A New Investment Phenomenon — Crowdfunding

Even at the beginning of the current millennium, it was practically impossible to obtain financing for the launch of any project other than in a bank or from a large investor. And small investors were allowed to dream about investing in real estate and major projects. But times have changed and from crowdfunding they started Profiting entrepreneurs, small investors, but also investors with more capital.

Ordinary people don't need millions anymore — through crowdfunding they can invest from a few hundred crowns. For investors who plan to value a larger amount, crowdfunding, in turn, is great in terms of portfolio diversification and opportunity support interesting Czech projects.

In addition, in some cases, such as on Investown, the interest on a crowdfunding investment is very fast.
‍

What is crowdfunding or when thousands of people join forces

Establishment firms, construction commercial real estate, development new product or maybe book release and a music album. These are just a few examples of what crowdfunding can be used for.

What exactly do you think of as crowdfunding? Simply put, it is group funding.

If a business or individual needs money to start a new project and does not want or cannot get a loan in the “traditional ways”, they will post their project on online platform and will try to get the finance from tens, hundreds or up to thousands of retail investors from the general public.

According to the purpose of financing, two main types of crowdfunding are distinguished. Within the framework of the so-called. investment crowdfunding The founders of the projects receive money from small investors, and in return they expect an appreciation in the form of interest. However, if it is Donor crowdfunding, this is charitable funding and the donor receives no or only a small reward in such a case.

A large group of ordinary people (hence the crowdfunding) is put up for the project in small amounts. When there are enough investors and they collect all the necessary money together, the project can be created.

Investment crowdfunding is beneficial for both sides — the founder of the project receives the necessary finance, and small investors receive interest on their investment for a prearranged period.

Thanks to crowdfunding platforms, retail investors can also invest in projects and assets that would normally be out of the question for them.

‍

Investments for ordinary people from a few hundred crowns

Thanks to crowdfunding platforms, retail investors can also invest in projects and assets that would normally be out of the question for them. There is no need to have millions in the account and own dozens of pieces of land. With the help of crowdfunding, the average person can invest in interesting companies, real estate and other projects from lower hundreds of crowns.
‍

For the most part, it works as follows:

The founder of the project on the crowdfunding platform publishes information about his project (for example, investing in a startup with interest of 10% per year).

A small investor invests money into this startup through the platform (sometimes 1000 CZK is enough, sometimes a little more is needed, depending on the conditions of the particular investment).

Until the maturity date, the investor regularly collects 10% interest on the invested amount.

At the end of the maturity, the investor receives the entire invested amount back.

Crowdfunding investments are usually medium term and they have fixed maturity date. This means that you will receive back the invested amount only after the expiration of the pre-agreed period (12 months, 24 months, 36 months, etc.).
‍

Portfolio diversification and stable return for a long time

The benefits for retail investors do not end there. Crowdfunding projects are also an ideal opportunity for them to Diversify your investment portfolio and supplement more risky assets (such as stocks, ETFs, or cryptocurrencies) with investment with a stable return.

The investor is after for a long time receives fixed interest of the invested amount, which is paid monthly, quarterly or annually. This regularly collects a stable return, which in the long run can pay off more than investing in riskier assets with potentially higher returns.

‍

Founders no longer need to look for a big investor

Funding through crowdfunding has a number of advantages even for the entity that raises money for its project.

Group investing is a great alternative to the classic search for one big investor.

Among other things, he can use group investing to raise more money if he has does not want to borrow from the bank, or when the terms of a bank loan are unfavorable. Thanks to crowdfunding, the founder also finds out if there is interest in his project, and at the same time has maximum control over your finances.

Group investing is also great. an alternative to the classic search for one big investorWhich startups, in particular, often fail to find.

‍

Group real estate investing is becoming increasingly popular

In recent years, it has become a trend Real Estate Crowdfundingwhich works similarly to crowdfunding for other projects (connecting property owners with investors using online platforms). Most often, you will come across two types of these investments:

Capital investment in real estate — the investor buys a share in the property and becomes its partial owner.

Debt investing in real estate — the investor does not own the property or part of it, but lends the property owner money to finance it through crowdfunding. Most often it is the so-called. investments in loans secured by real estatewhich is also provided by Investown.

While capital investment in real estate is not affordable for small investors, in the case of the debtor they can invest from less than 100 crowns and receive a stable return. For property owners, this is a convenient way to finance the property.

‍

Crowdfunding takes hold in the Czech Republic and abroad

Interest in group investing grows year by year, creating amazing projects that change the world. Crowdfunding was a great success in 2015, for example. Pebble Smartwatchin which investors have invested during the month $20 million. They did great on Kickstarter as well. Oculus VR Glasses (more than invested $2.5 million).

Also There is a lot of interest in crowdfunding in the Czech Republic. For example, through Investown, small investors have already invested in Czech projects CZK 471 million. And did you know that with the help of crowdfunding it was also born 3D Printer Prusa Mendel, one of the first printers of the successful Czech company Prusa Research?

In short, group investing gives opportunities to projects that would never have been created solely on the basis of bank loans or the investment of a large player. And that's great for investors, entrepreneurs, and our economy.