The best alternative to crypto is Crowdfunding

Short description

If you want to invest part of your crypto portfolio in safer /regulated instruments but yet ready to take higher risk with higher returns than traditional investing - crowdfunding is the best option for that!

Hey, Crypto boys and girls!

If you are looking to diversify your portfolio and invest outside Crytoverse this video is for you!

In this video, we will talk about crowdfunding which is the best option for that.

Since.

Crypto and crowdfunding have a lot in common, yet the differences that both industries have makes it the perfect match to build a diverse investment portfolio.

Let’s start with the big things and understand the purpose of both products.

Ideologically industries are very similar, both were born as a response to the failed financial system and their goal was to build a decentralized system and provide people with more power.

Crypto focused on the decentralization of money markets by removing the Central bank's role as the printing press and excluding Banking payment clearing systems for exchanging money allowing people to exchange money without middle man - but you know that better than me.

On the other hand, the crowdfunding goal was to exclude institutional players like banks as middlemen in businesses' fundraising process and provide people the possibility to invest in assets that were available only to the wealthy.

How crowdfunding was born?

After the 2008 crisis, many banks were bailed out or their toxic assets were rebought to avoid their collapse using taxpayers' money, but instead of returning money back to the economy by investing or issuing loans Banks were sitting on that cash. Therefore getting funding for small and medium businesses was mission impossible.

And that gave a boost to crowdfunding.

In 2012 Obama signed the so-called JOBS Act - which set a framework - how small and medium businesses could raise funds directly from the public, cutting off banks from this process.

In simple words, crowdfunding allows businesses to approach retail investors to raise funds and on the other hand allows people to invest millions of euros worth of assets starting with a few hundred euros, which is done by collecting small amounts from many people to fund businesses and projects.

There are two main forms of how Crowd provides funding - in the form of loans which means investors provide money for a defined period of time, after which they get provided money back + interest which is returns, or in the form of equity meaning that investors will own a share of the business or asset.

Initially, it was used to raise funding for start-ups and get loans for businesses, but soon after people understood that using this framework people can invest and own basically everything and now there are platforms that allow you to invest and own a share of real estate which is very popular, invest in wind and solar farms, art, expensive beverages basically you name it.

So if you think that tokenizing assets and raising funding from retail investors were invented in the crypto-verse, nope, crowdfunding was first, so to say crowdfunding is a crypto older bother..

The ideology of course is important, but I assume you are more interested in how much money you could make with crowdfunding.

Crowdfunding offers many interesting investment options but in this video, we will focus on Equity crowdfunding, which is basically ICO.

Let’s compare Equity crowdfunding, ICO, and IPO by risk, returns, and fundraiser profile.

Let’s start with the IPO. The IPO process is highly regulated and only big companies use it which makes it relatively safe but still given that company stock can be overvalued and it happens relatively often, I would give a risk score for IPO medium/low. Returns-wise, only big companies go for IPO thus they show moderate growth so in the best-case scenario you might double your returns which are high returns, but since we compare with ICO and Equity returns are considered medium/low.

ICO is no doubt high risk and high return. Due to the process is not regulated you can face a wide variety of risks from fraudulent cases, pump and drop, and high volatility. But people engage in ICO for a reason, if we look at most successful ICOs there are examples of a few 1000-time growths, and ofcourse idea of becoming a millionaire from a few 100 EUR investments is very appealing.

Ofcourse ICO can be used by any type of company, but the majority is using it to start new coins or services related to technology, in other words, most ICOs will be related to the digital world.

Equity crowdfunding is somewhere in the middle. It is a regulated industry and the crowdfunding platform analyzes deals before accepting them to ensure the mutual success of investors and fundraisers which adds more control and therefore, the risk of fraud and overvalued deals is lower, and due to limited possibilities to sell shares to other investors, volatility is low, yet this limits your possibility for an early exit.

Equity crowdfunding is definitely safer than ICO, but you invest in startup companies where the failure rate is high, therefore the risk is medium/high.

If we talk about the typical fundraisers on Equity crowdfunding those are companies that are focusing on the retail mass market and offering products like - food, travel sports, retail financial services, and sustainable development basically products that solve the everyday problems of many people.

The idea is that investors should also be product user and advocate therefore platforms tend to select companies with simple products for the mass market in such a way they get a wider renege of potential investor pull which increases the success of the fundraising campaign

Return wise if we review success stories on the two biggest European equity crowdfunding platforms, it is not rare when investors make x10 in a few years' time but in best cases, returns can reach 50-times and in general, if we look at startup investing returns, they might reach a few 100 times.

If you are not into start-up investing or looking for safer investments as mentioned crowdfunding allows you to invest and co-own basically everting from real estate to racehorse so everyone will be able to find a niche to invest in.