What tricks can be used in connection with crowdfunding? I will share this based on 4 years of experience, since to my knowledge no one has written about this in Hungary yet. I will primarily share little things that I discovered during practice and that are not included in the “textbooks”. I will tell you what the pitfalls are, but I will also show you clever tricks that you can benefit from in the long run. The emphasis is on practice and specific examples, but if you are also interested in the theory, read my previously written articles on the topic.
You can find the rest of the series about startups here:
- 🚀Creating a startup portfolio simply and clearly I.
- 🚀Crowdfunding and what you need to know about it II.
- 🚀Operation of startup platforms in 2025 based on real experiences III.
- 🚀Crowdfunding and what you need to know about it in 2025 IV.
💡Where you see the pushpin symbol, I am describing what happened based on my practical experience, because I have seen it much more closely.
🌐Which platform should you search for companies on?
Crowdfunding, or crowdfunding, is by definition for startups, not products. I wrote extensively about it in my article on startup platforms, so I will only touch on it very briefly in this article on crowdfunding tricks.
Among the crowdfunding sites, I only use one platform for startup investments, Republic, I no longer use Crowdcube (crowdcube), because they haven't developed anything on their interface in years. Are these platforms good? Not at all, but out of all the bad ones, they are still the most affordable, especially if you want to invest a small amount. Since Republic acquired Seedrs in 2022 and they continue under the name Republic Europe, a larger, more stable company was created, so I think the institutional risk has decreased. One more reason to only use this one.
Roughly 3-4 pitch decks are uploaded to the Repulic platform per week, which is 150-200 investment opportunities per year. Since I wrote earlier that 1 in 20-25 startups passes my filter, you will have about 6-8 meaningful opportunities per year. Don't be afraid to let go of the many terribly bad opportunities, you don't need them.
🗽US platforms? Thanks, but no
Why don't I use American sites? Because it's tricky, not because I don't want to. In many cases, you have to deal with legal or other restrictions, such as a US bank account, phone number, address, etc., the secondary market is often only available to Americans, startups can't be sold for 12 months, there's no credit card payment, you can't download the pitch deck in most places, and I could go on. The biggest problem, however, is that the investment thresholds are high, typically a minimum of 500-1000 USD. Of the crowdfunding tricks, downloading pitch decks, or data collection, can also be applied here, you can read more about this below.
It's clear that the US is the citadel of the startup world, but until the above things change, I don't think it's worth bothering with it. And to see how true this is, I hold a large proportion of publicly traded stocks in the US, because these barriers have already been removed there, so if the regulatory environment changes, I will look back at it.
🤝Crowdfunding in Hungary? What's the problem with that?
🏢Crowdfunding Tricks: Lesson I: Spread the Companies
One of the biggest mistakes you can make in the world of investing is falling in love with companies. In this case, you compulsively look for targets to invest your money in, and I've experienced this several times with my stock portfolio. And startup investing is much worse in this respect, as it's an illiquid, high-risk thing.
That's why I've built a selection method, the essence of which is that I try to screen out a company, and if that doesn't work, only then do I start dealing with it in a meaningful way.
🚮The most important thing about crowdfunding tricks: fuck the companies
I do not invest in companies that:
- 🗑️They are not aiming for "world domination" and do not want to expand: This is why The Ethical Butcher company went out of business at the time (The Ethical Butcher), because they specifically said they have no plans to expand beyond the UK market. Okay, but how big of a market will a company interested in processing pasture-raised meat have? There are only a finite number of pastures, and they have competitors.
- 🗑️which cannot offer an alternative to exiting the investment: It also happened with The Ethical Butcher that they “didn’t think” about the IPO, and then maybe someone will buy them out one day. Since this is an investment, you investors need to know what exit points and escape routes are available to you.
- 🗑️I completely avoid certain industries: I don't have investments in utilities, basic raw materials, and I avoid retail companies and some of the industrial sector. The reason for this is that where fixed costs are high, it is very difficult to extract money from the operations of companies, which is why the return cannot be high. The other reason, for example, in retail, is that where there is fierce competition, there are no high margins. A counterexample is Facebook, which is no longer a startup but once was, and which has a gross margin of over 80%.
- 🗑️small or undefined market: I did this with Unistellar (With Unistellar), they sell digital binoculars, they sold 4000 units, which they say they dominated 80% of the market. Okay, so now 4800 units covers the entire market? Because then I won't invest, and if it's not that much, the company is lying.
♻️Other exclusion reasons
- ♻️visionary, future-proof technologies that are immature: zero-point energy, dark matter, gravity drive, plasma power plant, space travel. These are very capital-intensive, difficult to define things, and for me, investment is more of a pragmatic issue than a guessing game.
