Crowd equity: is it worth investing in a company you are a client of? – July 2022 – News – Stock market

To finance themselves, more and more companies are choosing to turn to their customers. A complementary approach to traditional fundraising, motivated by both financial and commitment reasons.

Crowd equity, or equity crowdfunding, has been very common in the Anglo-Saxon countries for several years now. It experienced a phenomenal growth of +77%(one) between 2020 (€57 million raised) and 2021 (€101 million). For example, Finary, Qonto, Goodvest, and Wecasa have raised millions from their clients in record time. The first three named decided to go through British crowdfunding platform Crowdcubeon account of which more than 1300 operations.

Good luck on the way

In March, fintech Finary raised €2.17M in 21 minutes from 983 investors, and a month later, neobank Qonto raised €5M in 6:30 with 1,800 equity clients. As for Goodvest, their campaign was shut down after the €250,000 goal was reached “in just two hours”, according to its co-founder and CEO Joseph Shuifati. These successes are pushing these companies to resume operations, and it would be wrong to deprive yourself of this.

Value added in the long run

The formula is a priori also advantageous for investors. This is evidenced by data from a study by France Invest and Grant Thornton.(2)according to which investing in unlisted companies would generate an average annual return of 11.7% over a 15-year horizon.. This is twice the 5.4% per annum yield served by the CAC 40 over the same period.

A priori, the initial investment is relatively affordable: the share price is set at €1 for Wecasa (a home services platform), €10 for Goodvest and €138 for Qonto. However, this practice comes with a risk of capital loss: “90% of startups fail, 10% of them in the first year,” Claude Calmon, founder of fundraising consulting firm Calmon Partners, recalls in an interview with MoneyVox.

The problem of fame

In addition to the money aspect, all of these companies promote the concept of customer-shareholder commitment. Clients can create PEAs to be shareholders. Investing in a company of which you are a client “is primarily a commitment decision, not a financing one,” argues Pauline Pham, director of Crowdcube France in Les Echos columns. “Companies we work with in France […] convinced of the key role that their communities play in their development.”

Joseph Shuifati, for his part, sees this as a “serious publicity problem”: “The main acquisition channel is customers who recommend us. A customer-shareholder is an even more dedicated and engaged customer.” He adds: “For our clients, this is an opportunity to be involved in a project they believe in.”

Fanny Knusmann, head of the Wecasa brand, believes that “it is also a way to go beyond the simple status of a consumer”, while reminding that “this approach does not contradict more traditional fundraising, it complements it.” Indeed, “it is important for us that we are also accompanied by institutional and experienced investors who can provide us with strategic experience,” confirms Joseph Choueifati.

(1) “France Crowdfunding Barometer 2021 by Mazars for Financement Participation in France”.

(2) France Invest and Grant Thornton’s 35th edition of the barometer on the activity of French players in private equity and infrastructure funds.