Strengthened by growing popularity, crowdfunding attracts more and more people who want to invest in companies that have an impact on their everyday life, while increasing their wealth. The simplicity of the crowdfunding process, and the relatively small amounts of capital needed to start, make it an ideal investment option for many small investors.
If you can't wait to participate in our equity crowdfunding campaign Grow With Oval, before it it goes public, but you don't a lot about crowdfunding and you're not an experienced investor, here are five questions to ask yourself to make sure you're as prepared as possible.
1. What’s being offered?
By now you will know that with equity crowdfunding a private company sells equities to investors to raise capital. Before launching yourself with enthusiasm into the campaign, examine in detail all the information and growth figures provided by the company, including (especially), the risk factor and what exact services the company is providing. Is there a market for it? Does it have growth potential? What is the state of that particular market?
If it’s a market that’s “on trend” but may not have a long term future, it may not be something you want to take a risk on. Similarly, if it’s a company trying to launch a product that lacks innovation you might want to take another moment to decide whether you want to invest your hard earned savings.
At the same time, however, keep your eyes and ears open, and don't miss the opportunity to invest in companies that aim to revolutionise an existing sector by offering a fresh perspective. Look to see if they have something that makes them stand apart from their competitors and break new ground.
2. Why is you investment important?
Specifically, ask why the campaign was launched. For many companies, crowdfunding is an excellent opportunity to raise capital, of course, but also to make its users an integral part of the business growth process.
We will never tire of repeating it: this is one of the main reasons that led us to launch our new crowdfunding campaign, despite having revealed a recent funding from other sources. Before investing, it is worth taking the time to examine in detail the reasons that led a company to rely on crowdfunding. Check who else is contributing to the company, to see if it already has the support and validation from major well-known institutions.
3. Who’s running the show?
Since this is your investment, it is essential to find out who holds the ranks of the company. One of the advantages of equity crowdfunding is the high level of transparency: take advantage of it and ask all the necessary questions. (Do you have questions about the Grow With Oval campaign? Contact our support team or write in our Facebook Community: we are ready to respond!)
Find out who the founders are and who is part of the company's leadership. Browse their profiles on LinkedIn and search for additional sources that prove their professional experience. Have they worked for successful companies previously? Are they experts in their field? Are they connected to other relevant professionals? Do they have a history of founding and running companies?
Whilst all these details are not guarantees of success, having solid and competent professionals at the helm will always serve a company well.
4. How and when was the platform founded?
The validity of the project, its market position, and its CEO aside, before you consider investing you should always look at the history of the crowdfunding platform itself.
Ask yourself how long it’s been in business, and consider its track record. How many success stories has it had on its platform? What is the level of user satisfaction? How high are its fees for investors?
Regardless of the potential of the project, it’s always better to opt for a professional, profitable, long running platform with a strong presence and good reputation in its field.
5. Will you need to access this money in a pinch?
Finally, before you make any decisions about whether to invest in a campaign, and what you need to be looking for, be very sure that you won’t need immediate access to the money at any point in the immediate future. This is investment, not savings. Equity crowdfunding is illiquid. That means that as soon as you put that money into a project, you could be looking at a forecast of several years before you receive returns.
All projects are different, of course, but make sure that you know exactly how long the funds will be bound and that you understand the company's growth plan in detail. Ready to Grow With Oval?
This post has been approved by Oval Money, which is authorised and regulated by the UK FCA. Your capital is at risk, and past performance may not be a reliable indicator of future results. Oval Money is not permitted to provide financial advice, and if you have any questions please consult an expert.