Do you have a view on investment crowdfunding?

Former_MSE_Wendy · 23 July 2013 at 5:15PM

It’s not something we typically cover but I’m wondering if anyone has views on investment crowdfunding – lending money to start up businesses in return for a share of the profit.

It’s come up a few times in meetings I’ve been to recently and I wondered if it was something MoneySavers are doing.

I can see many of you are fans of peer to peer schemes but have any of you looked into investment schemes but been put off for any reason?

For example, you think the current regulation isn’t strong enough to cover such a risky market or maybe rules are too strong so new schemes aren’t able to start up that you’d like to invest with.

Also, while I’m here

– your views on how peer to peer schemes are marketed would be useful. Do you think people realise the risks involved before signing up?

Thanks folks

MSE Wendy

bugbyte_2 · 23 July 2013 at 11:33PM

Have a good read of the UInvest thread to see the potential pitfalls in this area. I am sure there are good crowd funding opportunities but personally I am not confident in my own skills regarding due diligence, etc. to feel comfortable.

Bazofts_Revenge · 23 July 2013 at 11:43PM

I have previously invested in unsigned bands through a couple of crowd funding sites. Thankfully I managed to break even. But honestly you don't know who your dealing with and what their true commitment is to a project. In the case of Bands one member seems to do all the promo and if one person quits it can all fall apart. I can see it being the same for any business ventures. You should regard anything like this as a bit of fun and certainly do not risk anything you can't afford to lose on it.

Former_MSE_Wendy · 25 July 2013 at 4:35PM

Thanks for your thoughts guys, that's very useful.

Are there any more prominant threads you've come accross I can have a scan over?

Wendy

Thrugelmir · 25 July 2013 at 10:06PM

Seed capital is extremely high risk. Best left to investors who can use and benefit from EIS for example.

princeofpounds · 26 July 2013 at 4:57PM

A lot of the projects that are proposed are not really financial investments in the classic sense. Often they do not come with the full normal rights of equityholders and debtholders attached. You don't get to control the company, vote for boards, foreclose on assets etc etc.

Many of the projects offer different sorts of returns. For example, in the launch of a new computer game a funder may get a copy of the game, or a unique conceptual artwork. So there are benefits other than cash (which are perfectly valid but not necessarily MSE reasons)

Reaper · 26 July 2013 at 5:06PM

MSE_Wendy wrote: »

Are there any more prominant threads you've come accross I can have a scan over?

The UInvest one bugbyte mentions is here:
https://forums.moneysavingexpert.com/discussion/4476101
It sounds like a scam that is collapsing but even now some people refuse to accept it is anything other than genuine.

There are plenty on peer to peer lending such as Funding Circle etc if you want those.

Ark_Welder · 31 July 2013 at 11:46PM

Alarm bells for crowdfunding as bubble pops for soap start-up

Alantheaged · 12 December 2013 at 1:50PM

I have become more interested in peer to peer lending recently, through one of the legitimate sites - if a lot of people started doing it as a safe investment like a building society, then I am sure the loss of savings investment to the banks/building societies would force them into providing better deals with more realistic interest rates. What is stopping me, though, is the lack of any guarantee like the £85k limit the FCA provides for the banks and building societies. If the Government agreed to this, I am sure saving with peer to peer companies would go through the roof - I would certainly go for it after a bit more research to identify the best company. But at the moment, I see them as too high a risk.

Jegersmart · 12 December 2013 at 2:07PM

I have had a look at this over the last year or so. The problem I see is that I cannot really find anything that is "investable". The vast majority do not offer equity share, but rather offer some sort of discount or freebie of what they are developing.

So for example a start up that is looking to raise £100K to develop a portable and removable lens system for an Iphone or Smartphone would offer me one of these free if I invest more than £1000 (retail price £100 or whatever). If I invest over £5000 I may receive 3 of these - or in some cases a customised item in addition. In this case, I and my fellow investors literally carry all the risk but do not benefit from any gain should the company take off and become a success.

It is a shame that the majority I have seen do not seem to be at all serious about their business and venture capital raising activities. In a couple of cases I thought there was a really good idea with potential but impossible to invest in.

It may be that I have seen a bunch of duff opportunities and need to revisit.

imho
J

JohnRo · 12 December 2013 at 4:25PM

I think it works best where investors have a direct interest and invest in the product itself rather than simply seeking to profit financially from it and others. Much of that is dictated by the terms and conditions of crowd funding the particular project of course.

One specific example which seems to work reasonably well in this area is computer software and games, if that's your thing. Where design decisions and direction are also opened up to the crowd to varying degrees.

I haven't personally got involved with any though.

Do you have a view on investment crowdfunding?

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