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12 Hidden Benefits Of Crowdfunding For Investors

Posted by Catherine Yushina on Aug 3, 2017 7:00:00 AM

Benefits of crowdfunding

The Regulation Crowdfunding opened new financial opportunities to every US resident. Luckily, the benefits of participating in new crowdfunding deals bring not just financial gain to the crowd. Here are the values that you get when investing in the next crowdfunding opportunity:

  1. Crowdfunding can benefit investors just as much as entrepreneurs. Crowdfunding allows investors to get insights into their investments before taking action. On top of that, discussions with entrepreneurs in an industry that investors are comfortable with is a great approach to becoming a more savvy industry expert. Regardless of your decision to invest or not in this particular company, you learn more about the industry and new solutions. This means your personal growth that could potentially lead to the beginning of your own venture.

  2. Crowdfunding reduces investment expenses. New crowdfunding rules require businesses to provide timely and transparent information to all interested investors. This means you get to hand-pick those entrepreneurs that you want to support. At the same time, crowdfunding platforms minimize the costs such as legal diligence, document preparation, background checks, and more. In fact, most of the platforms perform some sort of due-diligence on all the companies coming their way, they are interested in providing a positive experience for their users. So you can simply identify a company you are interested in and directly make an investment right then and there.

  3. Thanks to the Internet, crowdfunding is possible anywhere. The Internet has opened many possibilities for our society, including doing businesses from anywhere. So even if you don’t like big crowds or find networking boring, you can still keep up to date and invest while sitting on your couch or at a local coffee place.

  4. Testing the opportunity. Crowdfunding provides investors with the opportunity to see what’s out there. You can get a feel for market and investor availability. Regulation Crowdfunding requires having the comment section where investors can participate in discussions and learn from their peers on why this deal is good or bad and gain insights into the market and industry.

  5. Preparation equals determination. While the concept of crowdfunding itself may seem easy, it takes a great deal of time, effort, and preparation in order to ensure a campaign is successful. This means that investors can see by the quality of the campaign how vested and hardworking the business owners are, which is a vital criteria for choosing a successful investment.

  6. Running a business is harder than you think. They fail - a lot.  And therefore putting money into the next Facebook is going to be a lot harder than most people realize. The good thing about Regulation Crowdfunding is the diversity of businesses to invest in: not just idea-stage startups but also up and running small businesses. So you can choose what you prefer and be part of their growth. You can buy equity or invest in revenue sharing deals. If you can put $100 into your local coffee shop because you love the concept, you will be supporting jobs and local economy. If it does exponentially well and becomes Starbucks, you’ll get the thrill.

  7. Building the new economy. Of course, you could lose all of your investment should the company not succeed. But in an environment of record low interest rates, annuity rates, and bond yields, investors are becoming increasingly attracted to the potential returns that equity crowdfunding can offer. Depending on your risk tolerance, you could choose any type of investment that makes you comfortable: equity in an early stage startup or revenue sharing with an existing local business that already has revenue.

  8. Diversification strategy. Unlike traditional angel investments where a relatively large sum is invested in one or two companies, crowdfunding allows people to invest smaller amounts across many businesses and many types of deals. You can invest small amounts not just in different ventures, but also under different terms: equity or debt.

  9. Accessible to everyone. The beauty of Regulation Crowdfunding is that it is designed to include the 97% of US population who have been excluded from the business investment game all this time. So there’s no need to have a bank account the size of Warren Buffett. Investment is a right, not a privilege.

  10. Intangible benefits. This includes being human. The feeling of satisfaction of being able to help business owners develop their ideas is priceless. You are creating an impact in someone’s life as well as a long-term impact on the community. Along the way, you are making new contacts and learning more about investments. Way to grow!

  11. Opportunities for all. Crowdfunding opens up underserved markets like local, consumer and retail to individual investors. It forms an equal playground not only for investors but also for business owners. Whether you want to support minority business owners or women founders - crowdfunding provides a platform to choose beyond the next Tesla and SpaceX. Put your money where your values are. 

  12. Your wallet, not theirs. Crowdfunding was always used as a validation of the market interest and demand by angels and venture capital firms, who would then make money on the companies that succeed. Pebble Watch was discovered by the crowd. So now you, the consumer, can dictate the next best thing in the market and benefit from it financially yourself. 

Regulation Crowdfunding may very well offer different opportunities for investors and bring new and innovative products to the market that otherwise might not have been possible with the old rules. It also empowers local communities and small businesses to grow. While the financial return is the main goal of any type of investing, it is quite refreshing to be able to create more positive and mutually-beneficial outcomes from a simple action.

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Topics: Investing Basics