crucial Key Performance Indicator (KPI) that measures the profitability of an investment. For equity crowdfunding platforms like MainStreet Equity, understanding the return on investment is essential as it directly impacts the attractiveness of the investment offers listed on the platform. It measures the gain or loss generated on an investment relative to the amount of money invested and is fundamental in determining the success of an investment opportunity.

How To Calculate

The formula for calculating Investor ROI involves dividing the net profit from the investment by the cost of the investment, then multiplying the result by 100 to get a percentage. The net profit can be determined by subtracting the initial investment amount from the current value of the investment. This KPI takes into account the amount of return generated for every dollar invested, providing a clear picture of the investment's profitability and efficiency.

Example

For example, if an investor initially invests $10,000 in a startup and the investment grows to a current value of $15,000, the net profit would be $5,000. Using the Investor ROI formula, the calculation would be: (5,000 / 10,000) x 100 = 50%. This means that the investor has gained a 50% return on their initial investment.

Benefits and Limitations

The Investor ROI KPI provides businesses with a clear measure of the profitability of their investment offers, helping them attract potential investors. However, it does not account for the lifespan of the investment, making it essential for businesses to consider this KPI in conjunction with other metrics to get a comprehensive understanding of the investment's performance.

Industry Benchmarks

According to industry benchmarks in the US, typical ROI for equity crowdfunding investments in high-potential startups and SMEs ranges from 20% to 30%, while above-average performance levels can reach 40% or higher. Exceptional performance in this industry can result in ROI figures exceeding 50%.

Tips and Tricks

• Focus on offering investment opportunities with strong growth potential to increase ROI.
• Regularly analyze and compare the ROI of different investment offers to identify the most attractive options for investors.
• Provide transparent and detailed financial information to build investor confidence and attract higher ROI opportunities.

Repeat Investment Frequency

Definition

Repeat Investment Frequency is a key performance indicator that measures the frequency at which individual investors participate in more than one equity crowdfunding campaign within a specific time period. This KPI is critical to measure as it provides insights into the level of investor engagement and loyalty within the platform. For businesses, it indicates the effectiveness of their fundraising campaigns in attracting repeat investors, which is indicative of investor satisfaction and confidence in the business. This KPI is critical to measure as it impacts the long-term sustainability and growth potential of an equity crowdfunding platform and the businesses seeking funding. It matters because repeat investments not only demonstrate investor trust and confidence in the platform and businesses but also contribute to a more stable and consistent funding pipeline.

How To Calculate

Repeat Investment Frequency can be calculated by dividing the total number of repeat investors by the total number of unique investors and then multiplying by 100 to express it as a percentage. The formula for calculating Repeat Investment Frequency is as follows: To calculate this KPI, the total number of individual investors who have participated in more than one equity crowdfunding campaign within a specific time period should be divided by the total number of unique investors. Multiplying this ratio by 100 gives the Repeat Investment Frequency as a percentage.

Example

For example, if an equity crowdfunding platform has 500 unique investors in a year, and out of those, 100 investors have participated in more than one campaign within the same time period, then the Repeat Investment Frequency can be calculated as follows: This means that 20% of the unique investors on the platform have made repeat investments within the specified time period.

Benefits and Limitations

The benefit of measuring Repeat Investment Frequency is that it provides insights into investor loyalty, engagement, and the platform's ability to foster repeat investments. However, a limitation may arise if investors are incentivized to make repeat investments through schemes that do not reflect genuine interest or confidence in the business.

Industry Benchmarks

In the US equity crowdfunding industry, the typical Repeat Investment Frequency ranges between 15-25% for established platforms with a strong investor community. Above-average performance would fall in the range of 25-35%, while exceptional performance could exceed 35%, indicating a highly engaged and loyal investor base.

Tips and Tricks

• Build strong investor relationships through regular communication and updates.
• Offer unique perks or benefits to repeat investors to encourage their loyalty.
• Showcase success stories and positive outcomes of previous investments to instill confidence in potential repeat investors.
• Provide personalized recommendations for future investment opportunities based on previous investment history.