Investing in early-stage ventures is not for the impatient nor risk-averse. However, in recent years, technological developments and regulatory changes have made this market segment more accessible to investors, including smaller ones.
While still in early development, online capital formation is clearly the future, yet data on platform activity and investor returns remain elusive.
This is a shortcoming of many platforms that provide retail investors with access to private or non-public securities. Crowdcube is one platform that reports performance on a portfolio basis, which adds transparency to the process and highlights how the sector will be judged over the long term.
For investment crowdfunding to thrive, each constituent participant must benefit the ecosystem. Issuers must be able to raise the growth capital they need to execute their mission; platforms must be able to generate a profit; and investors should receive a good risk-adjusted return on their investment.
Professional venture capitalists expect many of their investments to go sideways or fail. This is acceptable, as the few that succeed could generate outsized returns, offsetting any less successful investments. Smaller investors should look at this asset class exactly the same – on a portfolio basis.
Crowdcube hosts a page summarizing investor returns to date. The platform reports:
“around 5% of Crowdcube’s funded businesses have exited, and around 74% continue to trade in Q1 in 2025, comparing favourably to the fact that half of all new businesses fail within three years of opening.”
And;
“…investors who’ve made 163k+ investments and had the opportunity to realise £201m+ in returns through exits, secondaries, and acquisitions by global brands.”
Exits are typically measured in a public offering or M&A event. Secondary transactions are becoming an important option for non-public securities, and Crowdcube also offers trading in this space.
Emblematic of a paper profit that is holding a good trajectory is Revolut, a company that raised early money via crowdfunding, which is now valued in the billions (~$33 billion).
The company also points to “paper profits” typically issued by issuers who go back and raise funds at a higher valuation. While this may not provide liquidity for early shareholders, it can help forecast the value of a future exit.
All online capital formation platforms should share their successes and failures. There should be nothing to hide. A marketplace that does not deliver on the tripartite mission should be judged on the data.
As always, do your own due diligence and only invest if you can shoulder the risk.
