Crowdfunding is increasingly becoming THE fun thing to do with your money that doesn’t involve betting websites – and it can actually be socially useful.
It’s not for everyone, though, only those with spare cash. But the good news is the entry point is usually low, depending on the platform, at between £50 and £100, widening the net of potential investors to those who may have less “spare”, but are no less savvy.
What’s our pick?
Crowdfunding is an IDEAL opportunity to choose a business that matches your beliefs, values, fashion style, or location… these factors shouldn’t supercede your financial justifications for making an investment (for an investment, it is), but they can certainly sit alongside it.
Below are a few we like, for the %s we could make in the long term future, as well as just sounding like jolly good ideas. But as with any early stage business, there are risks of failure, which means they’d take your money down with them. You have to weigh these up for yourself, unfortunately.
It’s also important to bear in mind the difference between crowd bonds or peer-to-peer loans, where you LEND to a business, and equity crowdfunding, where you BUY SHARES in a business. The first option should result in you receiving an amount of interest over a fixed term; the latter means the value of the shares you buy could rise or fall over time and your return depends on their value at the point you choose to sell them.
So with that….
- Kingdom. This Kingdom is a woodland retreat, of sorts, located in Penshurst, near Tunbridge Wells in Kent, with a planned 1.1 mile road cycle track, fitness studio, cafe, outdoor fun and relaxation area. It will be open to members and will take event bookings, including weddings. The crowdfund on Seedrs is more than 37% raised of a £360,000 target. The founders are behind a number of successful food establishments in nearby Tunbridge Wells and describe this as a “community project, with genuine green credentials” (disclosure, I live nearby and really want to see this succeed!).
The team is expecting around 100,000 visitors a year. Note that if you want to fund this project, you have to sign up to the Seedrs platform, which involves agreeing to a definition of what type of investor you are. This can be daunting if you are a first-timer – it is meant to be – the process is designed to weed out those who should not be investing in risky equity start-ups. On the other hand, if you are only wanting to put £50 or £100 into a venture you love, you may feel that becoming a member of Seedrs is a risk you are willing to take.
Want to earn 7 per cent a year from renewable energy? Ta da! The Green Energy Income Account (GEIA) allows investors to automatically invest in business loans to renewable-energy projects that benefit from government subsidies, such as Feed-in Tariffs. These projects include wind, solar and wave energy-conversion, but exclude fossil fuels and nuclear power.
The GEIA on Assetz, the peer-to-peer lending platform, offers a target, capped interest rate for investors of 7% (before tax and any loan losses). This account also benefits from strong, realisable asset security (usually land or other ‘real’ assets) for all loans and automatic diversification across multiple loans, plus the added protection of a separate, discretionary Provision Fund. Oh yes, and you can invest in it from £1.
NB. Assetz is also promoting a 30-day access account paying a 4.75 per cent gross return but only until June 6. An access account with such a high interest rate is unusual indeed – it is because the money is lent to British businesses directly (although it doesn’t tell you which ones). The rate varies but Assetz says it won’t drop below 4 per cent. It doesn’t count as one of our “profit with principles” picks because we don’t know about the businesses borrowing, but it is worth a mention if you are purely interested in getting a high rate.
One for the higher rollers as the minimum investment amount is £1,000, this is worth a mention because the business, Flute Office, is so blinkin’ cool. It upcycles waste material into desirable, functional furniture for offices: a “circular economy” business.
David Whitmore, 24Haymarket Private Capital and lead investor (Syndicate Room has “lead investors” who start the ball rolling on its equity crowdfunds), says: “Sustainability and the circular economy will have a significant influence over the corporate market in the next few years. There will be increasing regulation, but also customer, consumer and employee pressure on companies to be more sustainable and recognise the importance of circular economies.
“Flute has responded by investing in technology and developing a range of products which gives it a distinct first mover advantage in the furniture sector. We think the market could be very big and Flute is extremely well placed to become a major player.”
Again, you have to log into Syndicate Room to see this opportunity, which involves agreeing to a number of statements about your ability to invest. Pass these, and it’s worth a look.
One for your Innovative Finance ISA (what do you mean you don’t have one? Better read our guide), this partnership is “a MCS accredited installer of renewable technologies, offering in-house design expertise for biomass, solar PV and ground source heat pumps. Our business has grown over the years to include boiler and central heating system installations, electrical works and home automation. We are now looking for funding to set up our second wood drying plant with the aim to provide wood chip and logs to our many customers who have installed biomass and our additional new customers.”
Green Team has raised nearly half of its £266,000 target and is offering 10% on investments over £100. That’s more than 4 times the rate of inflation and impossible on savings. Although don’t forget the risk associated with lending to businesses – you might lose your cash.
Getting people running = getting people healthy = less disease = less burden on healthcare. The social benefits are endless. Six to Start creates running apps that allow users to take part in virtual races. It’s partnering with charities to offer more of these. You can invest from £10 in this but by the time you have passed Crowdcube’s 7 questions-test to demonstrate your investment nouse, you might be thinking of increasing this.
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