What Do Investors Look For and Why Do They Invest? How Does Steemit Relate?
Investments can be important for companies. Why do investors invest? What are they looking at?
source
Does Steemit need investors?
What is Steemit trying to do?
What is the initial purpose?
I think (correct me if I'm wrong) from the Evil Plan for Cryptocurrency World Domination, the short-term goal is to get STEEM bootstrapped to get more people to use it. Then the idea is that as more people have STEEM, more people will use STEEM as a currency in markets to buy and sell goods and services. OK. How does that happen?
Many people are focused on that goal, and in order to achieve it they are seeking to do whatever they think will promote the achievement of that goal. Therefore, some have adopted the position that Steemit is to focus on becoming popular so that people use STEEM by having STEEM and getting it distributed to more people through popularized means.
To make Steemit popular, the focus is on popular content topics. Is that all that is required? To get what is popular to be the main focus on Steemit, so that what is popular can get rewarded and attract more people to post to try to get rewards for the content related to things that are popular in society, and that attracts more people, on and on?
If more people come and post and get rewards distributed, does that increase the value of STEEM?
If people think it does and they buy more STEEM, then indeed that is all that is required. If more people come, and more users use Steemit, then that make Steemit more attractive as a potential investment, and more people will buy the STEEM token believing it is a valuable investment, right?
Isn't that what happened in July? A new popular thing opened up and many people rushed to it at first in their perception and belief of it's success due to the popularity it had. But that was a popularity-based psychological bias called the bandwagon effect that didn't last. And then the bandwagon reversed with the "abandon ship" mentality taking effect.
There was a certain appearance to things that made it attractive, but the substance of how things worked in Steemit and some expectations seemed to not pan-out for many users who left shortly afterwards.
Perception and appearances factor heavily in the psychology of decision-making. Appearances (such as popularity) can have things seem one way, but the underlying substantive reality demonstrates something else.
What about investors for increasing the value of STEEM?
If no one buys STEEM for some reason, then there is no money being spent to buy into the "owner shares" behind Steemit. If people aren't buying STEEM based on the appearance of popularity, then why would they buy STEEM?
What are investors interested in when looking to invest in something?
Are investors looking at mere appearances, or are they looking at the substance of the organization?
Why invest in a company?
Investment Profit / Return on Investment
- investing means waiting for profit to come back to you, and grow base don value of company or its stock rising
Income / Dividends
- is there a steady stream of passive income from the investment, such as dividends
Diversification
- investing in a company has a default reason of not put everything in one basket
- spread out the risk to improve chances of profit return by investing in different companies
Influence in Company
- owning stock allows a vote to influence what happens in the organization
Belief in Management and Leadership
- a track record of experience in past business success is an indicator that they have experience and know what how to maneuver a business
Undervaluation
- take a gamble on something that has potential to be recognized by the market and boom at some future point
Business Costs / Sales
- look at how much the business is spending and how much it is making
Customer
- understand what it's like for a customer to use the product or service
- does the company actually fill a void in a market
- are there better alternatives?
- is the product recommendable?
- 3 types of customer:
- loyal promoter
- passively indifferent to stay or leave
- unhappy detractors
Growth
- has there been growth, will there be more growth, does the company understand how to achieve that growth?
- analyze sales data to find out of they are distributing more, or if sales are growing "organically" at existing locations
Risk factors
- be weary of risks that potentially affect the company's performance and its future growth
- are they trying something new instead of tried-and-tested?
- are there competitors who are more successful?
- established competitors can mean a difficulty breaking into the market
- what are the financial needs or future funding requirements to stay-up
Reasons not to invest?
