5 misconceptions about equity crowdfunding

— 4 minutes read

At Spreds, we offer different types of investments such as equity crowdfunding, which is one of the four existing methods of crowdfunding. This type of crowdfunding offers each investor a way to participate (through a Participatory Note) in the start-up's equity, in exchange for their investment.

However, a lot of people don't really know what equity crowdfunding is and have some preconceived notions about it. 
Here are the 5 main misconceptions about this type of investment:

1) To raise funds, you only need the crowd

If the goal of crowdfunding is to rally the crowd, it's not the best idea to only rely on this one actor to have a successful campaign.

At Spreds, we've established a co-investing principle, which means that the crowd co-invests alongside professional investors, like business angels or venture capital funds (like Inventures).

2) It takes a lot of time to manage every investor

One of the most important myths about equity crowdfunding is the fact that having a lot of investors represents a time-consuming administrative task.

While this is somewhat true, at Spreds, we make this process easier for you thanks to our vehicle Spreds Finance, which gathers all investors into one structure and then acts as one unique investor, making the process simpler, both for entrepreneurs and investors!

3) Money is the only advantage of crowdfunding

If raising funds is the first objective when a start-up begins its campaign on our platform, it's not the only benefit.

According to Quentin Thireau, founder of Barnaby, to opt for an equity crowdfunding campaign is also to meet with your future customers, to have their feedback on your product/service but also to generate a community of early adopters who believe in the product and will be actively invested during its developing phase.

4) Business angels aren't interested in crowdfunding

This idea that crowdfunding only attracts one type of investor - the crowd - is wrong. As explained in our second point, at Spreds, we favour co-investment, which means that every start-up gets to attract interested business angels to invest in their project. 

5) It's easy to raise funds

It's wrong to think that because you use a crowdfunding platform, money will fall into your lap without lifting a finger! As we have explained in one of our articles, a campaign takes a lot of time, preparation and a lot of self-involvement.
Even though Spreds does everything to ease the process for you, a successful campaign still requires an important effort from the entrepreneur, at several levels.

Please read this before investing through Spreds

Investing carries serious risks, including partial or total loss of capital. Please invest responsibly.

 Spreds runs a crowdfunding platform that enables the public to finance innovative companies by participating in their capitalization. The proposed investment, for a minimum amount of 100 EUR, comes in the form of Notes issued under Belgian law, which represent a claim against the issuer, Spreds Finance, a public limited company under Belgian law headquartered at 5 Place Sainte Gudule, 1000 Brussels (n° 0538.839.354, R.P.M. Nivelles).

The total amount brought in at the end of the offer shall be used by Spreds Finance to subscribe to a capital increase or loan grant in the company/companies listed and promoted above. They are denominated in Euros. They do not offer any guarantee of yield or of reimbursement of capital. The Notes have an unlimited duration and the return on investment depends entirely on the performance of the investment made via the proceeds of the Notes issued by Spreds Finance.

The nominal value of the Notes corresponds to the sum of the subscription and does not include the costs of the issue nor the payment of expenses described below. Spreds Finance charges an additional subscription fee amounting to 5% of the nominal amount only for equity operations, excluding loan operations. 

The Noteholders bear the Expenses Relating to the Underlying Assets. The investors should be taxed on the income paid by Spreds Finance as if such income were paid directly to them (dividends and interests are subject, as a general rule and for private individuals who are Belgian residents, to a withholding tax of 30%, pursuant to article 269 of the Income Tax Code, or to capital gains tax).

We strongly advise you to read the Terms of Investment carefully before purchasing Notes, and in particular, to consider the risk factors that are described therein. We draw the attention of the potential investor to the fact that there is a risk that the goals of the company/companies will not be reached, which might lead to a substantial reduction in the expected revenue and thus incur a risk of insolvency or at least of low yield, and even zero or negative yield.

Any complaint relating to an investment in the Notes can be addressed to the headquarters of the issuer indicated above or to the Service de Médiation pour le Consommateur, Boulevard du Roi Albert II 8 - 1000 Brussels, tel.: +32(0)2.702.52.20, fax: +32(0)2.808.71.29, email: contact@mediationconsommateur.be