Your Thoughts On Equity Crowdfunding

Hello everyone! I am a PhD researcher at Lund University (Sweden) and I am currently working on a project regarding equity crowdfunding investors. The aim of my study is to develop the current knowledge we have of the crowd and improve the investors’ experience.

I would like to ask you a few questions, any input to the discussion will be extremely appreciated:

  • When you invest in equity crowdfunding, what are your expectations and investment objectives?
  • What is your role once the campaign phase is concluded (what do you do after)?
  • Are you happy with your current investments?
  • What are the major challenges of equity crowdfunding, in your opinion?

I am also doing online interviews on this topic, so if you feel you would like to share your thoughts in more details that would be great, just let me know. Once the study is completed, I will share a copy of the final research findings i.e. academic articles/PhD study.
Thank you!
Camilla

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Two great threads here.

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Looking forward to seeing your results.

The questions seem a little unstructured. Are you testing any particular hypothesis? (of course I would not ask you to disclose what that is, lest that influence my answers).

Quick relies:

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Hi!
Thank you so much for replying, and sorry for my late answer.
Regarding your question, I can briefly tell you that I am trying to identify a link between investment motivation and behaviour of investors, as well as coherence/incoherence between initial expectations and results from the investments.
Regarding the behaviour, most of the literature considers the crowd very passive, without doing actual research on it, while some interviews with entrepreneurs outlined that the crowd can try to be very participative, but each case is different.
I just wanted to ask you a brief follow up question on this comment you made:

  • What is your role once the campaign phase is concluded (what do you do after)?
    Usually I just read investor updates (if there are any!)
    I always hope for more engagement and maybe even take an active role.**

What do you mean with “more engagement” and “active role”? If you could give any example.

Thank you!

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/1 Firstly for me it’s an ego thing(can I choose the winners) and a close second is to hit the jackpot with just one company and make enough money to improve my life. I believe Freetrade will be that company. Especially once it opens up to your fellow swedes and n the next 3-5 months.

2/ I google most days to see what’s happening and also come on to the Freetrade CF every day also company updates

3/ I have almost 40 investments my 1st being Monzo Dec 18 and so far none have sunk or succeeded.

4/ False claims and over valuations. I believe that Seedrs and Crowdcube do the bare Due Diligence,which I kinda understand as it should be up to myself to do my own DD which I do. If you dig deep enough you can and “if you have any doubts,then leave it out.

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Thank you so much, very helpful comments!

Hi Camilla,

I would be interested in reading your final research paper, thanks for starting this thread.

  • When you invest in equity crowdfunding, what are your expectations and investment objectives?

My personal objective is to build a portfolio of private investments which can deliver outsized returns in comparison to a traditional Equity / Bond portfolio or perhaps the S&P500. I have a higher risk tolerance and I enjoy investing in early companies / ideas and the potential for higher returns.

  • What is your role once the campaign phase is concluded (what do you do after)?

I guess this depends on the company but it’s a passive role. At least I would purchase / use the product, provide feedback and make suggestions if the company is responsive. Engage in the investor calls / meetings.

  • Are you happy with your current investments?

Yes. However I have not had an exit yet (or failures) so difficult to say if my happiness will last. I would like to find more data on startup failure rates through UK platforms and try to asses deal flow quality.

  • What are the major challenges of equity crowdfunding, in your opinion?

Maintaining Deal Flow Quality. I see large UK based startups making it to an IPO phase who did not crowdfund. These companies used PE / VC as their preferred method of funding, and it locks out the opportunity for us. But I do think there have been some excellent opportunities through crowdfunding in the past.

Due Diligence. Being able to perform enough DD whilst keeping a full time job could limit investment performance.

Please let me know where I will be able to find your research when you have finished, thanks!

Matt.

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Hi Matt!
Thank you so much for your reply, I’ll be very happy to share the study once it is finished (it might take a year unfortunately - research tends to be slow…).
In the meantime, if you want to have more info and read some reports with UK data by reputable institutions, Beauhurst does reports on crowdfunding, the most recent being:

  • Following the Crowd The State of UK Crowdfunding 2020
  • The Deal Equity investment in the UK in 2020 (more general, but still interesting)
    The Cambridge Center for Alternative Finance latest report is also called “THE 5TH UK ALTERNATIVE
    FINANCE INDUSTRY REPORT” and it does give info on equity crowdfunding as well (they have many other reports you can read)!
    They can all be downloaded easily and you’ll find other stuff from them, hope this helps!
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