Lack of Honesty About the Organization
- not being forthright and a lack of transparency creates disinterest in developing relationship
No "Secret Sauce"
- nothing of their own to be "defensible against potential competitors"
- having something unique increases likelihood of greater growth compared to competitors who lack the "secret sauce"
No marketing for Products/Services
- no identifiable marketing methodologies
Lack of proven success
- not having Key Performance Indicators (KPIs) to indicate how cash was used and how future cash is planned to be used to grow the business and revenue
No Proven Sales of Product/Service
- having already made something and sold it to someone willing to pay for it
- investing is less risky after a company has proven it can sell its stuff
Lack of Vision
- founders don't have a clear vision to grow the company
- lack of vision makes it difficult to even change and adapt a new vision
Lack of Understanding Competition
- believing there are no competitors
- how the competition is marketing and selling their stuff
- can be a recipe for failure
Imbalanced Production to Sales Qualifications
- building something, and selling it, are two different domains that rarely are qualities of expertise possessed by the same person
- the team needs people suited for each task
Lack of Dedication
- founders need to be 100% dedicated, or else we won't have much faith in what they are willing to do to make it succeed
- full time devoted to the business, not other jobs
- ideally having invested their own money to create a deeper motivation for success, where it's more humiliating to fail
- "fight to the death" to make the endeavor a success
If an organization wants to attract investors, doesn't a product or service need to attract investors?
What is Steemit creating and selling that is the potential for revenue generation?
Does Steemit currently attract investors? Why or why not?
Please voice your knowledge about this and let's arrive at some answers by better understanding what's going on :)
References:
- Reasons to Invest in a Company
- Reasons to Invest in a Company
- 6 things to know about a company
- 10 Things An Investor Must Do Before Investing
- 11 reasons we didn’t invest in your company
Thank you for your time and attention! I appreciate the knowledge reaching more people. Take care. Peace.
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@krnel
2017-02-12, 12:05pm
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Thanks.
Great post @krnel. These are the kinds of discussions we need more of. All the discussions recently have been around distribution of rewards, but without investors, eventually there will be no rewards to speak of.
For me, the two biggest things are:
Right, so I'm going to respond here in more detail... having reflected a bit and read a number of posts and articles about how people feel Steemit can be grown.
But let me start with a couple of cautionary tales.
Way back in "another life" I worked in marketing and industrial psychology. One of my lifelong takeaways is that "you get EXACTLY what you ask for." My corollary to which is "make sure you fully understand WHAT you're asking for, and WHO you're asking." A very quick example... a pretty swank camping goods store in my (then) local Austin, Texas wanted to have a big event to kick of spring sales and drive new business. So they had a big radio thing which included giving a free name brand sleeping bag to the first 100 visitors. Well, they got a crowd! On the surface, a HUGE (YUGE!) success... but there was a fundamental problem. Said crowd was not a crowd of shoppers for upscale camping gear, but a crowd of people looking for free stuff.
Cautionary tale, part deux: The web is littered with 20 years' worth of failed "user generated content revenue sharing" ventures. I have been part of-- or at least monitored practically every single one. There's a huge basket of different reasons for their failures... but one single common thread: A severe underestimation of the depth of human greed. I believe it is essential that the movers and shakers who drive Steemit sit with that, as a path forward is charted... because few things can destroy a viable project faster than a swarm of "money for nothing seekers."
So where does that leave us, vis-a-vis investors and Steemit?
From where I am sitting, sell the platform, sell the "social blogging," sell the sense of "alt community;" sell the "uncensored," sell the "no Big Brother watching;" and... oh, as an aside, you also get compensated here. Get people excited about investing in long-term community building; moving "towards the new economy."
One of the great beauties of Steemit is that it offers this "soft entry" into the world of cryptocurrencies. You don't have to spend six months "learning how to speak blockchain" in order to be a part of the system. If you can write, have a few interests, are artistic or own a camera... you've got instant access.
Patience is important, too. IF this is going to become solid, and a real "thing," it has to be built slowly, on a solid foundation. Going big, too soon greatly increases the chances of screwing the pooch. Look at a couple of recent mainstream disasters: Bubblews and Tsu. "Social media that rewards contributors." They had angel funding and even second round venture funding and Wall Street buzz... and then they tanked when a several-million-strong swarm of "get paid to post" locusts descended on the system and ate every cent before any kind of scaleable safeguards against gaming the system were in place.
Of course, Steemit isn't mainstream... but that doesn't mean we get to sit back and think the dynamics of the broader world don't apply here. Psychology is psychology.
I personally lean towards the Peter Lynch school of investing... a great story and a hot idea are lovely notions, but I am going to go out and actually LOOK at a venture and decide that I like it, and feel comfortable that those driving and promoting it (decentralized, or not) are stoked about what they are doing, are USERS THEMSELVES, and have a solid plan.
