If you’re already an investor in crowdfunding, or new to the industry and want to learn more, take a look at Crowd for Angels’ 17 essential tips for investment success.
TIP#1 – Make sure that every year you take advantage of your ISA allowance – £20,000 for the 2017/18 tax year. This can be put into the cash, stocks & shares and innovative finance ISAs in whatever proportions you like. For more information of the Crowd for Angels’ IF-ISA CLICK HERE
TIP#2 – Take advantage of tax breaks on equity issues, including the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS). These government incentive programmes offer generous income tax and other reliefs on your investment. For more details CLICK HERE. Remember that tax law can change and is dependent on individual circumstances.
TIP#3 – Don’t keep all your eggs in one basket – in other words, spread your investments around a variety of assets in order to protect yourself if anything goes wrong.
TIP#4 – How diversified should you be? It is recommended to put no more than 10% of your investment pot into any one crowdfunding pitch.
TIP#5 – Only invest what you can afford to lose.
TIP#6 – For more ideas about creating a balanced portfolio which suits your financial needs do more research into the types of available investments. Or you could pay for the services of a qualified financial advisor.
TIP#7 – Be wary of “buzzwords” like #fintech #blockchain #big data etc. This can lead you to get caught up in the marketing message rather than how good an investment proposition a company has.
TIP#8 – On that note, don’t get caught in the hype, try to take the emotion out of investing.
TIP#9 – Follow your investee company on social media before and after investment so you can keep up to date with what they are doing and to find out their level of customer engagement. You can also read updates on the company’s progress via the Crowd for Angels website.
TIP#10 – Send an email to the company to find out how responsive they are. You can be a customer too to see how they are being treated.
TIP#11 – Be wary of hockey stick projections. It is extremely unlikely a company will swing from a small loss to a huge gain in a short-period of time. Many companies tend to over-estimate their forecasts in earlier years and under-estimate them in the long-term.
TIP#12 – Consider how much of their own money the directors have invested into the business. “Skin in the game” is an important factor for many professional investors.
TIP#13 – Looking to invest in an app? Download it first to check that it meets your expectations.
TIP#14 – Make sure to visit a company’s website and check that the information provided in the company’s pitch and directors’ experience match your expectations.
TIP#15 – Compare the company with similar companies in the sector to see what unique offerings they have over their rivals. The more differentiated a business is, the more likely it is to be a success.
TIP#16 – Don’t look a gift horse in the mouth – boost your non-financial returns with rewards. Many crowdfunding campaigns will offer additional bonuses to investors who subscribe a certain amount of money. These can potentially be worth hundreds, or even thousands, of pounds. For example, watch business Czapek & Cie gave generous product discounts to investors in their crowdfunding campaign.
TIP#17 – All equity investors need to realise a return on their investment eventually so read through the company’s exit strategy and see if it matches your expectations and investment timeframe.
Join the debate and tell us your essential tips when investing.