The securities crowdfunding industry needs to do a better job of highlighting successes for investors as well as embracing the failures. Entrepreneurship generates enormous benefits for society, but investors backing these early-stage firms are taking on a lot of risk. Most startups fail, and some bounce along, but every now and then, one hits it out of the park.
Professional venture capitalists and angels generate a return by taking a portfolio approach and diversifying among multiple early-stage firms. As for the ones that go bust, buyer beware – know the risk you are taking upfront. For investors in the UK, substantial tax benefits can immediately mitigate part of this risk, thus encouraging the support of startups while helping fuel innovation.
Earlier this month, a report in Tech.eu shared an anecdotal encounter with two investors in Monzo, a successful digital bank that raised money in several securities crowdfunding rounds.
According to the missive, one investor committed £1000 which today is worth around £28,000. The capital appreciation has taken around 8 years. The offering was listed on Crowdcube at a mere £29 million in valuation. Today, Monzo is worth billions. The investor backed multiple funding rounds on Crowdcube for around £5000. This is now worth around £55,000.
A second early investor also backed Monzo for around £5,000 in multiple rounds. While his returns are not disclosed in the article you can anticipate they will be similar to the first investor.
Interestingly, neither investor is in a hurry to cash out. Venture investing is not for the impatient.
Other success stories include the UK-based digital bank Revolut, which raised early-stage funding online. On the Seedrs Secondary Marketplace, Revolut shows an indicative value of £27.9 billion, or a 5022.5% increase in value. This is not too bad for smaller investors who got in early.
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