Crowdcube is the largest UK crowd investing platform with more than 700.000 members, making it the largest community of equity investors in Europe. To date, it invested in startup pitches more than 600.000.000 GBP.
The startups that are looking for funding create a pitch on the platform and offer equity based on their company valuation. If they value themselves at 1.000.000 GBP, for example, and they’re looking for 100.000 GBP funding, they’ll be offering 10% equity in their company in the form of stocks.
The startup can value their company based on whatever criteria they choose. If they overvalue themselves too much, they run the risk of not finding enough investors to fund their pitch.
Opening an account on Crowdcube
Anyone can open an account on Crowdcube. You can open an account by using your email address or your Facebook, Google or LinkedIn account.
Investing in Crowdcube
After registration, you can browse the available investment opportunities.
Each one will state the target funding they’re looking for, the equity offered and their valuation. The pitch details page contains details about the startup, their current progress (if they have a product or just an idea) and what are they planning to do with the money raised. Upon request, you can view their pitch deck, maybe some financial forecasts and business plan.
Each project has a discussion forum where potential investors discuss the pitch and ask for clarifications from the startup owners. Typical questions would be related to their exit strategy, current valuation and possible valuation at exit time, competitors and the market they operate in.
If a pitch meets your interests, you can invest in it any amount of money starting from 10 GBP. They only payment method accepted is by credit card. There is no money taken from your account until the funding round is closed. When the funding round is closed, Crowdcube will send you an email notification that it will attempt to process your payment in the next 24 hours.
All the investments are in GBP, so if your card’s currency is not GBP and you want to avoid any currency fees, you might be interested in a card like Revolut or Transferwise. If you don’t have a Transferwise account, you can create one here.
You can see your investments on your Portfolio page. Each one has one of the statuses: Active, Collecting Payments, Creating Share Certificates and maybe 10 or more other statuses.
Your investment will be locked until the startup finds an exit opportunity. Typical plans for exit are around 3 to 5 years. This could come in the form of an IPO, or the startup is sold to a larger company. Or the startup owners might want to buy back some equity from their investors.
There’s no secondary market, so you cannot exit your investment before an IPO or a similar event when the company becomes public or its shares become liquid.
Crowdcube recently introduced a 1.5% fee of the amount you invest in a pitch, with a minimum of 0.5 GBP.
Conclusions on Crowdcube
Crowdcube offers an easy way for everyday investors to access the world of investing in startups. The limits for investing are really low at just 10 GBP.
The platform is easy to use, and they also have a mobile app. I’m mostly using the mobile app during lunch break to browse through the pitches. If there’s something that catches my eye, I’ll get later o it and do a bit more thorough research on my laptop.
They have an investment fee of 1.5% introduced recently. From this perspective, Seedrs seems more attractive as they have no fee at investment time, they only take a fee if the project has a successful exit and only from the profits gained. However, if the investment opportunities are great, a 1.5% fee won’t be too big of a deal.
After a year of using both Seedrs and Crowdcube, I like them both, although Seedrs has some extra features that are helpful:
- a secondary market where you can sell or buy shares
- an active forum on each investment where companies post or you can ask for updates
Compared to Seedrs, Crowdcube has these advantages:
- the funds are taken only when the funding round is finished
- the number of projects is higher; also, I find more projects here that I like
So, I’ll keep using them both.
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