The alternative investment market is a vibrant and fast-growth sector, so it can be hard to know which platforms are the best, or are most suitable for you, as an investor or an entrepreneur looking to raise financing. Doing your own research makes sense and there are number of areas worth assessing:
How To Select A Platform
In the same way as you might look into a management team’s background and credibility for a specific investment you may make, take a look at who is running the investment platform. Do the team have a relevant and solid track record? Are they FCA approved? What is their previous experience of working with entrepreneurs, or have they run companies themselves? Can you reach them/meet them? What other credentials do they have? How well are they connected in the industry and investment community? Above all, are their interests aligned with yours?
In addition to being under FCA regulation, you should check if the platform is a member of any industry bodies, which help to set industry best practice and standards. We, for example, are part of the UK Crowdfunding Association, British Venture Capital Association, the UK Business Angels Association and sector-specific group Innovate Finance, which means we have a voice and insight into how our industry evolves its best practice guidelines. When reviewing a platform, you should consider whether the platform has access to a wide network of professionals and industry experts via an expert panel or members of a board.
Some valuations are company-led and others will be investor-led and it should be clear how a particular valuation has been arrived at. Look for external validation, for example by anchor investors such as VCs or Angel investors, who have conducted their own due diligence or are sector experts themselves.
POST FUNDRAISE RELATIONSHIP BETWEEN PLATFORMS AND THE COMPANIES THEY FUND
It may be difficult to ascertain how companies rate a given platform but what should be clear is whether there is an ongoing relationship between the platform and the companies they have funded. How closely will the platform work with the companies post-fundraise, for example actively leveraging the wider network to introduce new contacts or clients, thereby helping the companies achieve their growth ambitions. Will your platform have any role in keeping you updated on your investments, e.g. quarterly financials, update calls with management, company news or other updates?
ACCESS TO INFORMATION AND TRANSPARENCY
In order to make informed investment decisions you will need access to information about a given business. Does the platform make all relevant documentation available and are there opportunities to interact with the companies directly (e.g. management meetings, conference calls)? Can you make specific requests for information or ask questions prior to making an investment decision?
Are the charges made in line with others in the industry and how does it compare to other platforms providing a similar offering? Is it transparent? Is it success-based or are there any upfront charges, independent of success? Does it align the platforms interests with yours as an investor?
QUALITY OF INVESTMENT OPPORTUNITIES
Are the investment opportunities being offered businesses with solid business plans, with good growth prospects, run by strong management teams with the ability to scale up and exit the business? Is the investment offered at a sensible valuation point and does the legal structure ensure shareholder rights are protected? Most importantly is there a path to monetising your investment via realistic exit routes, allowing you to make a return on your investment?
Choosing your investment platform is essential to diversificationMartin McCourt Non Executive Chairman and Former CEO Dyson