- ♻️I don't invest in startup platforms: Did you know that Seedrs and Crowdcube are both startups? And that this year Crowdcube is profitable for the first time in nearly 10 years, while Seedrs was losing money until Republic acquired it? So there is a significant institutional risk in startup investments, and I don't want to add to that by investing in the platform.
- ♻️Religious things: I have nothing against religions, but since they generate strong emotions and I don't know myself among religious customs, I don't invest in such companies.
- ♻️I don't understand what the company is doing: If I can't understand what the company does based on a 3-4 minute introduction video, I won't invest in it. A company called Taster can rightfully claim the title of one of the worst introduction videos of all time (Button).
- ♻️if you need the money because the company is in trouble: I don't invest in anything to ensure the company survives, this means the failure of the model for me, see: Chapel Down
- ♻️big words, community welfare: Usually, when a company overuses words like "social welfare", "saving the world", "protecting nature", etc., they are trying to cover up some kind of deficiency. On the other hand, I like it when there is a really good product that is also environmentally friendly, see The Cheeky Panda as a positive example (The Cheeky Panda) or Wilton London.
- ♻️software companies asking for money to develop a non-existent system: Before a company asks investors for money, they have to show something that can generate revenue. Never invest in a company that is not generating revenue (but may be losing money, more on that later).
- ♻️I don't invest in local things: restaurants, breweries and the like, which are difficult to scale and are concentrated in a specific location. It's difficult to scale, I can't judge how replicable it is.
📌In practice: Among the startups above, I mentioned Wilton London, which has since gone bankrupt, so the list above only reduces the risks, but none of them are a panacea. The Crowdcube platform has not been developing for years, Seedrs was acquired by Republic.
🔍Crowdfunding Tricks, Lesson II: Do Your Own Due Diligence
In the case of startups, everyone lies, and this is the assumption to make. The company presents itself in a better light, platforms also release garbage because that's how they make a living, and I could go on and on. One of the most important tricks of crowdfunding is to trust no one! That's why you should do your own due diligence. Take a look at what startups say about themselves. I'll tell you how I do it.
🔍Due diligence step I – The pitch deck
The first step is to turn on notifications on the platforms for new startups, and then as soon as I get an email about it, I immediately download the pitch deck. If I could only choose one trick of crowdfunding, this would be it. It’s very simple, it’s free, and you can get an awful lot of information from it in the long run. As I mentioned, I usually find one out of 20-25 companies worth pursuing, so why did I download all the pitch decks? There’s a very simple reason: you can’t access them in later funding rounds. A typical example of this is the case of Curve, who claimed in 2019 that they would have 4 million+ users by December 2020 (Corners).
This 4 million user figure has been so unrealistic that they now only claim 2.2 million, which is roughly half of what they previously had. Some rumors suggest that only 14% of registered users use the service, or at least that was the case in 2019. In 2023, the company reported 4.3 million users, which, based on the above estimate, means 603000 active users. All this while having already raised $323 million in venture capital so far, in 13 funding rounds, which is brutal. Not to mention, Curve's after-tax profit in 2022 was a loss of $69 million and it has not been profitable since.
It's also worth looking at the orange bar on the right-hand graph, this is the number of users acquired through so-called referral links, which practically means that they received money for registering. To avoid misunderstandings, I have no problem with affiliate-based things, but there is a good chance that the churn here will be much higher than with users acquired organically.
📌In practice: After the first few hundred pitches, I changed the pitch deck rule above to only pitch to companies I was really interested in. There's no point in storing thousands of pages of garbage, even electronically.
🔍Vigilance Step II – Deafening or telling the truth?
We have the pitch deck, let's see what's in it. Of course, it's never what it should be, but the side conversations go on for 20-50 pages. Then I'll tell you what it should be:
- more information about the team
- a complete financial section, with all kinds of indicators: margins, revenue, profit, loss, debt, creditors, etc.
- What is the product and why is it unique? Can it be protected? Does it have an economic moat? Is it protected by a trademark or patent? If not, why not?
- What exit options are there from the company? Acquisition, merger, IPO plans?
- If the company did not grow, would it be able to generate a profit?
- How much does it cost to acquire a user or sell a product?
- What are the company's sales channels and what strategic relationships does it have?
source: crowdcube
Instead, there will be harsh rhetoric about things like the market being worth $1 trillion, the number of vegans is increasing and this is a trend, ugly cows are destroying the ozone layer, that from tomorrow everyone will drive electric cars, cannabis will be legalized all over the world, etc. There's just one problem with these: no one will buy the company's hyper trendy, very environmentally friendly, great product or service at an unrealistic price. NOBODY CARES about what the company thinks about itself. The numbers should speak for themselves.
🧐Examples of cross-talk
How can you spot when a company is lying? A typical example is tossing around market size and making such progressions that their revenue could increase tenfold in 3 years. But the products/services have to be sold somewhere. So definitely consider it a good sign if:
- 🧐For companies selling finished products, there are larger cooperating partners in the pitch deck: e.g. Tesco, Sainsbury's, Asda, Morrisons, Amazon, Tesco, etc.
