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What is Crowdcube?

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crowdcube logoCrowdcube is a crowdfunding site that allows you to invest your money in start-ups and expanding businesses in exchange for equity. It’s the first online platform of its kind in the world and is currently open to investors over the age of 18 based in the United Kingdom who want to invest in British businesses only.

What’s the fuss?

Similar to Funding Circle, Crowdcube doesn’t just allow you to lend money as a bond to businesses, but allows you to invest your money in exchange for equity share in the business.As the minimum investment for equity share is just £10, practically anyone can invest in British businesses – it’s no longer just for the wealthy and well-connected. To give you an idea of its popularity: the equity crowdfunding market grew over 55% last year.

There are two main benefits of using Crowdcube

1) Help find the next big thing -

2) No investor fees, either up-front or on exit

3) Gain generous tax breaks on your investment – see below under Tax benefits

There is a wide range of businesses to invest in. At the time of writing, tech businesses are most popular followed closely by internet businesses. Investors are also keen on IT & telecommunications, consumer products and food & drink.

Key stats

From the conception of the idea in August 2008 to its official launch in February 2011, Crowdcube has an impressive story to tell:

  • They’ve successfully funded businesses to the tune of $78 million
  • They have over 120,000 investors
  • They’ve funded 175 businesses
Tax benefits

To encourage investment in high growth businesses, there are two tax breaks available if you invest in the Equity option (see all three options for investing via Crowdcube below): EIS and SEIS. Both are designed to help smaller, higher-risk companies raise finance by offering tax relief on new shares in those companies that qualify.

Enterprise Investment Scheme

You can claim this on investments through Crowdcube up to £1,000,000 in one tax year. You are locked into the scheme for a minimum of three years, so look at any investment through Crowdcube as long-term.

Seed Enterprise Investment Scheme

Derived from EIS, SEIS was introduced to encourage seed investment in early stage companies. Investors, including directors, can receive initial tax relief of 50% on investments up to £100,000 and Capital Gains Tax (CGT) exemption for any gains on SEIS shares. The maximum amount that each company involved in the scheme must raise is £150,000.

*Should you invest?
*
According to Crowdcube’s infographic, 30% of investors earn over $125,000 a year. Investing in start-up or early stage business is risky, but Crowdcube highlights that returns are potentially great if you’re diligent and diversify. Diversification couldn’t be simpler as Crowdcube lists more than 300 pitches every year.

Every investor becomes a direct shareholder in the company which gives you greater autonomy and control over your investment.

How to get started

Like many online platforms, small overheads and few admin fees means you can invest for as little as £10.Crowdcube provides you with three options for investing:

1) Equity – invest in high growth start-up and early stage businesses in return for an equity share and potential of big returns

  • EIS and SEIS tax breaks available
  • High risk, high reward long-term investment
  • Invest from £10

Most businesses provide two categories of shares to investors e.g. A – for investors who invest more than £5,000 and B – for investors who invest less than £5,000.

2) Venture Fund - get a professional fund manager to build and manage your portfolio for you

  • EIS and SEIS tax breaks available
  • High risk, high reward long-term investment
  • Invest from £2,500

3) Mini-Bond - get a steady fixed rate income from your savings by lending to more established businesses and receive regular returns

  • Steady fixed income, up to 8% interest p.a.
  • Typically offered by more established, larger businesses
  • Invest £500
Regulation

Crowdcube is authorised and regulated by the Financial Conduct Authority.

Closing thoughts

The site is a dream to work with – a simple interface means you can see immediately how to invest or how to raise capital for your business. Each business is required to go through a rigorous process of checking by Crowdcube before their pitch goes live. LLB is yet to invest through the platform, but it’s likely to be something that I’ll be adding to diversify my portfolio in 2015.

All information provided at Life-Life Balance is for informational purposes only. MM is not a qualified financial advisor. Before making any decisions on your finances you should seek advice from a qualified advisor.


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