Fintech Crowdinvesting – Like any other start-up, Fintech’s are faced with the question of how to finance the capital requirements for the first few years of operation. A classic bank loan can be one option, but other alternatives are becoming increasingly important.
Crowdfunding is becoming increasingly popular, with several lenders raising capital for the young company. Financing through the so-called crowd – a large number of lenders – is possible through crowd investing, for example, which is a sub-form of crowdfunding. But how does crowd investing work, and what does it mean for an up-and-coming Fintech?
Crowdinvesting is similar to an investment
Crowdfunding is often referred to as swarm financing. The “swarm” is a larger amount of capital providers, whereby the individual investor can already participate with small amounts.The money is usually collected over Internet platforms, there the project is then also presented. In return for making the capital available, the financial backers receive a remuneration or a yield. They get thus not only their capital back one day, but also a fee for the fact that they invest the money.
In Crowdinvesting, the remuneration consists of a share in the company. This means that they share in the profits that the start-up company will generate in the future. They also receive a share of the sales proceeds, so that the investor can make a good deal if the company is sold at an attractive price. He will therefore tend to have a strong interest in selling the start-up soon. So in Crowdinvesting , the money is not provided as a loan with a fixed interest rate, but in the form of a stake in the company. In the start-up’s balance sheet, the capital is similar to a shareholding as equity capital, so the corresponding position on the balance sheet is strengthened. Crowdinvesting is an attractive investment not only for large investors with large sums of money, but also for private investors looking for a high-yield investment.
Fintech Crowdinvesting platforms
The number of crowdinvesting platforms in Germany has grown rapidly. Among them are young Fintechs like Exporo or kapilendo as well as offers of established financial providers like DKB or real estate service providers like Engel & Völkers Digital Invest. Especially the real estate sector is in the focus of a large part of the crowdinvesting platforms. Besides also the energy sector is frequently represented.
List Fintech Crowdinvesting Platforms
- Danube Angels
- Deutsche Crowdinvest
- Engel & Völkers Digital Invest
- GLS Crowd
- Green Rocket
- Home Rocket
- invest regional
- Kensington Crowd
- Lion Rocket
- New Shore Invest
For these Fintechs crowdinvesting is worthwhile
Whether crowdinvesting is a suitable form of financing for a Fintech depends primarily on how the founders want to handle the investment in their company. On the one hand, the question of the participation right must be clarified. If a founder has no interest in a financier having a right to a say in the development of the strategy or in day-to-day operations, crowdinvesting is unlikely to be an option. On the other hand, there is also the question of whether a sale of the young company is planned in the foreseeable future. In the case of a sale at a profit, the investor profits from his investment, which secures him a part of the sales proceeds. In crowdinvesting, a financier tends to have a certain interest in the young company being sold at a profit in the near future. Accordingly, he is likely to push for rapid growth, which can be to the detriment of the small company. Those who cannot imagine this for their own company should look for an alternative form of financing.
The situation is different, however, if a young founder wants to sell his start-up soon. In this case, crowdinvesting can be very attractive as financing. Both management and investors should then jointly try to sell the start-up as soon as possible in order to use the invested money at a profit. Crowdinvesting offers a good opportunity to raise a large amount of capital as quickly as possible in order to quickly build the young company to a certain size and then sell it at a profit.
The business idea behind the start-up is likely to be decisive for the success of this project. If it becomes apparent even before the start-up that the financial services offered are very well accepted by the market and that there is a corresponding demand on the part of the users, crowdinvesting with an appropriate positioning towards the financial backers is definitely a good option. However, if this prospect of success is not yet given, crowdlending as another form of financing could be the better alternative. Fintechs therefore does not make a general recommendation for a specific form of crowdfunding. The optimal model always depends on several factors that need to be carefully examined in the run-up to the foundation.