What do you think about crowd investing?
- Thread starter trade5656
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https://www.crowdfundinsider.com/20...ewdogs-deal-vindication-crowdfunding-process/
Brewdog returned 2700%. Drinks companies make very good investments on exchanges or crowd funded.
Brewdog returned 2700%. Drinks companies make very good investments on exchanges or crowd funded.
If you invest in a crowdfunded startup you're essentially donating money to them in order to be part of something you're interested or excited about. There's nothing wrong with that, just don't make the mistake of thinking you're investing. You have no power over the term sheet, which is ridiculously stacked against the crowd funded investors, you have no control over how the company is operated, future funding rounds, sales, pay, options...
You can generally expect that if the company is successful, future investors will come in at big valuations that will dilute all the crowd funders, in aggregate, down to a percent or two of the company. And that's if they're feeling generous. Even without future funding rounds, nothing stops the owners from issuing millions of new shares to themselves and employees, which is what is generally done to wash out key initial employees that leave. And that's just the worst issue, you're also exposed to significant adverse selection, the VCs have taken their pick and you're getting what's left, you get to do no due diligence, you have no board member to represent you, the list goes on and on.
I'm an entrepreneur who fortunately can now self-fund. If I ever start a company that needs funding I'll most certainly use crowdfunding if I can because it would give me a bunch of money with no effective loss of control. You'd essentially be handing me free money with no strings attached. On the flip side, I wouldn't invest in a crowd funded company even if someone gave me a a 10:1 match on my investment.
You can generally expect that if the company is successful, future investors will come in at big valuations that will dilute all the crowd funders, in aggregate, down to a percent or two of the company. And that's if they're feeling generous. Even without future funding rounds, nothing stops the owners from issuing millions of new shares to themselves and employees, which is what is generally done to wash out key initial employees that leave. And that's just the worst issue, you're also exposed to significant adverse selection, the VCs have taken their pick and you're getting what's left, you get to do no due diligence, you have no board member to represent you, the list goes on and on.
I'm an entrepreneur who fortunately can now self-fund. If I ever start a company that needs funding I'll most certainly use crowdfunding if I can because it would give me a bunch of money with no effective loss of control. You'd essentially be handing me free money with no strings attached. On the flip side, I wouldn't invest in a crowd funded company even if someone gave me a a 10:1 match on my investment.