UPDATED – 4th September 2018
Crowdfunding still labours somewhat under the reputation that it isn’t quite as serious as other ways to invest, retaining the legacy of high-profile platforms like Kickstarter, which are really more about donating than investing.
That reputation is slowly changing however, as more investors catch onto crowdfunding’s enormous potential for good returns. As an illustration of the industry’s coming of age, Funding Circle recently announced it was looking to raise £300 million and become the first peer-to-peer lender to list on the London Stock Exchange, in a deal valuing the business at over £1.5 billion.
This new way to invest your money has a range of advantages which can provide great rewards, if you’re savvy enough to spot them. Here are three of the top reasons you should be investing through crowdfunding now.
Invest in Exciting Companies
While being secondary to making a good return, being able to help exciting, innovative businesses to grow is one of the biggest benefits of being an investor. Any investor who manages to find the next big thing is able to leave their mark on the world, simply through the success of their investment. A start-up can only become successful if it has a fresh, new or useful concept that can genuinely help solve a problem consumers have. Giving them the capacity to bring that concept to a wider market can be incredibly rewarding.
Choosing the right start-up can have a big impact, not just on your returns but on the whole industry. One of the key attractions to investing, and particularly becoming an angel investor, is being able to give small companies that you believe in a leg-up, and having the satisfaction of watching them achieve something special. With crowdfunding, it’s easy to become an angel investor, and start helping businesses which are doing something really exciting to grow.
Diversify Your Portfolio
At Crowd for Angels, the minimum investment required to get involved in each pitch can be as low as £25, so you don’t have to use a lot of capital for any one investment. That gives a good opportunity to diversify your portfolio, putting a small amount of money in a number of investments in order to spread your risk. Crowd for Angels charges investors no fees, so all of your money will go into the company of choice. This is unlike investing in public companies where brokers will charge a commission.
Find Lucrative Returns
The bottom line is still one of the most important things (if not THE most important thing) to consider when you’re thinking about where to invest your money, and the main attraction crowdfunding has is the potential for extremely lucrative returns. Since you’ll be investing in small businesses and start-ups with huge opportunities for growth, you have the possibility of getting a much higher return on investment than if you were investing in larger, publicly-traded companies, which have less space to expand.
While there are risks to crowdfunding, and many platforms don’t adequately vet their pitches, at Crowd for Angels we carry out extensive due diligence on every business that applies to raise money through us – only 7% of those who apply to raise funds are eventually placed on our platform. That means you can have the confidence that every pitch you’ll see on Crowd for Angels is a serious business with an exciting and original concept.
What’s more, the launch of the Innovative Finance ISA (IF-ISA) in April 2016 enables investors to earn tax-free* returns on loans and bonds issued by peer-to-peer (P2P) lenders and crowdfunding companies (such as Crowd for Angels) by putting them within the ISA wrapper. The main attraction of these financial assets is that the interest rates on offer are much higher than on Cash ISAs – up to 12% in some cases, balanced by increased risk associated with lending to smaller companies.
We expect crowdfunding to become far more popular and established in the future. Investors who get in early will be able to make the most of the many exciting investment opportunities on offer – with such strong potential rewards, investors would be missing a trick not to start diversifying your investments through crowdfunding.