Why Crowdfunding Start-Ups are a Worthwhile Investment

Crowdfunding has been around for a good few years now and many of you are likely pretty familiar with it. However, like many investment options, it’s something that may have peaked your interest a couple of years ago, before fading into the background.

Even if you’re aware of, and even more than a little interested in crowdfunding, you might not know it’s an industry that was worth $34 billion in 2015 and is expected to be worth almost three times that by 2020.

With that kind of growth anticipated by experts, maybe it’s an investment option you need to rediscover and become more familiar with?

Research and Familiarity

If you are considering making an investment into a crowdfunding start-up, there are a few rules you should follow and two of the most important ones are:

  • Do lots of research.
  • It’s best to only invest in something you understand and are familiar with.

When it comes to research, most crowdfunding sites should already have a plethora of detail and information about the start-up or young company going into its next growth stage. Be sure to read all of it – not just the finance section. However, even if you feel you’ve got a good grasp of what the start-up is and whether or not it’s something you think could do well, you should always do some additional research of your own.

That should include:

  • Searching social media for the company directors/founders and business profile/mentions.
  • Finding out about the broader industry or sector the company is in – including competitors.
  • Looking at the general investment, industry and economic backdrop for investing in a start-up.

The reason for sticking with a familiar industry when it comes to your first few crowdfunding ventures in particular, is to help reduce the risk a little. Financial industry professionals, Global Resources LLC agree that if you’re comfortable with an industry and already know it well, your research will just be adding to the knowledge you already have. This puts you in a better position to make a sensible decision on the potential investment.

Crowdfunding Could be the Perfect Investment…

…but don’t jump into anything feet first. Take your time and thoroughly research the different crowdfunding platforms and the range of investment opportunities. If you’re unsure of the level of risk you’re willing to take, then pledge only a small amount that you’re comfortable with. That’s one of the many benefits of crowdfunding, you don’t have to invest a lot to get involved.

Remember, even though crowdfunding has delivered some huge successes in terms of business, products and investments, that’s not the same for every start-up. Make your investment choices wisely, just like you would in the more traditional world of stocks, shares and bonds.

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