Democratising private equity

The life of a micro-investor

Imagine being part of the numerous of exciting business journeys that change the shape of the world and which are improving upon existing products, services and/or processes. This is possible through equity crowdfunding, a rapidly growing sector across the globe with the lion’s share of activity in the EU taking place in the United Kingdom, France, Germany, Italy, Spain and the Netherlands. The early origins of this industry can be traced back to a platform launched in Canada at the end of 2009. While other forms of crowdfunding also arose between 2006–2009, perhaps as a direct result of the hardship encountered accessing ‘institutional’ financial resources during and after the Great Recession.

Before I tell you my story, here is a quick top-line view of the market; Crowdfunding as a whole comprises of four segments which fall into two categories, as depicted below:

Equity crowdfunding means everyone can own a piece of the ‘next big thing’. It allows the many to be part of the innovation that changes our societies (for better or worse, that’s now up to you). Imagine having been an early investor in Apple/Microsoft. Besides having quite a bit of spare cash now it would have meant being involved in the digital revolution that changed the world.

In this digital world of ours that was formed during this revolution, being part of the ‘next big thing’ is both a lot easier in terms of accessibility and a lot harder. To become part of future in the making, as a crowd-investor, the first hurdle is choosing a platform, there are 510 active platforms in the EU (Jan 2017) of which 143 alone are based in the UK, and it is not always clear what form of crowdfunding these are offering. Secondly, once you’ve identified one you like, platforms usually have a multitude of investment opportunities available, from seed stage ventures to startups which are raising for the second or third time. In other words there is a lot to sift through in terms of opportunities and information, a lot of due diligence is required before deciding to invest.

Perhaps the biggest hurdle to become an equity based crowd-investor is consciously giving up your money and accepting that you might never see it again. (NB: if you are a UK resident make sure you submit your EIS & SEIS forms to claim income tax relief)

Many will think twice when faced with this risk warning. However, to be part of ‘the next big thing’ you have to allow yourself to let go of any such inhibitions towards financial risk taking. Intrinsically motivating yourself to pour your SPARE cash into someone else’s venture while accepting that being part of something, no matter how small, is a lot more important than the potential extrinsic reward that might or might not be waiting for you at the end of that ‘journey’.

‘What’s next’ is a question that keeps most of us occupied and you can become part of that what is next by being a crowd-investor. Firstly, I always remind myself that enjoying the journey to that what is next is more than half the fun. So a first step is letting go and being mindful of your actions pertaining to these investments. I invest small to medium sized amounts in next-gen startups which I know might fail, so part of of letting go is also not focusing on short-termism. These investments usually take time to materialise into returns, if providing any ROI at all.

Platform recommendations

While typing in ‘equity crowdfunding’ into Google will render useful results to get started. I would recommend Crowdcube (UK based, international exposure) as it is a great platform to invest with, being the platform of my personal preference it has great costumer service, platform features and UX. It has recently become the market leader after a great first quarter in 2017 (it also operates under partnership form in Spain).

Yet crowd-investors might also prefer Seedrs. In Germany I am using Companisto, the market leader there, while in Netherlands I would probably recommend Symbid. There are a few others which I haven’t used yet such as Invesdor (Finland), FundedByMe (Sweden) and SeedMatch (Germany).

The reason for excluding some other platforms is quite simple, I micro-invest. For example SyndicateRoom would require a minimum investment of ￡1,000 and that’s a bit to steep for my budget, being a (spare) cash-strapped millennial. Besides, I enjoy being a brand ambassador and am usually an end user of the goods or services that are provided by the startups I invest in (e.g. Monzo, Freetrade, WiseAlpha, Notes, Rejuvenation Water, Bluebella, Mogul News, etc). In whatever way you look at it, spending some of my spare cash (most platforms allow investments from as little as ￡/€10) and time means I potentially am part of that what will revolutionise our societies and you could be too!

If you still have doubts as to whether or not you should invest ￡10 to ￡250 (or more) or would like to discuss the venture(s) you are looking to invest in do leave a comment below.

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Further reading; the Gender Equity gap, a call for more female founders and crowd-investors.

Originally published on 07/05/17