01 August 2023
The role of the crowdfunding platform is to review the proposing projects, make a selection, and assure the investor of an investment process that is as safe and clear as possible.
The platforms on the market are not all the same. If they do not do their job properly the investor will go to greater risk with his investments.
Therefore, it is up to the investor to understand how to evaluate a crowdfunding platform in order to choose the right one.
Below we see what are the main aspects of evaluating a crowdfunding platform.
Crowdfunding platforms must be approved and supervised by regulators such as Consob (National Commission for Companies and the Stock Exchange) or the Bank of Italy.
In the financial sphere it is unfortunately easy to run into scams, so it is necessary to verify that the platform is registered with the relevant authorities by going to the authorities' website and not blindly trust the platform's claims.
The credibility of a platform is made by its solidity in the market, i.e., parameters such as
The most solid platforms are those that generate sufficient economies of scale to be able to maximize the quality of their processes: make the user interface as polished as possible, increase the scouting processes of the companies in the market, maximize the rigor of the selection of the funding requests they collect, and finally coordinate the entire investment process.
Some platforms will simply submit the projects they have found, while others will go on to select only those that are the safest and most likely to succeed.
There is so much information about the project and the applicant company that can be evaluated, minimum values are often decided on some that act as an entry threshold below which the project is deemed too risky and the company is rejected.
Mamacrowd operates a strict selection process, in fact only 1 percent of applications received are published on the platform.
When using foreign crowdfunding platforms with currency other than the euro, there is an exchange rate risk or currency risk. This is the possibility that the foreign currency return is negatively affected by a change in the exchange rate between the two currencies.
If the foreign currency appreciates then the investment return will be amplified, if it depreciates then our return will be reduced to even negative.
The diversification potential offered by the crowdfunding platform is an essential element for any investor because it allows the overall risk of the investment to be reduced (Let's explore this topic in more detail in lesson 5).
The diversification offered by the platform depends on the type of projects proposed and also on the frequency with which new projects are published. The greater the number of projects available, the greater the potential for diversification of one's investment.
Mamacrowd offers three different types of projects (startups, SMEs and real estate projects) and a publication frequency of about 5 projects per month.
Transparency about costs is crucial in any investment. Some crowdfunding platforms may charge a fee to the investor. In equity crowdfunding, this cost is borne by the company applying for funding, and Mamacrowd does not charge any fees to the investor.
Some platforms offer customer service that can meet the need of users. One can evaluate the competence of the customer service, the channels it provides (phone, email, chat,...) and also the speed of response.
This aspect is very important for clarifying doubts about the functioning of the investment process or the details of individual projects published on the platform.
Or discover all the lessons from the "Ultimate Guide to Investing in Equity Crowdfunding".
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