- 🧐What is the customer lifetime value? This expresses how much it costs a company to acquire a customer. Above three is considered good, meaning that for each unit of cost, there should be three times the revenue that the user should generate. I write this because you can acquire any number of users/customers if you have enough money, but sooner or later they will run out, and they need to be maintained somehow, see Curve.
- 🧐If the product runs out quickly or breaks down, you have to buy a new one. We don't like things that are too durable, or the products have to rotate or the software requires a renewable license.
If there were an imaginary inverse list of crowdfunding tricks, including corporate tricks, I think side-talk would be the first item on it.
🔍My favorite side story: we are losing money because of growth
Many companies claim that they are losing money because they are growing. This would be a perfectly acceptable reason for a startup if it were true. It is often difficult to decide whether the company would be able to make a profit if it did not spend on growth, as this is not really visible in the numbers. Not least because you are not looking at the balance sheet, income statement and cash flow of a publicly traded company. Instead, in the UK there are micro or small account type filings, the rules of which are quite lax.
- 📊There's nothing you can do, you have to ask the company in the discussions section. The more unpleasant the question, the better, because a lot can be gauged from the management's reaction:
- 📊breakeven point (BEP): This is the point where the company generates enough revenue to cover its direct expenses, not including one or two accounting items.
- 📊monthly/yearly/yoy burn rate: That is, how much money a company burns over a given period. By simply subtracting this number from revenue, you can determine whether the company would be able to generate a profit.
🔍Visit Step III – If you don't know, ask
We executed the pitch deck, the company didn't fail, but how do you know that the numbers written there are true? The short answer is: nowhere. Therefore, you need to go to the electronic company register of the current country and do some research. This is obviously easiest to do if it is in English or German, so for now let's stick with the United Kingdom company register at Companies House (Companies House). Check what documents are uploaded at EVERY COMPANY. If something is missing, write it down, it may be useful later.
You should ask the companies everything that is not clear or that has not been asked by others, so it is best to read the entire discussion section. The company's responses and reactions are a perfect gauge of their attitude. If they are phlegmatic, don't respond, talk nonsense, or refer to an NDA, you can throw the company away.
I would mention two exceptions, which are acceptable:
- ↩️Many times, the company asks you to send them an email, and they share additional information there so that it is not public.
- ↩️if a form is not uploaded to the company register, there may be several reasons, e.g. a request was submitted to postpone the year-end closing, usually this is a six-month interval. In such cases, you should ask the company manager to link the draft, which is not official, to the forum. This was the case with The Cheeky Panda, and the CEO simply posted it at the request of investors (The Cheeky Panda).
🔍Due diligence step IV – What is the company’s management like?
One thing left to check is the management. You can add LinkedIn to your imaginary list of crowdfunding tricks, e.g. Republic also publishes LinkedIn profiles. It also works if you read a few Google articles about the managers. What you need to look for: is the information they claim about themselves credible or not. For example, Nordic Oil CEO Dannie Hansen even emailed me about his Danish consulting appointment. If you feel like they are an authentic person, that is a huge positive.
source: Seedrs, data from Companies House on the left, founders of Ember Snack on the right
Another important thing to check in this regard is how much of a stake the founders have in the company. These are usually disclosed in the pitch deck, it is good if the majority control is in the hands of the company managers (i.e. more than 50%), because then they are very interested in the proper management of the company. Let's look at the example, in the case of Ember Snack, the founders are Harry and Jack Mayhew, but they did not disclose the ownership percentages (Man Snack). According to the Companies House document, they both had 9932 shares, and the total shares were 32042, which I found by simply adding up the number of shares held by the shareholders. So they each own 31, for a total of 62% of the company, which means majority ownership, which is perfectly fine.
🔍Due diligence step V – Company evaluation
I think the most difficult task in relation to any company is to determine its real value. There is very complicated math for listed companies, but at least there is data available there, which cannot be said for a startup. The founders determine the value of such companies, but how? This should be some crude financial nonsense about valuing competitors, but in fact, in most cases, the technique of punching in the stomach is used. That is, the founders think that this is what the company is worth, and that's it, otherwise there wouldn't be such ridiculous valuations that a company that barely generates income is worth 20-30 million dollars.
I usually use the P/S ratio, but only because there is no better one, which is the company's value divided by its earnings. The highest valuation I paid was 14.7, but it was a profitable company with valuable numbers. Of course, I prefer values under 10, and I usually look at what competitors are asking for roughly and make a decision based on those two figures. Even the best investment becomes meaningless and kills future returns if you pay too high a price for it.
🔍Visit Step VI – What are you missing?
