How profitable it is to invest in crowdfunding projects: the results of British researchers

    Over the past two years, crowdfunding movement in the UK is gaining popularity among investors and founders. However, so far no studies have been published on the success of such projects.

    Company AltFi and law firm Nabarro analyzed the results of 431 367 companies kraudfandingovyh campaigns on platforms Crowdcube , Seedrs , SyndicateRoom , Venture Founders and CrowdBnk . Researchers examined the time interval from 2011 to June 2015.

    The conclusions were contradictory.

    • 302 companies attracted new investments after crowdfunding

    • Only one project - E-Car Club - was acquired by a third-party company. Europcar in 2015 absorbed the project. Investors received a refund with a ratio of about 2.5.

    • 58 companies attracted new investments and increased valuation. Investors have not yet returned their investments, but that’s what’s going on:

    • 29 of 367 companies “lost their distance”, having closed their business

    • 41 companies “went missing.” Their sites do not work, phones and other means of communication are not responding.

    It is too early to judge any pattern: most projects are somewhere between success and failure.

    If you combine the last two groups of projects, it turns out that 20% of investors have lost their funds.

    According to RSAfor 2014, 55% of small and medium-sized enterprises fail in the first 5 years of existence. The British company Nesta in 2009 noted that 56% of business angels do not return their investments.

    Therefore, AltFi / Nabarro believes that 20% of investors who have invested in nowhere are few. It could be much worse. Moreover, according to all the same Nesta, 62% of investors on crowdfunding platforms have not previously encountered such projects or have minimal experience, Business Insider reports .

    Researchers note that for a more complete analysis, each company must be observed for at least 5 years. It is during this period of time that promising projects are gaining momentum.

    AltFi / Nabarro SpecialistsEncourage crowdfunding platforms to be more “transparent” during campaigns, so that investors can better understand the possible risks and evaluate statistics.

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