Discover the crowdfunding collective financing system

Crowdfunding is just a great financing system for growing businesses like startups. Learn how to publish your project.

Do you know collective investment? In the past, starting a business often involved saving money or taking out a loan from a bank. The same was true with investing in stocks: it took a lot of money and a large team of experts to ensure success.

However, with the advent of crowdfunding – or equity crowdfunding – all this began to change. Typically, this model combines small businesses (startups) that need financial support to develop and ordinary people who want to invest in the capital markets to increase their money, but do not have a large cash flow or a team of experts.

What is collective investment?

Crowdfunding or collective investment, as the name suggests, is a method of raising resources (i.e. money) from several small investors to finance the activity of a given company.

But the question is where do these resources come from? These resources come from everyday people who want to invest in thriving small businesses. Similar to the situation on the stock market, anyone who becomes an investor in the company receives partner status in exchange. In other words, he has the same right to participate in the company’s profits as if he had purchased the shares. The difference with this practice is that instead of raising a large amount from a single source, such as a millionaire investor or a bank, the small business owner can raise money in a more decentralized way from people who don’t need it. There is a lot of money raised.

Is collective investment worth it?

In general, investments are divided into two large groups: investments in fixed income and investments in variable income. The first is the certainty of profit and the expected interest rate. For example, some fixed income investments are held in Tesouro Direto and in certificates of deposit.

On the other hand, investments in variable income are highly volatile and unpredictable. This means there is no way of knowing which bet will win or whether it will be profitable. Like betting, it is considered a high-risk investment. Crowdfunding falls into this category. But why invest when you are not sure of the return? It is this volatility that allows variable income investments to provide greater and faster growth than bond investments. This means that although there is a risk of losing money, there is also an opportunity to make a lot of money much faster.

Furthermore, investors can invest in several projects at the same time, as they do not necessarily have a great value for the company. This way, your chances of winning increase significantly.

Is it worth investing in the group? Answer: Yes.

Crowdfunding x equity crowdfunding

First of all, it is necessary to distinguish between crowdfunding and crowdfunding, that is, crowdfunding. This can cause confusion as the two words are very similar. Crowdfunding is the same as crowdfunding. You can imagine that everyone in your office is saving money to throw a party or buy gifts for their colleagues. This way, people can finance everything that interests them: music publishing, book publishing, product development, etc.

However, crowdfunding or equity crowdfunding is not one-sided. It involves exchange, giving and receiving. Small investors who want to make a lot of money invest in innovative companies. Therefore, just like any other investment, whoever donates the money also has the right to participate in the profits received. In other words, these companies are saying, “You need money to get started. give yourself to me And in return, you will become my colleague and contribute to my success.

Another important difference between crowdfunding and equity is that the latter is officially recognized and regulated by the Securities and Exchange Commission (CVM), an autonomous body that oversees capital market operations. Therefore, for a company to participate in the collective investment system, it must meet several requirements in addition to the MCV and the virtual platform that mediates the process itself.

How does a collective investment contract work?

When concluding a contract relating to money, it is first necessary to formalize the contract between the parties. Therefore, it is guaranteed that all promises contained herein will be fulfilled. For example, a company does not “manage” values and does not transfer profits correctly. For investors, the process is simpler. In other words, you enter the platform, select a project and transfer resources.

For companies, it’s a little more difficult. Extensive checks of investment websites and the CVM should be carried out to minimize risk.

How to participate in a collective investment?

As we have said before, the process for investors to participate in crowdfunding is different from that which companies go through.

Companies

According to them, project owners must first register on the platform of their choice and present their idea in the form of a business plan. The site’s experts then conduct a rigorous analysis of this plan, including cash flow, growth plans and credit analysis. Therefore, investment risk is reduced by guaranteeing the borrower’s ability to pay the installments. Once approved, the project will be available on the website for investor fundraising rounds.

Investors

A capital owner’s journey begins with choosing a trustworthy company. In this case, it is always a good idea to research the registration terms, fees, user reviews, among others. Then you need to register on the website and wait for approval.

Now, when looking at the list of investments available for financing, it is very important to do research and select promising projects that fit your profile. For example, at this stage you need to consider the amount you want to invest, the maturity date and the expected return.

After selecting the project, click on Options and send the offer using the payment method available on the website. After this period, investors can monitor the project progress and revenue stream yield at any time.

In this context, investors can finance more projects, diversify their portfolio and reduce the risk of large losses. As soon as the borrower pays the agreed installment, you receive your share and can withdraw it or use it for new investments.

Finally, you must always know the laws and remember to report your income and expenses on your income tax.

What are the main advantages of collective investment?

The advantages of crowdfunding are many; however, they all share the same principle: making investments easier and more accessible, rather than restricting such activity to career investors with a large cash flow and an extensive team.

Thus, the first advantage is precisely the democratization of the investment market – that is, with this new system, anyone can become an investor. If before it was necessary to have a lot of money, time and people, today a single individual with a relatively small amount can fit into this agenda.

A natural effect of the low amount required to invest is that it opens up the possibility of making several investments at the same time, in different areas – in other words, it is possible to diversify your portfolio more easily.

Next, we can highlight that crowdfunding offers much less bureaucracy than a classic investment system.

Everything is 100% online, which means that the entire process can be done from the comfort of home, through your laptop screen or even your smartphone. There is no bank involvement and there is no need to go anywhere to sign contracts and/or meet people, for example.

Furthermore, this method has no administrative fees. For the investor, this means an increase in profits, and for the borrower, it means greater chances of paying the loan installments. As a result, there is a reduction in the number of defaulters.

Finally, we can mention the possibility of good income as one of the great advantages of crowdfunding. Returns can reach 15% per year, a figure considered high by financial market standards – and can even go beyond. A piece of news released by the Valor Investe website announced, in June 2021, a record return on collective investment: 35% per year! Incredible, isn’t it?

Conclusion

Crowdfunding is a practical way to invest directly in corporate finance and you can also receive financial compensation for it. We’ve found this sets crowdfunding apart from its competitors. These are terms that describe very similar but different experiences.