This weeks Wha’t The F***nce covers investing terms. Here’s a run down of the most talked about terms and what they really mean.
Crowdfunding allows a business to raise money for their venture by receiving investments from many different individuals. One of the most popular sites for crowdfunding is Kickstarter. Kickstarter allows businesses to upload their pitch, usually including a video, some images, a description of what the product is and what they are trying to achieve.
On Kickstarter the individual investor agrees to pay a set amount of money and, depending on the level of contribution, they receive some products in return when the project goes live. Anyone can invest in a crowdfund as it is open to the general public. The important thing to know about crowdfunding is that the investor does not own any part of the company and is not a shareholder.
The difference in crowdfunded equity investments and normal crowdfunded investments is the individual buys equity in the company (in the form of shares), and therefore becomes a shareholder. In simple terms, they own a percentage of the company. There are many new companies that allow you as an individual to invest in a company in exchange for equity. Crowdcube and Property Partner are a couple that allow you to invest easily, using the popular crowdfunding method.
There are several ways to value a company, including but not limited to, discounted cash flow (DCF) analysis, comparable transactions method, multiples method and market valuation.
This easy to follow video breaks offers a more in-depth look at some of the methods and offers and idea of why they are important.