By following the steps above and following the rules I mentioned, 95% of companies can be eliminated. It's important to listen to your gut, for example, if the design of a pitch deck is poor (e.g. Planty), and let's say that because of this it is not possible to read the figures normally, then I will simply give up on the investment. For 2-3 million USD, companies should notice such mistakes, this also reveals a kind of pretentiousness/unpretentiousness.
No matter how thorough you are, you may not notice everything. However, there is a great way to prevent this, through various special sites, blogok and reading their forums.
source: crowdcube
📌In practice: There were previously two recommendations here, ECF Buzz, which has since been discontinued and is unavailable, and Crowd-Investor, which has not been updated since 2022 (Crowd-Investor). The lesson from this is that when there is a lot of madness in the financial market, people deal with startups, when this subsides, the pages disappear, the resources cease to exist, which greatly hinders your research efforts.
🐴Other crowdfunding tricks: the Trojan horse
Many of you probably don't know, but most platforms work by dividing the funding of companies into different stages. It looks something like this:
- 🐎pre-registration: You can request access to a closed campaign on the platform in front of the entire public. Usually, at this stage, all that happens is that the angel investors put their big bucks into the campaign so that when it officially opens, the other investors see that most of the money has already been received. This creates FOMO, they want to get you to hurry.
- 🐎normal stage: the campaign opens, usually for 30-40 days, the normal fundraising cycle begins, all data is available to everyone. Overfunding is an incredibly common occurrence, about 90% in my experience, as there are not many companies that jump at the chance of having bundles of money thrown at them.
- 🐎The campaign ends: Funders will still see the information, access the discussion forum, and receive updated company data, provided that management is willing to release it.
- 🐎After the campaign: The above will be true for those who participated in the campaign, but those who didn't won't have access to anything unless they somehow buy into the company.
????How do we push the Trojan horse in?
This is one of my favorite crowdfunding tricks. As you can see from the above, you have two options if you want to follow a company continuously and access its data: either you unsubscribe from the stock during the campaign or you buy it on the secondary market for a minimal amount. These are actually two options, but I didn’t want to include two very similar things on the list of crowdfunding tricks. The essence of the method is that if there is a market segment and there are companies that you can’t make a decision about, buy into it for a few GBP, and voila, you can follow the company. Example: the world of P2P lending is a very interesting topic, except that, for example, in Hungary it is forbidden to provide loans as a private individual. However, buying shares in lending companies is not.
source: seedsrs
Let's look at a case that happened to me: there were three similar companies on the market: CrowdProperty, Brickowner and Loanpad. The first two were in the process of funding, but the last one had already closed, so I couldn't participate in it. I analyzed the first company, so I invested a normal amount in it, but since I also wanted to follow the competitor Brickowner, I took a follower position in it. Since I couldn't invest in Loanpad, when the secondary market opened, I took a smaller position to access the company data. So it looked like this:
- ????CrowdProperty: 1X investment
- ????Brickowner: say X/100 investment, only trailing position
- ????Loanpad: the smallest offered position that was available on the secondary market, then company analysis, and if appropriate, additional purchases can be made
This allows you to compare all three companies, and there is another advantage to this: prices practically freeze on the secondary market, which is what we will talk about now.
📌In practice: Since then, Brickowner has fallen -98% and was acquired, so it's a complete failure, the other two have been thriving ever since, so I'm waiting to see what happens to them.
🔁Other crowdfunding tricks: shopping on the secondary market
Startup prices change quite rarely, since they are not market companies. Who can say how much the ltd. that operates the corner grocery store is worth? Pretty much no one, since demand is very rare or non-existent, and this is also true for startups. There is some kind of valuation that the company establishes, and then often nothing happens, say for 2 years, until the next big event. Which could be, for example, the next financing round, sale, IPO, whatever, and so the price doesn't move either.
Let's say the imaginary unicorn startup sold its shares for GBP 10. Its valuation was GBP 20 million, its revenue was GBP 2 million, or P/S=10. However, it is making a loss, -200000 pounds per year. However, due to COVID, the company got a tailwind, and by the end of the year its revenue will be GBP 3 million (P/S=6.7) and its profit will be +200000 pounds. This would naturally drive its price up sharply on the stock exchange, because the market follows the changes there. However, the pricing of startups is very rigid and the market is also illiquid. Thus, if you have additional information that other investors do not have, you can often buy shares relatively cheaply, even if the share is trading at a premium on the secondary market.
🍦When the ice cream licks you back
Crowdfunding tricks don’t always work, as the opposite of the above can also be true. I’ve seen funding rounds where the valuation was half of what it was before, meaning investors lost 50% of their investment “on paper”. This could happen, for example, because the founders’ original valuation was too high, the estimated growth didn’t happen or only happened to a lesser extent, and so on. So, when you analyze a company, you definitely need to determine the fair valuation. In other words, the point is not whether a given share is trading at a discount or premium on the secondary market, but rather what its real value is.
This is exactly the market where slippages can occur in both directions, and you, the investor, can profit from this.