So where do we go? As far as I can see, this has to continue to be a "soft rollout" UNTIL people feel comfortable looking someone in the eye and saying "Steemit is an awesome alternative social network with a great set of features-- writing, social blogging, art publication, creativity, music, video, photo sharing, free speech, COMMUNITY, peer curated, support for alt/underground/anarchist perspective-- and oh, it's also centered around a widely traded cryptocurrency but don't worry, UNlike others, it's a very short learning curve-- and with your contributions, you are not only INVESTING in a great concept for the decades ahead (definite pitch to the "increase in value" angle, rather than the "cash out" angle), and you can also earn current income from your contributions."
Does that seem a bit ambitious? Or tame? Well, you mentioned the Bandwagon Effect... I feel it's important to downplay what I call the "Lottery Effect..." that would be using the handful of very high value users on the site as ANY kind of representation of what Steemit can do for you.
As comments go, this is already WAY too long, so I'll stop here. Besides, I am only a lowly minnow who's been poking at the edges of this place for ten days...
Resteeming, hopefully to get the conversation going :)!
So to answer the question on my side.
The product would be STEEM and the services would be the applications/services on the blockchain, the Steemit, all the apps, the quick transactions, the "censorship proof" of the platform.
Meaningful interactions, social interactions, a constant flow of information in a way, because the pot is distributed daily and every day people are incentivised to produce and distribute content. A stable place of growth maybe, just maybe for the future :)
I'm not sure if it does, I wouldn't think so. People here should be "underground" and "fringe" thinkers and believers. Because only such can find and adapt to a new platform like thins one. I would argue investment would come from supporters of such ideologies as, "anarchism", "volunteerism",etc..
And that is why others might not invest, not mainstream enough as @kristy1 has said once :D, if you can buy boats and hookers with it, it's mainstream :D.
I would argue, we need to flesh out our "business" plan and soon because others might outpace us. The strong pieces here are the blockchain and the currency, the site is lacking compared to other apps, like Discord and mainstream applications, YouTube, Facebook, LinkedIn, Twitter, .. but we have the added benefit of the free thinking people and the extra layer of many entrepreneurs and developers.
So work on the strong suits, maybe use them to build on top like people are doing already :), cloud for hosting, radio, maybe even video hosting, .. apps .. initiatives ..
Cheers ! !
Thanks for the thoughtful feedback, appreciated.
Oh no worries, I wish we could get going with some of those ideas. Start experimenting here and working together. I kind of don't like the fact most of the people here aren't sure what they are doing, what is going on, where the "money" is coming from and are just waiting and whining there is not enough to go around, while they chase some Status Quo and wait for their approval, in liquid Steem :D.
Everyone that has succeeded has either taken the initiative or has found his niche where he is king.
Stil while things are great on the surface, if you dig deep you will see the rotten and spoiled parts.
I for one lack the "connection" needed to work with others, "resources" need to be distributed over other apps, so Discord or the chat, still it moves you away from the main point. There isn't a valid way to be updated on others, unless you spend the extra amounts of time required.
And there seems to be a disconnect, from what things were 4-5 months ago when I joined and now when things are flowing more. More content, less exposure, and less talks. Less bigger topics being thrown around. I understand everything needs it's time and has its moment, but still.
The only place people gather on is some trending post or upcoming changes and even then, the paradigm doesn't change, people continue walking the way they are going, where is the Steem :D, Who cares is what I'm asking :D , starting to go on a rant here sorry :)
Good evening, thanks for the informative posts.
Yes, Steem certainly needs to attract investors or there is no market price (and consequently, no payouts).
The benefits of owning Steem has to be worth the cost of buying it, both now as early speculative investors and in the future as long term stakeholders.
The benefits of owning a stock are that, aside from increasing in value due to other investors (this is not long term sustainable on its own), they pay out dividends to the owner when the company finally becomes profitable.
Steem doesn't pay dividends, your stake only ever dilutes, even as an active user of Steem Power engaged in curation. So the other benefits have to outweigh the cost of that dilution. In the case of liquid Steem, the benefits are the ease of transacting (it works much better than Bitcoin, with no fees). But ultimately it will depend on the benefits of Steem Power (your ability to participate in directing the rewards distribution, as well as informal benefits of ownership such as status within the Steem ecosystem).
