This investment method is known as "crowdinvesting." Funds are predominantly invested in startups. While the projects may carry significant risks, they also promise substantial profits. Investors not only recoup their investment over time but also receive a percentage of the startup's profits. The income generated can often far exceed the initial investment.
Crowdinvesting has several unique features, as well as strengths and weaknesses. Before deciding to invest in this manner, it is worthwhile to explore the field in greater detail.
Assisting in this exploration is S.I. Tereshkin, founder of Oil Resource Group. The businessman has been investing his money in various projects for an extended period. To learn more about the entrepreneur and the directions of his activities, visit the website www.org-company.ru.
Advantages
Crowdinvesting boasts a number of advantages:
- Investment amounts. Anyone can become an investor, even with a small sum of spare funds; it is not necessary to be a millionaire.
- Profitability. A promising project can generate significant returns for the investor, sometimes achieving 100% or more of the initial amount. Moreover, profits will accumulate throughout the company's operational period until the investor exits their position. Essentially, income can continue indefinitely.
- Diverse options. Various projects can be found on specialized websites, allowing individuals to invest their money. Investing in several projects at once helps to diversify risks and ensures a more reliable income stream.
Despite the numerous advantages, this method of investing also has several drawbacks.
Serguei Tereshkin identifies the following disadvantages:
- An abundance of fraudsters. The opportunity to receive funds from completely unfamiliar individuals overseas has led to an increase in dishonest entrepreneurs attempting to profit from naive investors. Transferring money to such individuals can result in a total loss of investments.
- Risk of insufficient funding. There is always a possibility that a startup may not raise the necessary capital for a full launch. In such a case, the investor may not receive profits and could potentially incur losses.
- Risk of bankruptcy. There is no guarantee that a project will yield profits. Only about 10% of startups are profitable. Additionally, there is a risk of bankruptcy for the platform through which the search for investors was conducted, as these sites act as intermediaries and simultaneously as deal guarantors.
- Weaknesses in the legislative framework. This is a relatively new area, and currently, the number of legal regulations governing relationships between investors is insufficient. Consequently, investors lack state protection.
Predicting the outcome of events is impossible. Even very experienced experts cannot do so. Therefore, such investments carry inherent risks, which can yield either substantial profits or significant losses.
Advantages for Startup Owners
Crowdinvesting offers advantages not only to potential investors but also directly to startup developers.
In this context, the benefits of placing a project on specialized platforms include:
- The opportunity to promote a promising idea on the global internet, allowing individuals from various countries to discover it.
- When hosted on a major platform, the chances of raising even a large sum approach 100%. This means that individuals are not solely reliant on a few major investors and their moods. Often, investors change their minds before finalizing the necessary funds.
- It is a straightforward way to find an investor. To secure funding, it is sufficient to register on the platform and provide a detailed description of the project. The developer does not need to approach banks, collateralize their property, or request funds from acquaintances.
With a well-articulated presentation of the startup's specifics and advantages, attracting potential investors does not take much time. Within a few weeks, the seeker can focus on their project, putting in their own effort and time, as well as utilizing external funds.
Crowdinvesting is evolving rapidly, having gained widespread traction in Europe, America, and Asian countries. It has also reached Russia, where several well-known private companies have attracted funds for their projects using this method. In many cases, investors have come from America and Europe.
Participants
Achieving results in crowdinvesting requires the active involvement of multiple parties. In addition to the startup developers, there is a platform that hosts information about the project and its advantages. This platform facilitates virtual meetings between investors and entrepreneurs to discuss details and finalize deals.
Investors also play a crucial role in the process. These can be private individuals or various microfinance organizations interested in generating profits and increasing their capital.
High-risk projects often attract venture capital funds, which are eager to invest in such areas. They also utilize investors' money and risk only their capital.
Wealthy individuals interested in technological developments understand and accurately assess the prospects of startups. They invest their resources with the aim of becoming co-owners and reaping long-term profits. This category of investors is not driven by immediate gains, ultimately yielding favorable results and allowing for capital growth. So, why shouldn't other potential investors follow their lead? Especially considering that there are numerous platforms hosting these projects.