📊Crowdfunding: my portfolio
I decided to share the numbers of my startup portfolio as of early July 2025, so you can see how it has roughly built up over the years. I also added some comments to the more important companies, so you can understand what kind of results crowdfunding can bring, and I try to show examples of the above tricks.
| Name | Platform | Record last position | Based on cost of entry | Comment | |
| 1. | Coat Paint | Seedrs(Republic) | 2024.06.23 | 21.75% | expands |
| 2. | Savvy Navy | Seedrs(Republic) | 2024.05.01 | 19.67% | expands |
| 3. | The Cheeky Panda | Seedrs(Republic) | 2022.11.28 | 10.13% | expands |
| 4. | Tonic Health | Seedrs(Republic) | 2022.04.11 | 6.93% | expands |
| 5. | Nova Innovation | Seedrs(Republic) | 2021.12.16 | 6.85% | works |
| 6. | CrowdProperty | Seedrs(Republic) | 2023.03.06 | 6.39% | works |
| 7. | |||||
| 8. | Loanpad | Seedrs(Republic) | 2021.08.07 | 5.89% | works |
| 5.86% | |||||
| 10. | Christ | Capital portal | 2023.02.15 | 3.07% | N/A |
| 11. | Promixx Ltd. | Seedrs(Republic) | 2021.10.05 | 2.80% | works |
| 12. | Corners | crowdcube | 2021.06.21 | 1.57% | works |
| 13. | Cranes Drink | Seedrs(Republic) | 2021.10.05 | 0.57% | works |
| 14. | Gathering | Seedrs (Republic) | 2021.10.07 | 0.56% | works |
| 15. | Desklodge | Seedrs(Republic) | 2021.10.05 | 0.39% | works |
| 16. | Creative Nature | Seedrs(Republic) | 2021.10.05 | 0.29% | works |
| Beeline | Seedrs(Republic) | 2021.10.05 | 0.25% | works | |
| 18.. | |||||
| 19. | Tipjar | Seedrs(Republic) | 2021.08.08 | 0.18% | works |
| Hydrate Drinks* | Seedrs(Republic) | 2022.04.11 | 0.18% | works | |
| 21. | |||||
| 22. | Som Saa | Seedrs(Republic) | 2023.02.10 | 0.04% | works |
Above you see the 22 names that are currently part of the portfolio, but I have already sold 4 startups – Aduna, Humble Grape, SHAREIGHT, Stashbee – so I have invested in a total of 26 startups within the framework of crowdfunding. I have sorted the table by cost of acquisition, so the first 9 positions actually count, but let's start from the bottom.
📌In practice: the current Hydrate Drinks were previously both Skinny Drinks and Happy Drinks. The interesting thing is that if a company keeps changing its name because it has eroded the previous one, it is always a warning sign. In this case, the company is on the verge of collapse, with the founder having to put in £350000 to keep the company afloat. So the “it’s working” comment here was a bit generous on my part, but we’ll see how they do in the long run.
🐴The previously mentioned trick of crowdfunding: the Trojan horse
Why do I have such small positions, between 0.2-3%? Position size in the case of crowdfunding expresses my conviction and is also a diversification element. Since I took positions in several rounds, sometimes in the actual funding round, and sometimes from the secondary market, the weight of the companies in the portfolio well expresses what I think about them.
Since there is little data on startups, small sizes in this case only mean taking a follower position, this is the Trojan horse trick I wrote about earlier. Of the above, Loanpad, Savvy Navvy and The Cheeky Panda were like this at first, and then how beautifully these positions grew.
It is also possible that my thesis changed in the case of a company and I was unable or unwilling to sell it, but I did not increase my stake either, so it slipped down the ranking, such was the case with Promixx Ltd.
🧬Survival chances in crowdfunding: unfulfilled promises
Of the top 9 positions, 1 went bankrupt, this was Wilton London, it went into the trash overnight. In the case of Nordic Oil, they bought the company 90% cheaper, so not as I imagined at the time of purchase. However, the company's management was honest and took upon themselves to compensate for the loss and compensate investors from their products, which is extremely rare.
Of the remaining 7 positions, Nova Innovation's management does not deal with small investors, to put it mildly, while Crowd Property and Loanpad are construction loan management companies that were hit by the high interest rate environment, so the decline there is quite large, but this is completely normal in an economic environment like the one in July 2025, apart from that, they are doing well.
Tonic Health's management is spinning, they are moving forward, The Cheeky Panda has stalled, but is slowly growing. Of the first 4 companies, Coat Paint and Savvy Navvy stand out, who mostly brought the numbers I expected, but not what they initially promised. However, their prospects are still very good, which is why these two companies make up 40% of my portfolio. But what is telling is that so far the companies have failed their own preliminary forecasts 100% of the time, so 26 out of 26, including those sold.
