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Equity crowdfunding platforms allow investors to invest directly in sustainable or green startups that are addressing one or more of the 17 SDGs (Sustainable Development Goals). Here we investigate the top European equity-based crowdfunding platforms and review the best options.

Intro

Equity-based crowdfunding has had a significant growth in the last 10 years. It all started with the lack of funding sources available in the aftermath of the 2008 financial crisis. Once banks restricted and limited their loan offering, startups and SMEs had to find out alternative sources of financing.

Equity crowdfunding is one of the four main business models of crowdfunding available for individual investors, which are:

• Reward-based crowdfunding: backers provide funding to individuals, projects, or companies in exchange for non-monetary rewards or products. E.g. Kickstarter and Indiegogo
• Donation-based crowdfunding: donors provide funding to individuals, projects, or companies based on philanthropic or civic motivations with no expectation of monetary or material rewards. E.g. Kiva
• Debt-based crowdfunding: individuals finance loans for other individuals (P2P), projects, companies, or real estate (P2B). E.g. Lendahand, Trine and GoParity
• Equity-based crowdfunding: individuals or institutional funders purchase equity issued by a startup or small company. E.g. Seedrs, Crowdcube, Invesdor, Funderbeam

Reward-based and donation-based crowdfunding are considered non-investment-based options since once the user contributes to those projects, no financial return is expected. The funds are allocated to the projects and as an outcome, either backers or donors receive non-monetary rewards. Alternatively the projects create a social or environmental impact.

Debt-based and equity-based crowdfunding are an investment-based crowdfunding options, where investors should expect financial returns. Debt-based crowdfunding, also known as peer-to-peer (P2P) lending or crowdlending, is the most common business model with a global volume of more than $40 billion in 2018 (excl. China). On the other hand, the European equity-based crowdfunding is still a small mrket , reaching $1.16 billion in 2017, and expected to reach $2.3 billion in 2020.

When investing in green startups, individual investors from Europe and the UK have several equity crowdfunding platforms to choose from. In this post, we will look into the main investing options, evaluate their main differences, and discuss how sustainable investors can select and invest in green startups.

How to invest in green startups?

The regulatory changes that took place in the last 10 years enabled small investors to join attractive early-stage investments previously only available to VC (venture capitalists) and accredited investors. Equity crowdfunding platforms allow investors to allocated as little as 10 Euros into a startup and become a shareholder.

When looking specifically at green startups, investors must be even more cautious when assessing if the social and environmental impact claimed by the startup is indeed effective and that it is addressing a relevant social or environmental problem.

As we will see below, the leading equity crowdfunding platforms have a broad selection of startups, covering different industries, from fintech to cleantech, from beauty products to beverages. Sustainable investors need to learn how to navigate those options to find attractive green startups that create real impact.

We list below a guide to select green startups created by SeedTribe, the equity crowdfunding platform from the Angel Investment Network:

• Business Model
  • Do you have a sound business model?
  • Is there a big enough market?
  • Is it the right time and place for this type of business?
  • Does the valuation seem fair?
  • What are the Key Performance Indicators?
  • How long until you make revenue?
• The Team
  • How many years of relevant experience does the team have?
  • Does the team have a well-balanced skill set?
  • Does the team have the drive to grow this business?
  • Do your values align with the founders’?
• Sustainability
  • Is the business model sustainable?
  • Does the business address an SDG in its mission?
  • What is the social or environmental impact of your business?
• Product
  • Is it defensible?
  • What are the barriers to entry for competitors?
  • Is there an IP, trademark, patent, or another factor that gives you a competitive advantage?
  • What is the competition like?

List of top European equity-based crowdfunding platforms

Ranked by total amount raised, we list below the top European equity crowdfunding platforms:

Top 5 European equity-based crowdfunding platforms by amount raised (including the UK)

Seedrs

Seedrs is one of the largest equity-based crowdfunding platforms in the world. Founded in the UK in 2009, the company has a global presence and has raised a total of £1 billion in 1,235 highly diverse deals. The platform constantly offers new opportunities for investors willing to invest in early-stage startups.

Seedrs was also the first equity crowdfunding platform to implement a Secondary Market, allowing investors to sell their shares and exit their investment before the startups’ secondary transaction (e.g. acquisition or IPO). The Secondary Market is in beta and works in cycles: the market opens on the first Tuesday of every month and closes on the following Tuesday. Buy orders can only be placed when the market is open.

Main features:

• Secondary Market increases the liquidity of the investment, but also allow investors to buy startup shares after funding campaign.
• Auto Invest: automated investment tool allowing algorithmic investments based on investor selected criteria.

