Startup investing platforms
Startups can be good investment opportunities, even with smaller amounts. On startup investing platforms you can easily invest in young corporations as a regular investor. Here you can buy shares or a convertible loan of early stage businesses.
Please note: investing in startups involves high risks, many companies fail and you can easily lose your entire investment.
Startup investing platforms in Europe
You don’t have to be a venture capitalist or business angel to fund a company. Startup investing is made easy on online investment platforms. Here you have access to investment opportunities from different early stage companies and can start with smaller amounts. Below, you will find a selection of the most popular startup crowdfunding platforms in Europe.
The English startup investment platform Seedrs is a platform for equity crowdfunding-campaigns all over Europe. It has many campaigns for startups all over the European Union, including some well known scaleups. It also has a monthly Secondary Market included.
Crowdcube is about the same size as Seedrs. The biggest difference between the two of them is of course the offer of investment opportunities. They are both well-known startup crowdfunding platforms, so see for yourself which one you prefer.
Swedish FundedbyMe is startup investment platform with equity crowdfunding campaigns from all over the world. There are a lot of investment opportunities listed on the website. Startups in many branches can try and raise capital through this platform.
Angel Investment Network
Angel Investment Network is an online platform connecting startups with a global network of angel investors based in the UK. There are a lot of investment opportunities, with over 1.4 million entrepreneurs registered. Startups in all kinds of branches can raise capital through the website.
Oneplanetcrowd is a Dutch crowdfunding platform with a focus on sustainable capital. It mainly works with convertible loans. Startups that have a sustainable or social mission can raise funds through the platform.
Romanian Growceanu is an angel investing platform. Connected angel investors use their expertise, network and funds to help entrepreneurs grow their high-tech startups. Companies can raise funding through rounds of 50,000 euros or more.
Leapfunder is a Dutch platform that offers angels investing for startups. The platform was launched in 2015 so that investors and startups can discreetly make new deals through its own payment environment. Round sizes vary from 30,000 to 800,000 euros.
Why should you invest in early stage businesses?
Investing in a startup means you fund a business in its early stages. A startup is a new venture (usually no more than five years old) that is innovative in some way. For example, they offer a new business model or innovative technology. For this reason, these companies have a lot of potential to grow and scale internationally.
It’s a long-term investment
Investing in a new venture is high in risk. There are a lot of new businesses and many of them won’t survive. But if a company does succeed, the investment can offer huge returns down the line. Especially when the company gets listed on the stock exchange.
‘The investment can offer huge returns down the line.’
You should also be aware that funding new businesses is a long-term investment. It takes at least five years or longer before you see potential returns on such investment opportunities. This is because startup entrepreneurs aim to grow fast. The costs are high in the beginning and there will not be profits for a while. This is why many ventures try raising funds by reaching out to investors for seed capital.
Convertible loan or buying shares?
There are two ways you can invest in a new venture on crowdfunding websites. First, you can buy shares and become a co-owner of the company. If the startup grows, the value of your share will also increase. You can then sell your share for capital gains, for example. This type of investment is typical for startups, since the business wants to grow fast without using cash flow for debt repayments.
Startups aim to grow fast without regular debt payments.
Another option is investing in a convertible loan, also known as convertible debt or a convertible note. This is a business loan that can convert into shares later. Convertible debt does not have payback in the first couple of years, so the startup has financial room to grow.
Once the company shows results, you can convert all or part of your investment into shares with a discount. But if the business performs badly, you can get a payback of your loan plus interest. A convertible loan can therefore mitigate some risks that come with funding startups.
How does a crowdfunding site work?
Startup investing used to be something that could only by done by venture capitalists and business angels with a high net worth. But with the rise of all sorts of platforms, retail investors have access to funding early businesses. On crowdfunding sites, an angel investor as well as an individual investor can find exciting businesses to invest in.
On a crowdfunding site, there will be many fundraising campaigns listed. The fundraising goal will sometimes be up to 800,000 euros, but funding rounds can also be lower, such as 50,000 euros. On these platforms, you can often invest with smaller amounts, as small as 100 or 1000 euros for example.
Regular investors have access to startup investing with crowdfunding platforms.
To start investing on crowdfunding websites, you need to create an account. Usually the platform will check your identity and income in order to register. Companies will also be screened before they can raise funds. The amount of due diligence differs per platform.
Try to diversify your portfolio
After creating an account, you can choose from many different projects seeking seed capital or growth capital. Crowdfunding campaigns usually run for a limited time in order to raise a certain amount. As an investor on the website, you have access to a risk analysis and company performance numbers, for example. On some platforms, you can even get investment advice from professional investors.
‘As an investor on the website, you have access to risk analysis and company performance numbers.’
Because of the large range in startups listed on platforms, it’s easier to create a diversified portfolio when you invest through these crowdfunding sites. Consider investing smaller and larger amounts in different ventures, while also making sure that the companies are operating in different sectors or markets.
Fees of investing
When choosing a platform, an important thing to consider are the costs. First of all, registering for an account is typically free. However, as mentioned before, there probably is a minimum investment amount. This differs per platform, but is usually at least 100 euros.
‘Registering for a platform is usually free.’
In addition to a minimum, there can also be a maximum investment amount. This is usually a maximum per year depending on your income. Some platforms may also issue a small processing fee of the investment in a startup.
How to choose an online broker
It can be difficult to choose an equity crowdfunding website. Aside from possible fees, there are other factors to consider. The first one is which types of companies are listed on the platform. Some crowdfunding websites focus on one industry, like tech startups, while others offer a wide variety of deals. Also consider the types of investment offered, like equity shares, convertible loans or both.
A secondary market can provide more liquidity.
Furthermore, check if the platform has a secondary market. This means you can resell your shares on the platform. A secondary market can provide more liquidity on your otherwise illiquid investment. This way, you can sell your shares even if the startup does not have an Initial Public Offering (IPO).
Frequently asked questions
These are some frequently asked questions about platforms that can be used for startup investing:
What is a startup investment platform?
Some investment platforms specialize in startup investing. On these websites you can find a company that’s in its early stages and has launched a fundraising campaign.
These companies are usually innovative and no more than 5 years old. To grow quickly and expand internationally, they are looking for seed capital. Through these platforms, you will be able to choose an interesting company and either buy shares or invest in a convertible loan.
How do I choose the right site for me?
Choosing the right startup crowdfunding platform can be complicated. There are multiple factors to consider. Look at the funds you have available to invest. Some platforms handle a minimum amount when you want to invest. Which amount suits your situation?
Also consider which companies are listed on the website. Does the website focus on one sector or at multiple? What kind of investments does the website offer? Always remember that a diversified portfolio is safer when it comes to investing. You can also check whether the platform offers a secondary market, which will provide more liquidity.