📌In practice: I was able to mitigate the 9/10 startups fail rule I cited earlier in my portfolio as follows:
- 🌱I don't want to say anything about 1 piece, Cristo, because it is a domestic company.
- 🌱2 went bankrupt, 2 were bought out, which is a kind of exit, but in a bad way, because I lost most of my capital, so we can look at them as if they went bankrupt; 20%
- 🌱13 are working, but they are not growing significantly; 60%
- 🌱4 pieces are expanding; 20%
The lesson from the above: not one has yet brought the expected ten- to thirty-fold price gain, which would be roughly expected based on the risks of a startup, over a 7-8-year period. Obviously, half of this time period is still to come, but the trends are already visible. So, overall, crowdfunding is not suitable for an average investor to part with a lot of money, even if they put in a lot of work.
💼📊❓Crowdfunding: secondary market buying, company valuation anomalies
I gave two examples, both without company names so as not to reveal secrets. In the first example, I bought exclusively from the secondary market, because the company's revenue increased 16-fold in 4 years. In the first round of capital raising, the company's valuation was P/S=18, you can see where I bought in the positions below. This is how I took positions in the company:
- 💰2021.10.05: GBP 6.26/share (secondary market), P/S=6.9
- 💰2021.10.05: GBP 5.84/share (secondary market), P/S=6.3
- 💰2022.01.26: GBP 10.76/share (capital raising, anti-dilution protection)
- 💰2023.01.31: GBP 11.89/share (capital raising, anti-dilution protection)
- 💰2024.05.01: GBP 11.89/share (capital raising, anti-dilution protection)
After that, I didn't do anything else but hold the position, and when they were going to dilute it in another round of capital raising, I bought it to prevent that from happening. The price has risen by about 98% since then, but revenue is growing much faster, which is always a good sign.
In the second example, I did not invest during the 2021 campaign because I was overvaluing the valuation, which was then P/S=12.5. However, revenue increased from £1.2m to over £4.9m while the valuation fell, so I took the positions from the secondary market, in the following steps:
- 💰2022.04.13: GBP 6.26/share (secondary market), P/S=5.6
- 💰2022.04.13: GBP 7.53/share (secondary market), P/S=6.72
- 💰2022.04.13: GBP 7.83/share (secondary market), P/S=7
- 💰2022.04.13: GBP 8.14/share (secondary market), P/S=7.28
- 💰2024.05.29: 7.53 GBP/share (capital raise, anti-dilution), P/S=2.2
- 💰2024.05.29: GBP 7.53/share (capital raise), P/S=2.2
As you can see, I started buying the stock on the secondary market, then paid for the dilution protection first in 2024, and then tripled my position. Why didn't I do both at the same time?
Because at first I didn't believe that a four times larger revenue would have a third of the valuation. This example is typically an anomaly that only occurs in the context of crowdfunding and the startup market, because lay investors have no idea about these connections. And what's even better: the company closed last year with a revenue of 7.4 million GBP, with a positive EBITDA result. This is a pretty good sign for the future! I'll tell you how the story ended in a few years.
🧊Summary of crowdfunding tricks
This concludes the topic of crowdfunding tricks, and I have already written more than 120000 characters on electronic paper, which is about the length of a small book. I do not claim to have covered the topic to the fullest, but I think there is plenty to build on. To summarize the essence of the article briefly: most startup companies will not offer you an investment opportunity that is really worth investing in. This is a case of finding a needle in a haystack, meaning you have to pick out the few diamonds that are hidden in it from the pile of coal.
It's worth saving all the interesting pitch decks, applying follow-on positions, or investing small amounts in stocks on the secondary market to get enough information. The more data you collect, the more precise decisions you can make and the less chance of making bad decisions. Still, this remains the genre where the main rule is always this: Amounts invested in startup investments should always be written down to 0. In that spirit, move forward if you wish.
Frequently Asked Questions (FAQ)
What is the meaning of crowdfunding?
Crowdfunding means that many people pool small amounts of money for an idea, product or project - typically through online platforms.
Essence: The money is not provided by a bank or an investor, but by the community. Anyone can join, usually in exchange for a reward (e.g. a product, an experience, a name among the supporters).
Varieties:
- Reward-based: product pre-order (e.g. Kickstarter)
- Equity-based: they give a share in exchange (e.g. Republic)
- Donation-based: purely donation (e.g. GoFundMe)
- Debt-based: loan-like (e.g. peer-to-peer lending)
What is it used for?
Startups, inventors, artists, tech projects, films, books, charity. Whether it will happen or not depends on the enthusiasm of the community.
What is a startup?
A startup is a start-up business that is based on an innovative idea and aims for rapid growth, usually in a technology or digital field. Characteristics of a startup:
- 1. Innovation: Startups often come up with some kind of innovation, whether it's a product, service, or business model that didn't exist before or is significantly better than existing ones.