How to find green startups in Seedrs?

Seedrs does not distinguish green startups from standard startups. Among the several sectors in Seedrs, “Energy” and “Healthcare” are the ones with a higher likelihood of finding sustainable startups. However, investors will need to do the heavy lifting when looking for green startups. Seedrs could easily implement a “green/eco/sustainable” tag that would facilitate investors’ lifes when looking for green startups.

Successful green startup cases: Sono Motors, Marine Power Systems, Riversimple 

Invest a minimum of £150 with Seedrs and get £25 in investment credit

Crowdcube

Founded in 2011, Crowdcube is at par in volume of deals with Seedrs, reaching 1 million members and an accumulated £1 billion raised in funding campaigns. Recently both companies, Seedrs and Crwodcube announced a merger, where Crowdcube will own 60% of the shares and Seedrs the remaining 40%.

This merged company will dominate the European equity crowdfunding in market share. In the company’s own words, it will “accelerate growth, in the UK and overseas, and become the world’s largest private equity marketplace”. The merger is still to be approved by the Competition & Markets Authority (CMA) and the Financial Conduct Authority (FCA).

Main features

• Direct Community Offer (DCO): this is Crowdcube’s version of a secondary market, allowing investors to sell their shares at an internal secondary offer, pre-IPO, without releasing more shares. However, liquidity is still limited, since to qualify for the DCO the companies need to decide to launch a DCO and need to fulfill Crowdcube’s strict criteria.
• Deal structure: Crowdcube uses both a direct ownership model and a nominee structure mode. Direct ownership allows investors to directly invest in startups without intermediaries.

How to find green startups in Crowdcube?

Among the platform several sectors, Crowdcube offers sectors “Energy & Renewables” and “Heathtech & Healthcare”. The first includes green startups with cleantech solutions, while the latter includes startups with social and community impact. Like Seedrs, investors will have to dig deeper into those sectors to find truly green startups.

Successful green startup cases: PodPoint, Witt Energy, Calla Lily

Invesdor

A Finnish equity crowdfunding platform founded in 2012 with operations in Northern Europe (Finland, Sweden, Denmark, Norway, Austria, and Germany). Invesdor raised a total of €160 million in more than 200 funding rounds. Investors can choose to invest in shares, bonds, or convertible bonds.

Main features:

• Low fees: charges only 1% from investors as a management fee and a transaction fee based on the payment method. Do not charge a performance fee or fee on profits.
• PaaS: offers a platform-as-a-service for businesses looking to digitalize their fundraising process.

How to find green startups in Invesdor? Sectors are limited to technology, finance, and food & drinks. “Technology” is the sector with a higher likelihood of finding green startups, especially related to cleantech.

Successful green startup cases: Oceanvolt, Pupu, Solar Water Solutions

Companisto

The fourth-largest equity crowdfunding platform is Companisto from Germany. Founded in 2012 it has raised more than €83 million for startups and growth companies in 166 funding rounds.

Main features: when investing at least €10,000 in a single company or when reaching a total investment of €25,000 in Companisto, investors can join the Angel Club. The club offers funding rounds at preferential conditions and exclusive access to a network of angel investors

How to find green startups in Companisto? Companisto claims to finance ambitious and sustainable companies, however, the platform does not offer public information about the current investment opportunities.

Successful green startup cases: My Toy Box and BE Food AG

WiSEED

The largest crowdfunding platform in France, made for French startups, and French investors. Having been founded in 2008, WiSEED is one of the oldest crowdfunding platforms in Europe.

It offers investments in real estate crowdfunding (fixed interest) and equity crowdfunding (share ownership). The platform has a strong focus on renewable energy and environmental projects, however, most of the projects in the platform are real estate crowdfunding (70%).

The platform has raised a total of €251 million in 596 projects. When it comes to equity crowdfunding, the amount raised is around €75 million.

Main features: allows investors to engage in startup selection by voting on companies and discuss it with other investors before the raising campaign is approved/starts.

How to find green startups in WiSEED? The platform has a strong focus on sustainable and green startups allowing investors to choose between projects with “impact on humans” and projects with “impact on nature”.

Successful green startup cases: Gustoneo, Dracula Technologies, Steadysun

The 3 Bonus Platforms

The 100% Green Alternative – Green Rocket

A pure green equity crowdfunding available in Europe is Green Rocket. However, the platform is not open to all investors. Only investors from Austria or Germany can invest in Green Rocket.

“GREEN ROCKET is the first crowd investing platform specializing in sustainable companies in the fields of energy, environment, mobility, and health”.

