If you get excited about an idea and start working on it, sooner or later, you will be faced with the question of financing. Even if you find like-minded people in your team who are ready to go towards the goal of a share in the future business, you still need funds for tasks such as promotion. And crowdinvesting is one of the ways to attract them. If you are looking for crowdfunding or private investment platforms or dream of creating your own platform of this type, this article is for you.
What Is Crowdinvesting
Crowdinvesting is a financial tool for raising funds for startups and small businesses from a wide range of different levels of investors. This is not the same as traditional crowdfunding – collective financing of projects through special platforms based on voluntary participation.
Crowdinvesting is less focused on altruistic, social goals. Unlike crowdfunding, crowdinvesting suggests that investors receive a share of the company’s equity capital and are also aware of the risk of losing their investment. It works like this: an investor gives money to a project through a specialized platform and then returns it with interest.
The main emphasis in crowdinvesting is concentrated on specialized online platforms that attract the desired pool of investors using various marketing tools to participate in the financing of projects. Platform operators undertake technical support during investments and return on investments. For this, they charge a commission from the promoted project, from investors, or both. Ideally, everyone wins on crowdinvesting platforms: projects, investors, and the platform itself. If you are interested in launching a crowdfunding or private investment platform, we recommend contacting LenderKit.
For a startup, crowdinvesting can close the development stage when there is already a working prototype and initial funding has been received. The company does not yet meet the criteria of a venture fund, and for business angels, this amount of funding is already unaffordable.
Let’s look at the largest crowdinvesting sites.
The platform was founded in 2010 in San Francisco. Its peculiarity is that it combines a website for conducting crowdinvesting campaigns and a message board for those looking for work. AngelList has over 2 million job openings from tech companies and startups. 100,000 startups and tens of thousands of specialists are registered here, ready to become members of startup teams.
Another feature of AngelList is that it allows entrepreneurs and startups to run capital campaigns for free, with all fees paid by investors. More than $1 billion was raised through the platform.
The platform was launched in 2012 in Los Angeles and works mainly with tech startups, as well as social entrepreneurship projects, film startups, and entertainment startups. Crowdfunder connects more than 200,000 entrepreneurs and investors. This is a site for already quite advanced projects – with MVP, users, and investors.
Through the platform, 15,000 individual and institutional investors invest in projects. The average deal size here is $1.8 million. More than $160 million was raised through the site.
The site does not take a percentage of the funds raised. To launch a crowd campaign, you need:
- Create a profile (free);
- Prepare documents – they are quite complex, so it is better to seek help from a lawyer who specializes in their preparation;
- Subscribe – package prices: Starter – $299/month (raising funds for the project, public profile, notifying potential investors about the launch of the campaign); Premium – $499/month (in addition to the capabilities of the Starter package, it provides: campaign analytics, the ability to see investors who have viewed the project, the ability to search for investors through the platform and contact them, and 1 hour of consultations from platform specialists).
If you purchase the Premium package for 3 months, the platform gives a discount – you will pay $999 for the entire period.
A platform for projects that need financial support ranging from $150,000 to $1 million. The site has raised over $100 million for growing startups. The platform checks all applications from startups to launch a campaign that it receives and approves less than 1% of them.
MicroVentures looks for startups that have a new take on established technologies. The platform is suitable for projects whose products fall into the following areas: Internet technologies, media and entertainment, software, green technologies, mobile, society, and gaming. When evaluating startups, experts look at the team, traction, market size, and other factors before deciding whether a given project is suitable for the platform. In addition, the platform gives preference to those projects whose founders have invested their own funds in the development of the startup. Since 2019, the project does not charge a commission from startups and investors.
Through MicroVentures, over $220 million has been invested in over 400 startups. More than 110,000 investors are registered on the site.
The platform cooperates with startups exclusively from the consumer goods sector – food and drinks, personal hygiene products, household products, electronics, and pets. Most of the companies that are located on the site have an income of $1,000,000 or more per year, and absolutely every startup that launches a crowdinvesting campaign through the site has a product that can be tested. CircleUp has raised more than $390 million across more than 200 projects.
A special feature of the site is the presence of the Helio algorithm, built on the basis of machine learning. It identifies future trends and provides information in the form of convenient charts. The algorithm takes information from public data, partner resources, and analytics.
Helio identifies, categorizes, and evaluates companies in the North American market. This is especially attractive for investors who receive all the information about the startup they are interested in, its direct competitors in the market, and forecasts for industry development.
The platform allows you to invest in two ways: through crowdinvesting and through the CircleUp Growth Fund – when the investor transfers money to the platform, and it invests in projects selected by Helio.
Wrapping It Up
There are many crowdinvesting platforms in the world, and each of them has its own characteristics of interaction with projects and investors. When choosing, it is important to take into account all the nuances. If you intend to launch your own investment platform for crowdfunding or private equity, we recommend turning to LenderKit. The company provides a white-label solution with which you can start a business quickly and safely.