Editor’s note: This is a sponsored post in co-operation with Invesdor
If you have been following the recent crowdfunding developments, then you would probably agree that this year was the year of crowdfunding worldwide. Not only did the first part of the jobs act get passed, but the overall stats and growth speak for themselves.
This year, the global crowdfunding market is expected to hit $5.1 billion of which $166 million would be in equity crowdfunding. In 2012, the amount was $2.7 billion and $116 million respectively.
Sometime before the summer of 2014, the next part of the Jobs Act is supposed to open up, allowing anyone in the US to invest into equity crowdfunding companies, which will be a further boost to boom. Looking at Europe, we are not that much behind with $945 million in 2012 and are actually ahead in equity crowdfunding. This gives local platforms such as Invesdor an interesting edge and a huge, growing market to fight for. Especially given the fact that we do not have as strict a rule set as the US, when it comes to equity investments.
And the numbers do back it up. Invesdor launched the platfrom in May of 2012 and since then have successfully funded 10 companies and raised a total of €1.42 million for them.
That may not sound like a lot, but if you consider the fact that they only accepted 40 companies, it gives them a success rate of 25%. In comparison Crowdcube and Symbid report success rates of around 10-16%. Oh and before you start screaming that Kickstarter success rate is 43.75%, keep in mind that this is equity we are talking about here.
You are not allured by new shiny toys, a remote controlled airplane or a lifelogging camera. What you get is an opportunity to make some money, and that is a surprisingly harder sell and also a bigger risk. Yet, there might be a much bigger reward at the end of the investment cycle.
Invesdor, saw that and wanted to be a part of the game. As any other good startup, they launched it lean, using one subcontracted coder and a lot of willpower. At launch, they only had four companies and those did not raise the money.
So they set out to market the platform through social media, press, advertisement and other options and soon enough they had their first success – Netoutlet. Who unfortunately decided to take the friends and family money instead. That is because Invesdor allows you to accept/decline investors at the end of the round so as to make sure you know who your stakeholders are. After all, you might not want your biggest competitors owning 15% of your company. Then there was Climbstation, which raised €64 000 to build a sport climbing station that you can put anywhere. Following that there was gTIE with € 288 162, Bryggeri with €158 600 and others.
When talking to Lasse Mäkelä, the CEO of Invesdor, he told ArcticStartup that in the beginning they did not realize just how important it is to explain to the entrepreneurs that they have to manage, lead and do their own marketing for the round. After all, Invesdor is a platform and the only way to be really successful with your round is to promote it as much as you can itself. Another thing that seemed to determine a lot of the success was to have some secured investments before you open the round publicly.
According to Mäkelä, “…the key for getting these offerings through are twofold. One is a hidden phase. Once the pitch is ready it is not yet visible on our system and it will be sent it to our investor partners and the entrepreneur will send it to their closest partners and possible investors. During this phase our goal is to get 20-30% subscribed. Once you have this 20-30%, then we open it to the public. Then the entrepreneur has to do a lot of marketing himself.”
That does not mean that Invesdor throws you into the open waters and lets you do all the heavy lifting. No, they actually do try to help you on writing the pitch, suggesting areas to focus on, providing feedback on your valuation, marketing to their investor partners & media, etc.
For example when talking about the valuation, Mäkelä commented that nearly all entrepreneurs have too high of a valuation and that “normally you should start with a lower valuation. You need to leave some upside for the investors as well” and the stats back it up once again.
The average pre-money valuation in successful rounds was €1.4M, offering on average 14% in equity. When it comes to the amount of investors, then in successful rounds there is an average of 45 investors per round and they tend to invest around €1 700 each, but there were also a lot of larger angel investments done through the platform, in the amounts of 40/50k.
So if you are thinking about jumping the already very popular equity crowdfunding ship, which allows you to raise money relatively quickly, while still being completely in control of the process, do check out Invesdor. After all if you do your research, create a good pitch, think about and understand your valuation, then your chances of success can be considerably higher than the average of 25%.