Investments

Crowdfunder Reveals The Odds Of A Successful Investment

Investors have a 28% chance of making a profit from a crowdfunded deal, according to new statistics.

Crowdfunding platform Seedrs has published details of 375 deals completed to date – including a risk profile of investing as a crowdfunder.

Out of the 375 deals, 108 have a business that has appreciated in value – while 211 have broken even and 14.9% have lost money.

The rate of return on investment unadjusted for tax is 14.4%.

The data comes from a report that examines the performance of successfully funded deals on the platform between July 2012 and the end of September 2016.

No winning formula for investors

Picking a winning formula is tough for investors as the statistics and accompanying analysis do not point to any recipe for crowdfunding success.

The deals range across 15 sectors, but no single sector accounts for more than 11% of funded transactions.

Digital companies account for 45% of all deals, while non-digital deals make up 15% of the crowdfunded portfolio.

The rest are a mix of digital/non-digital deals.

Business to consumer companies take 55% of the crowdfunding pie, 30% are business to business set-ups and the rest cater for both.

The most popular sectors are food and drink (11%), home and personal (11%) and finance and payments (10%) – while finance and payments has also topped the charts as the best performing sector with a 38.6% return unadjusted for tax.

Portfolio investors see better returns

On average, investors with a single deal fail to make a return, with a loss of 2.1%.

Those with the best returns typically have between 10 and 19 investments which return 14%.

Those with fewer investments fail to pick up more than a 6.8% return, while those with 20 to 50 average a 10% return.

To achieve the best returns, investors are looking at holding on to their shares for five to seven years.

“People and institutions who invest through Seedrs do so in the expectation of financial returns. When we set out to build Seedrs, our goal was to give profit-seeking investors access to an asset class that was once difficult or impossible for them to reach,” says the report.

Seedrs also comments that crowdfunding is a ‘riskier and more illiquid’ asset class and investor returns need to be high to reflect that.

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