Crowdcube Equity Investor Guide

Type

Crowdcube is an equity crowdfunding platform (as opposed to a P2P or peer to peer platform). As an equity crowdfunder, your investment gets you a share in the equity (ownership) of the business. This differs from P2P, which is debt funding for borrowers. Debt funders’ return on investment comes from what they lend, plus interest and is usually repaid in set instalments, while equity funders’ return comes through what their stake in the business is worth. It’s also worth noting Crowdcube offer mini-bonds as a form of debt funding investment.

Key facts and figures 

Launched: 2011

Minimum investment: £10

Minimum term: N/A

Requirements to invest: Anyone over 18. Might be eligible for Enterprise Investment Scheme (EIS) or Seed Enterprise Investment Scheme (SEIS) tax benefits. Should have sufficient knowledge to be able to evaluate possible investments on their merit.

Cumulative volume invested: £101,356,111

Type of borrowers: Early stage and start up businesses

Most common reasons for loan: N/A, but as an investor look for businesses seeking funds for growth

Money invested in last 12 months: £64,139,993

Crowdfunding market share % over last 3 months according to Liberum AltFi Volume Index UK: 55.52%

A Nesta study revealed that an overall return of 2.2 times the capital invested if you build a broad portfolio. However, there are no guarantees and it is more difficult to predict returns than other investments.

Getting started

• Register online via the Crowdcube website in about 1 minute.
• No money required until you decide to invest.

Getting money on the platform

Once you decide you’d like to invest, you enter your payment details. No money is taken until the pitch has made its target and you’ve reviewed the paperwork.

Do investors get a choice in who or what they invest in?

Yes, you can choose between start-up, early stage and growth businesses in a variety of sectors to satisfy your risk appetite, investment preferences and budget, and see details of each business.

Investing your money

• Once you’ve found a business you want to invest in, you decide how much you’d like to invest.
• If the pitch makes its target, the relevant paperwork is sent drawn up and sent to investors. You have seven days to review them and if you’re not happy you can withdraw from the investment.
• Once the seven days have passed your investment will become binding, and the money will be collected from your account.
• When all funds have been collected you’re issued with your share certificates.

Monitoring your account

• Crowdcube lets you browse pitches online at any time, as well as managing the investment process until the deal is done.
• Investment management is then up to each individual, subject to the terms of the business’ pitch, Articles of Association and other legal requirements.

Understanding the risks

• Crowdcube state investing in start-ups and early stage businesses involves risks, including illiquidity, lack of dividends, loss of investment and dilution, and it should be done only as part of a diversified portfolio.
• Consequently, Crowdcube is targeted exclusively at investors who are sufficiently sophisticated to understand these risks and make their own investment decisions.
• Crowdcube do screen potential pitches to see if they are “investment ready”, but whether they are a worthy investment is left up to the crowd. Around 75% of the applications Crowdcube receive don't make it onto the site.

Withdrawing money

• This is one area of major difference between Crowdcube as an equity funder and P2P debt funders.
• Generally returns are realised after an 'exit', either through a trade sale (the sale of the company to another company) or an initial public offering (IPO) on the stock market.
• Access to money invested will depend on the terms of each pitch, type of equity or shares held and any conditions agreed upon at the time of investment.