San Francisco startup LOYAL3 enables brands to sell stock to their customers on their website or Facebook page. The platform makes the process easy for consumers, and could encourage more valuable consumer relations.
Crowdfunding equity was expected to encourage small business growth, but we can now expect other benefits to arise from enabling more people to invest online. LOYAL3 predicts that if customers can easily and inexpensively buy stock in companies that they shop from, they will care more about these brands and be more loyal to them. The San Francisco-based startup is made up of a group of companies: parent company LOYAL3 Holdings, Inc; platform and service developer LOYAL3 Labs, Inc; and the cash and securities handler LOYAL3 Securities. Together, they form LOYAL3, which provides a way for public companies to offer stock directly to customers from their website or Facebook page with a Customer Stock Ownership Plan (CSOP).
Democratizing access to stock
LOYAL3’s strategy mostly involves lowering the barrier of entry for both companies and their customers to trade stock. Companies offer a CSOP, and if they are just going public, a CSOP IPO, and cover customer fees in order to appeal to a wide consumer base. If they increase stock ownership this way, LOYAL3 clients believe that customers will be more loyal, visit stores and sites more, and tell friends about the company. Customers connect a credit card, debit card or bank account to their LOYAL3 membership. To buy stock, they can choose to invest a minimum of $10 in three clicks, while choosing to buy once or on a monthly plan. There are a few more restrictions on IPO investment - the minimum is $200, payable only by checking account.
Capitalizing on social networks and virality
Making investment simple may encourage more consumers to buy stock - it seems likely that people who really like a brand would be willing to chip in at least ten dollars to own a piece of it. With the LOYAL3 Facebook App, customers can share this with their network, even more directly promoting this new type of investment opportunity. Current CSOP offerings are slim with only Fifth & Pacific Companies being offered, but may gain momentum. As another offering made possible by the JOBS Act passing, this category is certain to see growth and more interesting players to utilize equity crowdfunding.