Retail investors are becoming more than shareholders

Andreeson Horowitz|  Oct 23, 2020

retail investors and ambassadors - Retail investors are becoming more than shareholdersHistorically, the definition of an investor has been almost entirely focused on the financial component: the flow of capital from those who have it to those who need it.

More recently, the venture capital model expanded the perception of what it means to be an investor. Startups now look for those with expertise, a strong brand, connections, and a slew of other resources, in addition to deep pockets.

Over the past decade, through the rise of alternative investments, fractional shares programs, and companies like Robinhood, it’s become easier for anyone to become an investor.

However in the public markets, retail investors are often still viewed solely as capital providers. Companies are unlikely to know who their retail investors are, much less engage with them.

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Hypothetically, let’s say you own shares in what we’ll call FintechCompany A. As a FintechCompany A shareholder, that likely means that you support the company’s vision, product, and leadership team and hope that it will succeed.

But as a retail investor, owning shares is about as deep as the relationship goes. Beyond that, your interactions with the company are limited: you probably don’t vote on board initiatives or provide input on new products or business strategies.

Now this, too, is changing: Companies are realizing the value of retail investors beyond their capital. Since these investors are financially married to the success of the company, they can be effective advocates in fostering brand loyalty and trust within their communities.

Today, more companies are finding ways to connect and engage with retail investors, parlaying that relationship (and community) into a competitive advantage.

What if instead of surveying random people on its next product launch or marketing campaign, FintechCompany A could ask you — a valued shareholder — to vote or offer an opinion?

What if you were rewarded for holding shares in FintechCompany A? What if you had your own referral code to encourage your friends’ businesses to choose FintechCompany A over FintechCompany B? Now instead of just giving the company capital, you’ve become a true asset.

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Interestingly, giving investors rewards is not a new phenomenon. McDonald’s, for one, offers a free item voucher to every investor in its annual report, as do many other companies. A new app called Stockperks even compiles shareholder rewards offered by publicly traded companies into one centralized database.

But expanding this behavior beyond rewards — effectively turning retail investors into brand ambassadors — is a new development, with fintech companies at the helm.

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