5 Things Every Investor Should Know About Crowdfunding

Written by Gene Wright. Posted in Crowdfunding

Deciding to invest in your first crowdfunding campaign can be a daunting decision. Angel and Venture Fund investors are financial professionals who have a good handle on making investments in early stage companies, but non-savvy investors can quickly find themselves overwhelmed by the sheer amount of decision-making criteria and analysis that goes into making an investment.

The following is a list of five things every investor should know about crowdfunding investing, regardless of experience:

  1. Know the Management.
  2. Most professional investors agree that their No. 1 criterion for investing or not investing in a company lies in the management team. Do they have confidence in it? Do they get a good feeling about them? It’s no different with crowdfunding. How well do you know the business owner(s)?

  3. Know the Business.
  4. The more background and understanding you have in the product the company produces or the service it provides, the better chance you have of understanding the potential success of the business long term.

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  5. Know the Plan.
  6. The campaign strategy must be clear about why it needs the money and how the money will be used to achieve its goals. Will there be reports and accountability afterwards as to whether the business used the money the way it said it would?

  7. Know the Owner’s Exit Strategy
  8. A lot of business owners are good at explaining how much money they need and the reasons they need the money. But what is harder to get an answer about is how they’re going to pay back that money and when.

  9. Is There a Gold-Standard Advisor/Consultant/Underwriter Involved?
  10. Companies with the expertise to help the issuer create financial transparency, explain the risks involved in investing in private business opportunities, and communicate what the money raised will be used for are important. Companies who will put their stamp of approval on equity raise campaigns. And a crowdfunding consultant with formal investment experience and a sound financial background can help you understand more about the crowdfunding investment process. “The more you know…”