As we said in previous occasions, at Fellow Funders we would like to make investing in startups closer to individual investors from a professional point of view and following high-quality standards used by the big investors. Today, we are going to talk about one of the main aspects of our model: the profitability of the projects that Fellow funders provides to investors.
Most companies that are financed through Equity Crowdfunding are high-risk investments that are not ideal for investors who are looking for safe profitability. However, the risk assumed is in accordance with the profit expected. Each project can offer a different profitability, always according to its level of maturity, its situation and the sector in which it operates, among other factors.
Ways to make your investment profitable
There are two fundamental ways to make your investment profitable: divestment (sale) or dividend collection
- Startup investment is characterized by offering future potential profits based on the total of partial purchase of the company by a third party. This share sale process is known as Divestment or Exit. A great number of startups are purchased by much bigger companies, taking place the purchase of the total shares to every shareholder.
- Another way of potential return on investment is based on dividends, or the percentage of profits that the company decides to distribute to its shareholders at the end of each year. The most attractive dividends are usually given in mature companies where the room for growth is more limited and they earn a lot of money. In contrast, young companies tend to reinvest all the profit generated in order to grow the business and generate greater future value for their shareholders.
Remember that creating diversified portfolios is the best way to decrease our exposition to risk and to decrease your portfolio’s volatility. It is advisable to gradually continue creating the portfolio and select in what sectors and projects to invest. At FELLOW FUNDERS we help you to create a diversified portfolio with a wide variety of projects and terms of maturity.
Next week, we will talk about other important source of benefits for investors: tax incentives for startup investments.