Clearly it does attract some, or there would be no market price. Of course there is a risk that Steem remains entirely speculative, like a stock such as Twitter, where they never turn into a genuinely profitable company (in the case of Steem it must be a genuinely valuable token to hold, in a non-speculative sense) and any increase in stock value is just funded by other speculative investors coming in.
Good post @krnel.
I could go down the list of "Reasons not to invest?" and put a check mark next to every single one when it comes to Steem/it, and easily defend my reasons for doing so.
On the "Why invest in a company" side, it is more of complicated situation. Some could be viewed as favorable, some not.
(Nevertheless this does not guarantee failure. There are many well-known examples of businesses that were pitched to intelligent investors who made this sort of analysis and declined to invest, followed by the business becoming a success, sometimes a big one.)
I skimmed through the list but I don't recall seeing management on the reasons to or not to invest.
Steemit as a platform, as a concept, the code the way it functions is actually rock solid. It's great system for blogging. The steemit system works.
It's the organizations that have tricked people into thinking they control what happens. They decide what is worth rewards or not. New people think guilds own the platform, which they don't but it looks that way to many.
It markets its self as a great place for everybody but that is not the reality now is it?
I know what it is like to be in favour of the whales. I know what it is like to fallout of favour for criticizing how some things work here. I have even been mocked afterwards.
The devs can't really make huge changes if only a few users are being effected so certain individuals go and make bots that piss everyone off until the devs make changes for them.
Steemit looked promising but to be honest its the people that made it great.
Something just isn't right and everyone can feel it. Everyone feels it.
Best investment comes from gut feelings.
No one wants to spend 8k dollars just to have 1 cent upvotes. The distribution of tokens is what stinks, bad.
I absolutely understand that too.
"Belief in Management and Leadership"
Skim less, read more? ;) Thanks for the feedback.
Hehe, I didn't apply everything to Steemit, such as the "secret sauce" is not missing since chainbase is pretty unique, the fastest blockchain out there, no? Success can indeed and does happen without "passing" all of the above for sure! Thanks for the feedback and upvote.
The graphene blockchain code is open source and can easily be copied. At least one if not more than one other blockchain has been launched since Steem using that code. Moreover there are other blockchains out there that are close enough (for example lisk has 10 second blocks).
Furthermore 'secret' doesn't apply since the methods being used are all public and can be copied if there were a demand for it (the aforementioned Lisk being an example of something using similar methods)
I think a growing number of people are tired of the garbage on most social media platforms and the idea that posts with quality content would be rewarded should hopefully steal or share more of the market in the coming years.
Quality of info matters, which more people need to come to the realization of if Steemit is to succeed IMO.
Lot of important questions raised here. I'm going to read, "digest" and be back.
Seems to me Steemit is reaching that important juncture where "having a great idea" needs to be replaced with "here are the goods." Only so many are going to throw their investment influence behind an idea; for broader support there must be something tangible. So first step is to clearly define "the goods."
In the meatime, resteeming.
With Steemit primarily being a social media platform, it would seem that the quality of the published content would be the thing to draw investment interests. From there, it can expand into other areas in the way Amazon has. @stephenkendal recently wrote a post about merchandising Steemit that would go along with this.
https://steemit.com/steemit/@stephenkendal/steem-woke-up-this-morning-with-a-eureka-moment-could-you-franchise-steem
Yeah, I read it just now, a few hours ago to be precise. Have to say I agree with him and the way he has portrayed it, really makes a world of a difference between what I have on my head and how simple it could be, my best bed now would be internet hosting on the blockchain :).
You get your "site" represented and some added benefits, verifications, extra revenue, promotion ..
And Steemit Business is born :)
@stephenkendal, should I resteem your post too :)
Thanks for the plug also @timothyb, got me thinking after all :)
great idea here!
Promoting steem as a currency and getting merchants to accept it is a big part of it, This morning I posted about a map that shows 3 places that I have so far managed to agree to accept steem or sbd.
Nice reading btw
Yeah, there are more places I'm sure, but they aren't official I guess and you have to talk it out with the owners, or get them on Steemit :D
Im having fun doing it, no stopping me now!