Investment platforms: Enriching Angels world

Investment platforms – that allow large numbers of people to invest in the start-ups considered attractive & having growth potential, are all universally classified as the „crowdfunding platforms” category. All of them present the same sins as well as the same virtues. Their main issues refer to the fact there is an injection of „dumb money” provided by a large number of small investors – ticket size being in most cases under $100. Their good part is they allow democratization, and this is undeniably positive.

This crowdfunding category is too new, hence has not yet been segmented or divided into subcategories based on those who are targeted. An obvious classification criterion can refer to the fact the platforms are single or double-sided.

The single-sided ones focus exclusively on offering benefits to the investors via an abundant pipeline, sufficient for those basic clients that can make investment decisions by themselves. The interest of these platforms in start-ups is limited to checking the legality of their business, consistency of the business model, and solidity of the founding teams.

The double-sided platforms still focus with priority on one of the sides – usually also the investors’ – trying however to balance the demand & supply and to offer more quality, by implementing risk management processes and by assessing & vetting the listed start-ups.

Another classification can be based on the fields of activity the platforms are destined to. Whilst most of them address innovative fields in general, some focus solely on technology; it is natural: limiting scope gives better results than tackling the whole domain.

Once classified as per the above criteria, the platforms need to get involved along the full process, end-to-end, and not only singularly at the beginning of the actual investment. Entry, manage exit: this is how dumb money are converted into smart money. Portfolio management, advisory management, future rounds structuring, and exit management, are only some of the features that can make a crowdfunding investment platform become a real partner for start-ups, as well as for investors.

The network formed by a large number of investors and the listed start-ups proves to be a very generous support if there are well-defined processes that can convert potential to reality. The future seems to belong to democratization, providing that it is approached wisely but also frontal.

And now about the ticket size that, in a technology focused investment platform cannot be smaller than few thousands euro. Using these tickets – may be unawarely – the investors benefit from an investment structure really similar to those used by business angels, offering everything that normally lacks in a traditional club, and sharing in equity with all the investment players.