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Evaluate Crowdfunding Investments Before Making a Decision

Crowdfunding has proven to be of great help to raise funds virtually. Because of technology, people can reach more audiences with a generous heart, to help fund their endeavors. Crowdfunding is becoming more famous since it enables people to mobilize their plans with the help of other people who don’t expect anything in return- or maybe just a “thank you” note. People post different various funding needs on the platform from medical assistance, to business startups. Despite the backlash that crowdfunding generally receives, there are already many success stories that prove humanity is still live and kickin’

Recent development in the world of crowdfunding is ‘investment crowdfunding’. But don’t get intimidated by the word “investment” because its not like the other investments people generally make.

What is Investment Crowdfunding?

U.S. President Barack Obama signs the Jumpstart Our Business Startups (JOBS) Act, April, 2012

Investment crowdfunding was first introduced in the year 2012 which is part of the Jumpstart Our Business Startups  (JOBS) Act. The Securities and Exchange Commission (SEC)  gave rules on the investment crowdfunding, where startup businesses can have the opportunity to raise capital without providing investors a stakeholder positions. All these rules can be found in Title III.

The JOBS Act can also allow for non-accredited investors to invest in startup projects they want. Non-accredited investors are those who don’t have an annual income of $200,000 or a net worth of $1 million. This gives the business owners and investors a win-win situation.

Where to invest?

There are already many platforms that promote investment crowdfunding. Some of these websites include Kickfurther, WeFunder, and RealityShares. Investment crowdfunding was seen to be an effective support which is why a lot of campaigns have been successful.

It is important to note that each website has a different minimum amount for investing. For Kickfurther, some campaign allows a $20-dollar minimum. Campaigns that are focusing on real estates like RealityShares require a minimum of $5,000-$10,000 which is significantly greater than the others. Though it is evident that it is a more expensive investment, it is still relatively cheaper to the traditional real estate investment which could cost up to $100,000.

Interested in investment crowdfunding, yet? Well, here’a quick guideline to assess which campaign to root for.

Personal Interest

It’s always important to incorporate our personal preference when making decisions especially if it involves money and investing. There are already many startup companies in the arena, which give investors a chance to choose freely. Some of the most famous campaigns include business in technology, brick-and-mortar small business, and consumer goods. There is a higher chance for investment longevity if a person chooses something he/she likes.

Illiquidity of the business

Investment crowdfunding usually has no money-back guarantee

We are not given a 100% assurance that the business we fund will eventually make it big. Just like the traditional form of investment, investment crowdfunding can also experience instability. But unlike the traditional investment, there is no money-back guarantee on investment crowdfunding. People just can’t pull out their money once the business is heading into the dark. Business owners can’t just also sell, just to get the capital back.

The people behind the curtain

It would be impossible to invest on a startup project without talking and inquiring with people who’re running the project. Take advantage of the correspondence to assess the quality of the team working behind it. If they’re unprofessional and looks sloppy, then take it as a red flag. People handling a business should represent their brand well, and that includes their professionalism and tone.  Aside from believing in the project, it’s also better to believe in the team since they’ll be responsible for running the business.

Bottom line:

Investing can be risky that is why it’s important to have a holistic approach when it comes to these things. Though investment crowdfunding is a more modest form of investment, this doesn’t mean that it’s free from people who aim to scam others.

Ouya is one the most successful campaigns that raised $8.5 million in 29 days

Doing some research on the platforms that triggers interest is deemed important. Don’t just settle for the readily-available information from campaign platforms. It’s best to still dig deeper just to make sure that it is a profitable venture. Personal preference is also important since it’ll become a motivating factor that will keep us committed to our investment.

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