New trends in Crowdfunding - "Profits in crowdfunding campaigns have been 811% higher in cases where professional investors have been involved."
A study by Krista Tuomi, Assistant Professor at the School of International Service, American University, Washington DC, reveals possibilities and risks in equity crowdfunding. Tuomi visited Finland in 2014 at the EBAN angel conference.
Equity crowdfunding is growing rapidly as an alternative source for funding for new and growing enterprises. From a business angel perspective, equity crowdfunding is changing the market, presenting new opportunities to invest in early stage companies. Tuomi states that campaigns with business angels have had greater success.
Crowdfunding with professional investors - 811% higher profits
Tuomi states that on average an equity crowdfunding campaign lasts for eight weeks and gathers $190 000, based on a study made by Massolution. Tuomi presents the research results of Decarre and Wetterhag suggesting that the profits in crowdfunding campaigns have been 811% higher in cases where professional investors, like business angels, have been involved.
Equity crowdfunding investors are typically less experienced and younger than angel investors, and spend significantly less time considering the investment than an angel investor. In general, equity crowdfunding investors are more interested in local projects as well as projects that share the same values and beliefs as the investor. Startups with more abstract and complex ideas are more likely to seek angel investor funding, while startups with tangible products prefer crowdfunding campaigns. Notable risks with equity crowdfunding are the platforms that fail to provide enough information as well as the high risk in the investment.
Equity crowdfunding is a current topic in Finnish legislation. FiBAN has released a statement on crowdfunding. FiBAN has two partners, Invesdor and Funderbeam, that are working with equity crowdfunding.
If you have questions about the original article, please don’t hesitate to contact Krista Tuomi, tuomi(at)american.edu.
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