- 2. Scalability: The goal is not to create a small stable enterprise, but to build a business that can grow quickly, even internationally.
- 3. Risk and capital requirements: Startups often require external investment capital, such as from angel investors or venture capital funds, as they may not necessarily generate profits in the initial stages.
- 4. Experimental phase: Startups often test, experiment, and pivot (change direction) to find real market demand and a sustainable business model.
Using a simple example: A new burger joint isn't a startup because it copies a known model. But an app that uses artificial intelligence to recommend personalized diets and deliver ingredients to your home could be a startup.
Who is an angel investor?
An angel investor is a wealthy individual who invests their own money in startups – usually in the early, risky stages – in exchange for a stake in the company.
Main characteristics:
- It helps in the early stages: when the startup has no or minimal revenue yet and a traditional bank loan is not an option.
- Uses own capital: You do not invest as a fund manager or company, but as an individual.
- You will receive a share of: In exchange for your money, you acquire an ownership stake, e.g. 5–30%, in the business. It is not worth acquiring a very small stake, because then it will have no impact on the operation of the company and even in the event of a large profit, you will only realize a relatively small amount of money.
- More than money: It often provides experience, connections, and advice; this is called smart money.
- The purpose of profit: the long-term profit that the startup can realize after a successful exit, e.g. sale, going public, etc.
Using a simple example: If someone comes up with a new healthcare app but doesn't have the money to launch it, an angel investor might give them, say, €30 to build the first version - in return, they'll get a 000% ownership stake.
Who is a startup investor?
A startup investor is a person or organization that invests money (and often knowledge and connections) in a startup business with the aim of generating future profits through the growth of the company. A startup investor can invest in several ways:
1. Angel investor
The meaning of an angel investor is: an individual who invests his own money in early-stage startups (I wrote about this in detail above).
2. Venture capital (VC)
A professional investment organization that manages money from external sources, such as pension funds, banks, and government funds, and invests it in startups, typically in the growth or scaling stage. It works with larger amounts than angel investors.
3. Accelerators and incubators
They are not classic investors, but they often provide a small amount, mentoring, office space, and connections to a fledgling startup in exchange for a small stake.
4. Crowdfunding investors
They are ordinary people who support startups with small amounts of money through online platforms such as the previously mentioned Crowdcube, Republic, or StartEngine, in exchange for equity or other rewards.
Startup series: what to watch if you want to get smarter?
You can watch countless series about startups online or on various TV channels. These are typically transferred from one country to another on a franchise basis, and they may be renamed, but the basic logic is the same.
🦈 Shark Tank (USA)
- The most famous startup reality show.
- It has been running since 2009 and has produced hundreds of episodes.
- It includes investors such as Mark Cuban, Kevin O'Leary and Barbara Corcoran.
- Several successful startups have started here (e.g. Bombas, Scrub Daddy).
🦈 Dragons' Den (UK, Canada, Japan, etc.)
- The original format that Shark Tank was made from.
- It has been going on in the UK since 2005.
- It started in Japan even earlier under the name "Manē no Tora".
- In Hungary, for example, it was broadcast under the title Among Sharks.
🎬 StartUp (Netflix, 2016–2018)
- It's a fictional series, not a reality show.
- It tells the story of a tech startup (based on digital currency), embedded in crime and drama.
- Starring Martin Freeman and Adam Brody.
📈 Planet of the Apps (Apple TV, 2017)
- A reality show where mobile app developers compete for investment.
- Will.i.am, Gwyneth Paltrow, and Gary Vaynerchuk were also featured as mentors/investors.
- It was cancelled after one season.
🧠 The Pitch (podcast, USA)
- An audio-based “Shark Tank” where startups pitch live to investors.
- More honest, less showmanship, more real business decisions.
Is startup a tricky investment?
It's a bit difficult to define the above concept, but "tricky investment" is an unofficial term in the startup world, but it usually refers to investments that appear favorable on the surface, but behind the scenes, they hide conditions that could be detrimental to the startup (or other owners) in the long run.
🔍 Typical “tricky” elements in startup investments:
🎣 Too low rating
The angel or VC gets in at an unrealistically low value, thus acquiring too large a stake, which demotivates the founders or makes subsequent rounds impossible.
📜 Preferred shares (liquidation preference)
This is a standard condition, but if it is extreme (e.g. 2–3x refund right), it can practically "zero out" the founders during an exit and you won't necessarily know about it. It's worth asking the founders if they have one.
⛔ Protections against share dilution
The investor is protected against future devaluation when additional shares are issued, but if this is too aggressive, everyone else loses significantly on their stake. This has happened to me several times, fortunately crowdfunding platforms almost always give you the opportunity to contribute additional capital so that your stake does not change.
🧨 Buyback right
The investor stipulates that in certain cases he can return his share at a fixed price, for example, if the exit does not occur within X months. I have not encountered anything like this yet, but it is theoretically possible.
