How we generate income or return on investment is becoming more important to many people because information is so readily available at every turn that not knowing where your investments last produced a 10% yield is no longer acceptable to image sensitive investors.
As little as five years ago, it was acceptable to give fund managers free rein to produce the best return possible and the risk factor would be the only stipulation from a client, but today, failing to remain ethical in one area can affect your ability to do business in another area. Hail the arrival small business investment portals where anyone wishing to secure start-up funding can appeal directly to investors.
An Angel Reborn
Angel investors have been around for a long time, but the rise of peer-to-peer lending schemes and crowd funding sites has kick started the industry and made the route to finance for new entrepreneurs more accessible than ever before.
According to a report in the Telegraph, Crowdcube recently raised £15.3m for new ventures, but many more crowd funding websites are catching up with Crowdcube as the ‘go to’ option for UK businesses that need a little seed money. Each new platform vying for a foothold has to bring something different to the table and that’s usually industry expertise, but some offer a lot more.
What it Takes to Be Different
With so many investor platforms, this truly is the age of the entrepreneur, but how does the new business owner know where to go when they have a great idea and so many options? For many, it boils down to what peripheral services are on offer from the investor and sometimes that’s more important than an abundance of willing investors because money is rarely useful without expertise.
brain-box.org.uk is one of the best examples I’ve come across. Their model takes a relatively new approach to ensuring their investments are not just ethical, but come with enough mentoring to ensure the return is much more likely to arrive in the investors bank accounts. The businesses that qualify for investment also receive mentoring that includes everything from business plan creation through to marketing support.
At the end of the investment cycle, a portion of the produced return is donated to a chosen charity, which makes the investment vehicle hard to beat if you are looking for ethical ways to make your money work for you. Although this example is only open to investors who want their money in high technology start-ups, there is an abundance of micro-businesses and start-up concepts on sites like Kick Starter and Crowd Cube that might have be equally ethical business idea.
Due Diligence Before and During
Like with any investment, you need to examine the potential of the people involved with the start-up as well as the market size and a competitor analysis. You would expect the budding entrepreneur to include these in a business plan, but performing due diligence on the research quality is your responsibility rather than the responsibility of a fund manager that would traditionally manage a portfolio of unit trusts or similar.