Exploring new financial assets is fun. By studying investments vehicles myself, I can decide to use them or not. That is how I got into options, that is how I got into crowdfunding.
The first real experience with crowdfunding was via Kickstarter. This was an interesting experience. The short story: One day, I noticed I was spending way to much time and money and went cold turkey. Now, I no longer use the platform. It is not so much the campaigns I funded. Most delivered as described and in a reasonable timeframe. The problem: when I got onto the platform, I was not as intentional as I am today with my view on things, fun money and experiences. Would I see something fun, interesting or cool, then I funded. This leads to a lot of wanted stuff, not needed items.
I look at that period as a necessary stage towards my current view.
(yes, that toll is spinning)
At the same time, different Belgian crowdfunding initiatives start to get attention and news time. I decided it was time to dip my foor in the water.
In 2012, I entered a cooperative equity investment in green energy. It would pay 6pct dividend, tax free. Yiehaa…let’s go. This one needed a bail out. I never saw any dividend and now have to wait a few years to get my money back. That means a loss, as there was inflation in between. The idea was good, the execution not so much, lot’s of financial doubtful constructions and private interests by executives.
In 2014, I invested a 250€ equity investment on an app to help divorced parents communicate and organise for the well-being of their children They are now rolling out to the US it seems, as observed in the 2nd crowdfunding campaign they did.
A second one was a 500€ obligation in a local installer of LED lights. The money is used to fund the working capital of the projects. So far, the first coupon was paid on time.
A third investment is a 200€ obligation in a good cause project, set up by local entrepreneurs. They started a taxi service in Africa, that is safer and more reliable than the current local offering. The managers have a strong entrepreneurial background and have proven management skills. And they provide half of the obligation themselves, next to the equity capital of the company. I see this more as a donation than as an investment. No denial here, it does pay a coupon.
The last one is an investment in a company that produces underwear for men. I had bought their products before and liked it. My investment of 100€ yields already 20pct as they gave the investors products for the new year… 🙂 happy me.
My conclusion
- Due to the lack of a secondary market, these are very illiquid investments. It is near impossible to define the current market value and to find a buyer. When you need cash, you can not sell them.
- There remains a distance between you and the company. They typically have no investor section in their website to get info or an update. So far, I feel blind. The feedback via the crowdfunding platform is not meeting my needs.
- I would use it again to fund good causes, especially when there is a big group of experience managers or an organisation behind.
So, until further notice, I no longer deploy my money here. There are better places to go.
Do you have any feedback?
amber tree leaves 
We did a few in the past but not anymore. The profit had a maximum(e.g. 6-7%), it has relatively high costs(1%) is normal and it’s illiquide as you said.
Now compare that with an index fund, lower costs, no maximum on the profits, you can sell it anytime and the risk is lower…
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I looked into crowdfunding as well. Decided to not do it.
1) You don’t have as much financial transparency as with a stock on an exchange, therefore less control.
2) Micromanagement. Investing less than 1000eu is not worth my time on investigations and follow ups.
3) Some will succeed, some will fail. The failers will drag the winners down by a lot.
4) More difficult to keep an eye on than a regular stock.
5) I prefer stocks rather than loans. If for example a company would require 20k euro and give me let’s say 10% of the stocks, I would be more interested.
6) illiquid.
If I would ever consider crowdfunding, it would be more an ethical choice (like the Afrika project you mentioned).
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Could not agree more. They are great “feel good” investments, but not something for the long term.
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I also could not agree more based on forst impressions. Never really looked into it though..
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It is fun to see what else you can put your money toward and see what happens. Might make a new source of income or it’s a learning experience. At least you only put in smaller amounts so the risk wasn’t all that high. Makes for a fun activity/ exercise though. Long term, just keep doing what you are doing with your quality stock purchases.
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Never started with crowdfunding because of the reasons you already mention: liquidity and also scalability. It is all small amounts and I just do not feel like having to track dozens of small investments. If I put my time and effort in looking at an investment I want to have the possibility to go big in it. It may sound terrible spoiled but even having to do the effort to actually do the investment itself to just deploy a few 100 euro of capital is not worth to me. I mean, registering on a platform, transferring funds for an investment of 200 euro that is going to make 12 euro dividend? And then needing to track if the 12 euro was actually paid? Hell no!
Even the UVXY put play (which is guaranteed money) annoys me because you can only deploy a couple of thousand usd’s in it!
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I stick to investing in UPRO (the S&P’s 3x ETF). I don’t like risk, so I don’t trade what I don’t know.
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