Do you invest in crowdfunded start ups?

Malone2020

I'm interested in hearing people's perspectives on and experiences of investing in crowd funded start ups? I've increasingly seen some stuff online about this type of investment and I've toyed about with looking through platforms like Crowd Cube but haven't taken a plunge yet in any real serious sense.
I guess I'm keen to know what either encourages or deters people from investing in one particular start up or other - what are the 'must haves' on the list and what are the red flags you look out for? I'm certainly interested in this kind of investment but I kinda feel its more speculating than investing and in most, if not all, the cases I struggle to understand exactly what some of the investment opportunities actually are - even though in many cases they're already overfunded. 
I have a fairly basic grasp of some of the things that might be relevant when making a decision. So one particular investment I'm looking at at the moment is a craft distillery that has Ashai as an institutional investor; the backing of a major international brand like this is an encouraging sign. Likewise, I understand that having people at the helm with both sound business acumen and entrepreneurial vision is key but that experience of and in the industry is also important. As another example, one brand that was launching healthy lifestyle snacks was being headed up by people from Kraft Heinz so obviously they're going to have knowledge of the industry and market. 
Apart from these very general tips I'm completely in the dark about how to distinguish between a genuine investment opportunity and what is going to be a waste of money. Are there any key metrics I should loom to read into - year on year growth to date, projected value of market, non-domestic presence, current and previous levels of investment through crowd funding, debt etc? 

DireEmblem

Look up how many companies succeed or fail.  I’m not sure if many companies through Crowdcube or spike have yet managed to return a profit to investors.

Brewdog is probably the most well known crowdfunded company out there. It has returned some profit to early funders, but has yet to IPO.

Malone2020

DireEmblem said:

Look up how many companies succeed or fail.  I’m not sure if many companies through Crowdcube or spike have yet managed to return a profit to investors.

Brewdog is probably the most well known crowdfunded company out there. It has returned some profit to early funders, but has yet to IPO.

That's kinda where I'm at. I know Monzo (I think it was them anyway) began through crowd funding and, as you say, Brew Dog did. I often questioned whether they were the exception rather than the norm though. Some of the investments on offer I really struggle to see coming to fruition already; there's a comedy streaming service but given the dominance of YouTube, Netflix, Spotify (podcasts), TikTok and Facebook live streams (increasingly used during the pandemic to deliver live content) I don't see how this new service will compete witj, never mind disrupt, existing services. Despite this, its already being heavily invested imtk by others which again reinforces what guys like Benjamin Graham and Buffet always said about simply following others. 

Scrudgy

 Spent £1000 on Revolut on the Seedrs platform, in theory my investment is up 996%, but if I wanted to sell out I can only do so on the Seedrs secondary market to other Revolut investors, so I would have to offer a hefty discount for someone to buy them and also pay Seedrs fees. I will probably sit on them to see if they get to an IPO.

Malone2020

Scrudgy said:

 Spent £1000 on Revolut on the Seedrs platform, in theory my investment is up 996%, but if I wanted to sell out I can only do so on the Seedrs secondary market to other Revolut investors, so I would have to offer a hefty discount for someone to buy them and also pay Seedrs fees. I will probably sit on them to see if they get to an IPO.

This is very interesting; thanks for sharing your experience. If you did, hypothetically speaking of course, sell to other Revolut (another start up I forgot to mention above) investors on that platform secondary market what sort of profit would you be looking at?
I guess your case also points to bearing in mind the exit strategy when investing in a start up; is it through a buy back, an IPO or do they plan to be bought out be larger corporations (like Diageo take over of craft breweries). Did the Revolut pitch on Seedrs outline the exit strategy and did this have any influence on your decision to invest at the time? 

Albermarle

Even if the company is successful , getting your money out is often the issue, as you are dependent on events beyond your control , such as if/when the company is sold . 

Emmia

I've got a few "investments" on Crowdcube - the biggest is £500 in Chip, and I've got another £500 ish spread across a couple of others. The stuff I've gone for are things I actually use.

To be honest it is really just a bit of fun (and it's money I'm ok to lose) - rather than being anything serious.

mikb

Malone2020 said:

 I know Monzo (I think it was them anyway) began through crowd funding and, as you say, Brew Dog did. I often questioned whether they were the exception rather than the norm though

Exception or norm -- it's the exceptions you hear about, the great success stories. You don't hear so much about all the bad pitches that didn't fund at all, the ongoing money-pits trying to dig a hole deep enough to climb out of. You might hear the occasional "the whole pitch was a fraud and the money was pocketted before the directors left the country".

Compare with the oft-touted "had no education/qualifications and now I own my own multi mega dollar company" role model. They are the exceptions that worked hard and succeeded despite the odds. You don't hear so much about all the people with no/poor education that get nowhere. Also, you don't hear anyone using Trump-like logic saying "Well, if that success comes from *no* education, I should abandon school to succeed!"

Malone2020

Emmia said:

I've got a few "investments" on Crowdcube - the biggest is £500 in Chip, and I've got another £500 ish spread across a couple of others. The stuff I've gone for are things I actually use.

To be honest it is really just a bit of fun (and it's money I'm ok to lose) - rather than being anything serious.

Thanks sharing your insight. Do Crowd Cube update you on whether or not your investments have made any returns yet (maybe too early to tell this yet?)? 
Some of the pitches do seem pretty interesting and fun, and many even have some sort of reward for investors (free bottle of gin, samples of snacks, free first year subscription etc). I could definitely see me doing this as 'fun' rather than as serious investing. Kinda like how doing a £5 12 accumulator is a bit of fun rather than a more methodical and thought out process like matched betting. 

Scrudgy

Malone2020 said:

This is very interesting; thanks for sharing your experience. If you did, hypothetically speaking of course, sell to other Revolut (another start up I forgot to mention above) investors on that platform secondary market what sort of profit would you be looking at?
I guess your case also points to bearing in mind the exit strategy when investing in a start up; is it through a buy back, an IPO or do they plan to be bought out be larger corporations (like Diageo take over of craft breweries). Did the Revolut pitch on Seedrs outline the exit strategy and did this have any influence on your decision to invest at the time? 

I think I bought in at £8.57 per share, they are now £93.93 Each. The maximum I could invest in was capped at £1000, so the 116 shares are now valued at £10.8k. However, selling them is a different story at nearly 94 quid each there are not many buyers who want any more at that price. I can offer a discount of up to 30% to get them sold, and also Seedrs take a 8 or 9% chunk in fees,  so yes you can get out with decent profit.

For me though it was just a speculative punt to see where it will end up. I was aware that an exit might rely on an IPO but for me it was worth seeing where Revolut would end up. Happy to sit it out for now.

Malone2020

Interesting. Even taking all the discounts into consideration you'd turn a tidy profit - provided of course you got a buyer.
One of the pitches I've been looking - the distillery backed by Ashai - at has set its share price at €80 which seemed a bit steep to me. Its certainly not chomp change and not even the kinda 'fun' investment either.