Main features: Combines crowdfunding business models (e.g. debt and equity-based crowdfunding). When investing in Green Rocket, investors might earn money from a combination of elements: fixed interest, profit-sharing, and exit-share.

How to find green startups in Green Rockets? All companies in Green Rocket are sustainable or green startups.

Successful green startup cases: Commod Haus, Quantum Voltaics, Omi’s

The Premium Green Option – SeedTribe

SeedTribe, an initiative by the Angel Investment Network in the UK, is a pure green equity-crowdfunding option for premium investors. Starting from £10,000, an investor from anywhere in the world can invest in UK-based startups that address one or more of the United Nations’ Sustainable Development Goals.

Main features: Investors can support startups with their time or money. Individuals can also invest their time and get involved in the startup scene in a variety of ways, mentoring founders or facilitating introductions, becoming a product tester or early product adopters.

How to find green startups in SeedTribe? All companies in SeedTribe are sustainable or green startups.

Successful green startup cases: PinPoint

The Underdog – Funderbeam

Finally, there is Funderbeam, the Estonian equity crowdfunding platform, launched in 2013. Despite only raising €28 million, the company has equity of $15.8 million, half of the major players Seedrs and Crowdcube. The large equity puts the company in a comfortable position to expand its businesses globally (mainly to Scandinavia, Brazil and Singapore, as outlined on their last fundraising campaign).

Despite its small size, Funderbeam is the second platform (besides Seedrs) to offer an efficient marketplace (secondary market). Investors can use the marketplace to either sell shares of companies they own or buy shares of companies after the fund-raising campaign has ended.

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Main features: Always open marketplace or secondary market where investors can buy and sell company shares.

How to find green startups in Funderbeam? The platform has a dedicated sector/industry “Energy & Sustainability” where investors can find sustainable and green startups. However, this sector does not cover all green startups on the platform. Investors will need to investigate other sectors to find all the green startup options in Funderbeam.

Successful green startup cases: Ampler Bikes, Citilogistik,  

The risks of investing in equity-based crowdfunding platforms

Equity crowdfunding is among the riskiest asset types available for individual investors. Early-stage startup ups might have zero revenue at the time of investment and might encounter several challenges during the growth phase. Below we list the main risks of investing in green startups through equity crowdfunding:

Loss of capital: Most startups fail. Investors should be aware that 100% of their original capital is at risk and that they will need to diversify their investments into 5 or 10 startups to increase their chances of positive return.

Dilution: early-stage crowdfunding is usually used by startups to bring in cash flow and promote the business until a later and larger funding round is received. Investors should look for deals with ‘pre-emption rights’, which will give them preference in future shares offerings.

Limited liquidity: Except for Seedrs and Funderbeam, equity crowdfunding platforms do not have an efficient secondary market. Therefore, most investors will have to be prepared to hold their investments for 4 to 7 years, until the company is acquired, or an IPO takes place. Some platforms indicate that investors can sell their shares to other investors, however, this process can be quite complex and time consuming for smaller investors.

Lack of dividends: startups at growth phase rarely distribute dividends. All profit is usually reinvested in the business to accommodate operational growth. Shareholders of early-stage companies should expect no return on capital until the startup exit.

Dependence on the management team: the success of the startups is highly dependent on the performance and experience of its management team to keep the company on track, achieve milestones, and attract future funding. Before investing it is recommended to check the background and experience of the team behind the startup.

How to diversify your equity crowdfunding investments?

It is recommended to diversify your investments across platforms, regions, development stages, and sectors/industries. It is recommended to create a portfolio with at least 10 startups. Be sure to select platforms where the minimum investment is aligned with the amount that you can allocate to a high-risk asset.

Based on the equity crowdfunding platforms available for European investors listed above, investors could select one of the large global platforms and combine it with a local niche platform. For example, invest in 5 startups from Seedrs and 5 startups from Invesdor, Companisto, or Green Rocket.

Conclusion

Investors based in Europe – including the UK – have several equity crowdfunding platforms to choose from when investing in green startups. However, finding sustainable options is not an easy task, since most platforms cover a wide range of industries and sectors.

When it comes to green startups, investors from the UK, Germany, and France are better served than the rest of Europe. Those countries have equity crowdfunding platforms that suit sustainable investors’ needs by proactively distinguishing green startup opportunities from the rest ((e.g. SeedTribe, Green Rocket, and Sowefund).

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Not investment advice: The information provided on this website is intended for general information purposes only and does not constitute investment advice, financial advice, trading advice, or any other sort of advice. You should conduct your due diligence and, if necessary, consult a qualified independent financial advisor before making any investment decision.

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