Crowdfunding Fundamentals

In the last couple of years, crowdfunding has grown in popularity due to its effectiveness–and thus has become a widely used method. There are numerous of well-known individuals who have turned to this new way of raising money in order to come up with a meaningful sum for their respective ventures, such as serial entrepreneur Sir Stelios Haji-Iannou and Better Capital boss Jon Moulton, while Nicola Horlick is considered to be one of the first high-profile figures to endorse this new method that is little by little becoming the go-to option for poor and rich people alike.

When a crowdfunding project has a recognizable name attached, it can definitely yield better results, as it makes everything more trustworthy because people tend to automatically feel like they know the individual who is behind it. A lot of people trust their endorsement 100%; of course, this alone should never sway a person to invest. It is the fundamentals of a business that should matter the most, such as what are the company’s prospects for the longer and medium term, the management, what revenue is generated, and whether the numbers stack up.
When it comes to a potential deal, investors who are responsible should ask difficult questions and make sure to go the extra mile to check the foundations upon which an entity is founded. The ideal crowd platforms are the ones who take an extra step further and aid in this process which can be quite complex. At CrowdBnk, we are able to separate the chaff from the wheat, as we have our own due diligence Bootcamp.
Just because celebrity credibility is present, it doesn’t mean that this is the only measure an investor who is savvy should look into. Valuation is a very important element that should be look into as well.
(In exchange for 1.5% of equity, Haji-Iannou was aiming for £1 million, but he surpassed his aim, while Sir Stelios didn’t get so lucky, as his attempt to raise money only shot back £12,300.)
For those individuals who are able to recognize the probable successes of tomorrow, there are definitely great opportunities to invest in. Crowdfunding was designed to support projects that are at an early stage. You just have to gather all the facts and always have your eyes wide open so that you can wisely invest.
If you stop to think about it, the argument about whether people who are famous deserve to be part of the crowd–can definitely get very distracting. What should really matter is that for the ones who are involved to be adequately informed. If more investors are attracted to crowdfunding due to individuals who are always in the public eye, then the better it is.

When investors arrive knocking at the door, they must be supported and encouraged so that they can conduct the groundwork that is necessary before investing. Our industry must ensure that every business that we place forward is thoroughly credible and vetted. At the end of the day, what should count here is the numbers, not really the personalities.

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