Crowdcube: How to invest in tech startups

Crowdcube.com gives investors the opportunity to invest as little as £10 ($16.40) in private tech start-ups long before they’ve hit the IPO stage.

There’s something infuriating about getting locked out of investing in high profile tech companies like Facebook and Twitter by virtue of being too broke. If you’ve got a net worth of $1 million or more, you’re more than welcome, though, to sign up to buy shares in Facebook and Twitter via secondary exchanges like SecondMarket.

A small UK-based Web site is trying to change that with last month’s launch of Crowdcube.com. The site gives UK investors the opportunity to pony up as little as £10 ($16.40) to invest in private tech start-ups and small businesses long before they’ve hit the IPO stage.

“We want to enable people to have a real share – real equity in the business,” Luke Lang, one of Crowdcube’s co-founders tells GrowthBusiness. “We want to make investing open to everyone so that the ordinary man or woman in the street can invest in a limited company.”

Crowdcube takes Kickerstarter.com, which allows individuals to contribute cash to creative projects in exchange for gifts or recognition, a step further by offering up the real deal: equity. Prospective investors can peruse fully-developed, vetted business plans and video pitches as well as interact with entrepreneurs in Crowdcube’s forums before deciding to invest.

Pretty snazzy. As of today, there are 13 start-ups soliciting investments on Crowdcube. They range in scope from an online auction software developer to a mobile advertising company and a “Fairtrade certified bodycare products” manufacturer.

The business plan that has me most excited, though, is Crowdcube’s itself. The company’s currently waiving its £250 ($410) listing fee for entrepreneurs. If a start-up hits its funding goal, Crowdcube skims 5 percent off the top in addition to a £1750 ($2,871) legal fee. A lot of 5 percent cuts could quickly add up if Crowdcube hits critical mass. Now, I just wish the site would offer up equity in itself for early-stage investors.

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