Alt Fi Data on Whether Crowdfunding Is A Wise Investment Or Not

Crowdfunding has been booming for both investors and companies alike in the UK for the past two years. But we didn't have a solid information of whether it's a good investment or not.

Finally, a report has been produced by Industrial website AltFi and a law firm Nabarro. The report shed a light on the performance of 431 equity crowdfunding campaigns arranged in the past by around 367 companies using various platforms such as Crowdcube, Seedrs, SyndicateRoom etc.

The results are somehow mixed. There are 302 companies out of the total which have been allotted 'red' meaning that they are still trading. However it isn't clear whether its increasing or decreasing eventually leading to an increase in the crowd investments.

There are 58 companies that are 'green plus' indicating they have been fortunate in raising more cash at a high estimate. This indicates that the things are moving in an accurate way, according to Business Insider.

There are 41 companies classified as 'amber' meaning that either the companies weren't able to be contacted by phone, or had inactive websites. 29 out of 367 companies were exposed to be gone out of the business.

So, the results evaluated from the report still don't give a clear way. On some side, there's a big success and on the other, a failure. If we add the 29 companies have gone out of business and the 41 marked 'amber', around 70 out of 367 companies have lost or are likely to be lost, around 20% of the total.

The report authors believe that it's a pretty low percentage, they write, "In the UK, the RSA 2014 study suggests that 55% of SMEs fail in their first five years of existence. Furthermore, the Nesta 2009 report suggested that 56% of angel investments failed to return capital. Relative to any of those benchmarks, crowdfunded companies seem to be outperforming significantly,"

Julia Groves, founding chair of UK Equity Crowdfunding Association, appreciated the transparency shown in the research work but criticized that the "figures were a bit premature to be meaningful," reports Financial Times.

Ruper Taylor, Founder of Alt Fi data says, "This report is a beginning of a returns index for the industry. It's too early to do anything with it. The data set is not substantial enough, but it platforms paid for a report every six months, it would cost a fraction of a big marketing campaign and deliver far better returns for them, investors and the industry," as reported by City A.M.

The report requests for more clarity from platforms of crowdfunding on the performance campaigns arranged in the past to let the investors know all the involved risks comfortably.