Crowdinvesting: high-yield alternative for small investors?On March 16, 2019 by Debra Nowlin
What is Crowdinvesting?
Digitization is also pushing for the capital market. Crowdinvesting will allow retail investors to participate in large-scale projects that were previously only available to financially strong investors. In times of low interest rates, this is an interesting alternative to the barely worthwhile fixed or overnight money. What is Crowdinvesting? http://marabi.net for more.
Distinct difference: Crowdinvesting not equal to crowdfunding
Crowdfunding has made a name for itself in recent years. An idea for a product is developed and presented to the public. If you are convinced by the concept, you invest a small sum and receive the newly developed product. This investment will then be used to finance the production. The companies already have guaranteed customers for their idea. However: From the point of view of the investors, it is a mild gift with which an interesting concept should be put into action – crowdfunding has nothing to do with a high-yield investment.
Finance large projects by the crowd
This is where crowdfunding comes into play. Like crowdfunding, a larger project is being tackled, with many small investors joining forces. Depending on the provider as capital already a few hundred euros are perfectly adequate . Start-ups can also be financed, as well as major real estate projects, for example . The joint financing also ends the parallels to crowdfunding. After all, crowdinvesting is an investment in a company. This means that the retail investor can also profit from profits or, in the case of a property, from increasing prices and to some extent exert influence.
No business plan necessary
For the companies, which want to support the financing of some projects by Crowdinvesting, there are pros and cons. On the plus side, crowdfunding reduces dependence on banks. In addition, this financing method is less complicated – the financial institutions require a carefully crafted business plan. It is not clear in advance whether the necessary amount of capital will be raised at all. If too few investors are interested in the project, the financial flow will also be reduced. In addition, transparency must be offered and a right of codetermination granted – something which not every entrepreneur should be pleased with. Because even the competition can take note of the plans.
Opportunities and risks of crowdinvesting
From the point of view of investors, crowdinvesting is exciting, but of course also risky: If a project fails, the money has disappeared. For this, lure returns on success, as they are impossible to achieve with time deposits and Co. The real peculiarity lies in the fact that retail investors have access to larger projects through crowdinvesting. What advantages this brings is quickly made clear: If a property was built for a seven-figure amount, retail investors could buy a maximum of one condominium in the building. On the one hand, they were excluded from the developer’s profit and, on the other hand, a lot of capital was needed. Crowdinvesting also allows investors who only want to invest a few hundred euros to participate from the outset. Various online platforms make getting started easy – and could soon set the capital market in motion.