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How to syndicate investments in start ups with equity crowdfunding
Rise of the Online Angel Investor series: #9
If you’re thinking of investing in unlisted (start up, early stage, and more established businesses which are not yet listed on the stock market) companies online for the first time, there are ways you can turn what seems to be one giant leap into just a small step.
Although you may already invest online and own shares in listed companies, such as the FTSE 100 etc, the world of unlisted businesses can seem daunting.
Don’t worry about things too much, though. There are ways to make the process a little less daunting and a whole lot more exciting! If you build a portfolio of at least 10 early stage businesses, as suggested by the Nesta report: Siding with the Angels, studies have found that 1-2 will perform brilliantly, 2-3 will do “alright”, and the rest will fail. This approach will give you the best chance of generating the 25% ROI as shown in the Nesta report.
The ROI of the 1 or 2 businesses which perform brilliantly should cover any losses caused by the other investments. You can find more information by reading this post on “The ‘what’, ‘how’, and ‘why’ of building a diversified portfolio”.
But for a chance to receive this level of ROI, you’ve got to invest like an angel
...and it’s easier than you think. With the right online equity crowdfunding platform, one which is structured in such a way that it facilitates co-investment between crowd investors and more experienced angel investors and VCs, you can mitigate the risks associated with investing in start up businesses.
GrowthFunders offers this co-investment and syndication approach
So how can an online equity crowdfunding platform enable you to:
1. choose the “right” businesses - those with the biggest high growth potential and the best chance of delivering a return on investment (ROI),
2. protect yourself and the investment(s) you make,
3. manage your own portfolio, feeling confident and comfortable with your investment decision(s)?
#1 Co-invest alongside angels and VCs
1. How do you know which businesses will do well?
The short answer is: at this point, you might not know what to look for. The longer answer is: there are things you can do - approaches you can take - which could mean that you choose businesses which perform brilliantly and grow quickly to become revenue-generating and highly successful. Asses each opportunity - for some top tips, read the 5Ms of what to look for before investing.
Investment opportunities which have been anchored by professional investors often carry a little more clout with them. Why? Because this is what experienced angels and VCs do.
They’ve had a lot of experience with investing in businesses at all different stages of growth and across every sector. They know what has worked previously and why, as well as what hasn’t worked and why it hasn’t.
From this, the professional investors can apply this information to current opportunities and make qualified decisions.
Professional investors know how to conduct due diligence to a very high level. They know what they want to see when conducting background checks and market research.
This, added to the due diligence which can be crowdsourced on a crowdfunding website, means that a lot of questions are being asked and a lot of valuable information is being gathered. Find out more in our post on conducting due diligence when investing online.
#2 Minimise risks. Maximise returns
You can take advantage of SEIS (Seed Enterprise Investment Scheme) and EIS (Enterprise Investment Scheme) when investing in compliant start up, early stage, and established businesses, which could mean that you receive up to 64% relief.
You have the opportunity to take part in follow-on funding rounds, at the same time as professional investors, in order to protect the value of your shares against dilution.
#3 Managing your own investments
You can invest in any of the businesses currently listed on the GrowthFunders platform for as little as £100. No one is going to make you join a network and invest the same amounts of money as angels: £10,000+.
When you invest in businesses via a well-structured equity crowdfunding platform, you can make your own decisions, investing smaller amounts, and managing your own portfolio online.
Last, but certainly not least, you want to invest online in a simple, streamlined way, which isn’t time-consuming, and allows you to make your own decisions. Want to visit a place where co-investment between crowd investors, experienced angels, and VCs exists?
Then look no further than GrowthFunders. Our structure allows the first-time investor to invest alongside professional investors who know exactly what to look for in a business with high growth potential.
You can have confidence with your choice of investment opportunity because this is what angel investors and VCs do, and therefore they have lots of experience.
Managing your own investments and making your own decisions will enable you to give yourself the best chance of achieving the same ROIs (22%-25%) as experienced angel investors.
Are you ready to build your investment portfolio? Why don't you head over to our pitch pages and take a look at our selection of tax efficient investment opportunities all with high growth potential.