💼 Forced exit rights (drag-along, tag-along)
These can be useful, but if they grant excessive rights to only one side, the interests of the other side will be harmed.
🤔 Why would a startup undertake this?
- Money is needed, and there is no better offer. It was quite typical in 2024 that there was 1 offer, on a “must have, don’t have” basis, because of this, there were cases where the valuation fell by a third, while the revenue increased by four times! This is a typical value disparity, the question is, was the higher valuation the exaggerated one or the new one very low? This is why you have to understand startups too.
- Due to inexperience, they fail to see the long-term consequences.
- The investor “seems friendly,” but the contract is not.
What is liquidity in startup investments?
Liquidity for startups refers to how quickly and easily a company can convert its assets into cash when needed. This is especially important because early-stage companies often don't have a stable revenue stream, so they need to have cash readily available to ensure cash flow.
Liquidity therefore helps startups respond to market changes, finance daily operations, or make new investments. 💰🚀 Maintaining an adequate level of liquidity is essential for a business to operate smoothly, even if larger investment rounds are still pending.
In another sense, liquidity refers to the turnover of the underlying secondary market. Unlike listed companies, startups are not listed on the stock exchange, so they are completely illiquid by default, there are two solutions to prevent this:
- secondary market of platforms, such as Republic's own
- When publicly traded companies invest in startups, the shares of the holding company are traded on the stock exchange. Startups are also acquired in the SPAC format. A SPAC is an empty publicly traded company that has no substance but has acquisition money, so the acquired startups are automatically listed on the stock exchange.
What does minimum viable product mean in startup investments?
In the world of startup investments, a minimum viable product (MVP) means that a company creates a product in the simplest possible form that is already capable of solving an important problem for the target group. The goal of the MVP is to quickly create the basic version intended for the market, with the least possible resources, in order to test its reception and further develop it based on that. MVP helps avoid the excessive costs that would arise if the product were launched in a fully refined form while the market response is not yet known. 🚀💡 This allows startups to quickly validate their idea and modify the product if necessary before making larger investments.
What does NDA mean in startup investments?
An NDA, or Non-Disclosure Agreement, is a legal document that two parties sign to protect their trade secrets and confidential information. In the case of startup investments, an NDA often comes into play when discussing new ideas, products, or services, and it is important to keep the information private. An NDA ensures that the other party does not share, use, or disclose the information shared. 🤐🔒 This helps startups protect their intellectual property while giving others the opportunity to take an interest in their projects without having to worry about information leaking out.
What does pro-rata law mean? And what does pro-urbe mean?
Pro-rata rights in startups mean that an investor can retain the same proportion of their share in future capital raisings as they acquired when they made their initial investment. For example, if an investor has a 10% stake in the company and the startup raises new capital, the pro-rata right allows them to secure that 10% with a new investment so that their ownership stake is not reduced. 📈💡 This is a protective mechanism that allows investors to maintain their influence in the company.
The term pro-urbe is a legal term of Latin origin that means “for the sake of the city.” In a legal context, it usually refers to the fact that a decision or action should be made with the interests of the city or community in mind. Pro-urbe rights generally refer to benefits or rights that benefit a city, town, or community, such as the use of property for public purposes or the provision of public services. 🌆It usually has nothing to do with startup investments.
What is a startup pitch and what is a pitch deck for startup investments?
A startup pitch is a short, to-the-point presentation that aims to pique the interest of potential investors, partners, or customers in your startup idea. During the pitch, the entrepreneur presents the company's vision, the product or service, its market position, the problem it solves, and why it is worth investing in this business. This is usually a personal, oral presentation that lasts about 15-30 minutes. 🎤🚀It is almost always given in person or, more recently, via video call, as investors from many countries around the world are interested. In my experience, the latter are typically longer, and the ones I have attended have been 90 minutes or more.
A pitch deck, on the other hand, is a visual document in PowerPoint, PDF or other presentation format that presents the startup in detail. A pitch deck is usually limited to 10-15 slides and contains the most important information about the company's business model, market, product, financial plans, competitors and team. A pitch deck is therefore a supporting material for the pitch presentation, which helps potential investors understand the startup and its growth opportunities. 📊📈On online platforms, both forms usually exist in parallel, as investors are aware of the pitch deck and ask questions of the owners during the online pitch.
Legal and liability statement (aka. disclaimer): my articles contain personal opinions, I write them solely for my own entertainment and that of my readers, so the articles published here do NOT in any way exhaust the scope of investment advice. I have never wanted, do not want and am unlikely to give such advice in the future, what is written here can only be considered informational content and cannot be interpreted as an offer. The expression of opinion can in no way be considered a guarantee for the sale or purchase of financial instruments, YOU are EXCLUSIVELY responsible for the decisions you make, no one else, including me, assumes this risk.
