This is a Global Funding and Trading Platform that’s Creating Unique Liquidity for Investors.
One of the most important sectors in any country’s or continent’s economic growth is small and medium businesses. Currently, many small and medium businesses (SMEs) not just in Europe but across the world are weighed down by an overwhelming credit gap that seems to be widening with each passing year! And because SMEs are integral in generating large-scale employment at low capital cost and are the backbone of any economy, it’s essential to inject much-needed liquidity in this sector.
Unfortunately, traditional brick-and-mortar financial institutions such as banks alone cannot solve this dire problem. This is exactly why new-age credit models such as P2P platforms need to step up. Funderbeam is one of the very first P2P platforms that are playing a vital role in mobilizing funds from investors to small and medium businesses in need of funding.
Given the current economic difficulties, accessing high-quality investment opportunities in upcoming and growing startups is a challenging undertaking. This is exactly where Funderbeam comes in handy as it helps investors easily diversify and gain liquidity by trading on a platform that connects them (investors) with ambitious and smart startup companies that require funding.
This article, therefore, takes a comprehensive look at Funderbeam and whether or not it’s a viable crowdfunding and trading platform.
What is Funderbeam?
Funderbeam is a peer-to-peer crowdfunding and trading platform that essentially connects startup companies looking for funding with investors. This platform offers its members free information and data on these startups to help them make informed decisions when choosing to invest in these startups. The platform also gives startup companies the chance to connect with investors and, of course, the chance to access funding at a reduced cost.
In essence, Funderbeam is a great funding and trading platform that offers its members an easily accessible marketplace to buy and sell their investments in startup companies. In fulfilling its mission of filling in the gap in venture and SMEs capital markets, Funderbeam is providing various start-ups with access to early-stage investments and liquidity through its trading platform. So far, the platform has helped fund more than 45 high-quality, high-growth portfolio companies by connecting them with over 13,000 verified investors pulled from across 126 countries.
Founded in Tallinn, Estonia in 2013, Funderbeam has gone international with offices also in London, Copenhagen, Zagreb and Singapore. The platform has so far raised more than €20 million in funding with almost €4 million investment shares exchanging hands on the platform’s secondary marketplace, more than 18,000 completed trades.
Led by the platform’s CEO, Kaidi Ruusalepp, Funderbeam was founded by three Estonians with a long history in the financial sector. Together with her partners, Ruusalepp, a former CEO of NASDAQ Tallinn, wanted to create a platform that could help fund private investments and growth companies that had limited access to growth capital without any border restrictions.
In addition to opening new offices in London and Singapore, Funderbeam has also increased its presence in the Scandinavian countries. That being said, Funderbeam has five active offices around the world that are currently hiring new employees to add to its already remarkable team.
Access to Excellent Investment Opportunities – This is one of the top crowdfunding platforms in the world connecting investors to some of Europe’s most promising startups.
Cross-Border Investing – Through Funderbeam , you can invest in startups from all over the world with less bureaucracy, formalities, and a lack of added costs by intermediaries.
Digitalised Investments – The syndicated investment model offers digitalised investments that can be sold for cash at any point.
Simplified Cap Table – Your investments are pooled into a single block known as a syndicate that’s managed by the lead investor.
Minimal Paperwork – The platform is easy to use and ensures that there is minimal paperwork as the processes are automated.
- Estimated annual returns – €2 million;
- Founded in 2013;
- Auto invest – No;
- Registered investors – 13,000+;
- Regulated – Yes;
- Minimum investment – €1(Trading), €100 (Direct investing);
- Country of operation – Estonia, U.K., Singapore, Croatia, Denmark;
- Accepted currency – EUR, GBP, SGP;
- Time needed to manage your investment – Low;
- Buyback Guarantee – No;
- Investment fee – Free;
- Secondary Market – Yes.
How Does Funderbeam Works?
Funderbeam fully understands that every marketplace needs a data component. That’s why Funderbeam on its more than 13,000 investors that are looking to invest in more than 45 high-quality startups worldwide. The platform uses what’s known as syndicated investing or Funderbeam syndicate.
Fundamentally, Funderbeam works by combining multiple products on one platform. As a startup, you can easily use the platform to raise capital. Funderbeam is a funding and trading platform where investors can invest in the listed startups (which must undergo thorough verification to be approved).
Similarly, investors can invest in startup companies and take full advantage of the platform’s liquidity. In other words, you can easily cash out your investments on your terms by taking advantage of the platform’s secondary market, which allows you to sell your shares or investments to other investors at any time.
What are Funderbeam Syndicates and How Do They Work?
So how does Funderbeam syndicate work? Well, a lead investor puts together a syndicate to invest in startups. Other investors can then join this syndicate as backers. They can invest in various startups but no investor holds any equity on any startup. Instead, they have digital investments referred to as Loan Notes, Shares or Share Units, but for simplicity we will refer to these as tokens. Tokens prove their claim on a particular syndicate. While these digital tokens are pretty worthless on their own, they are proof that the investor has a claim on the syndicate. Digital tokens can be bought and sold and every transaction on digital tokens is recorded.
The lead investor also has the responsibility of negotiating the syndicate terms with the startup company. In other words, the lead investor acts as a point of contact between the startup company and the investors. If the investment is successful, whether, through dividend payment or buyout, the lead investor and, of course, Funderbeam will take their cuts.
Even though investing in Funderbeam is free, the lead investor will generally charge a fee of around 1-3% while Funderbeam will command a fee of 3% of successfully raised funds. On the other hand, the lead investor and Funderbeam will not receive any fee if any investment is unsuccessful. For this reason, lead investors will always put in more effort to ensure that every investment is viable and profitable.
How to Trade on Funderbeam
Funderbeam provides two forms of company structures that investors can choose to use: the loan-based SPV (Special Purpose Vehicle) or a Nominee. An investing vehicle is created by Funderbeam for each company that successfully raises funds. If you choose to invest through a Nominee, you’ll become a legal shareholder in the company.
If you, however, choose the SPV structure, you’ll be making your investment in a company that holds your investment. In short, a company, co managed by Funderbeam and the Lead will hold the shares in the company on your behalf and the SPV (in this case, Funderbeam ) is listed as a shareholder in the company.
How to Sign Up and Get Verified
There are two ways to invest through Funderbeam. As explained earlier, you can invest by joining a syndicate on the primary market or by investing through the secondary market by buying digital tokens from a willing seller. But before going into that, you’ll have to sign up and verify your account as an investor.
How to Sign Up
Like many other P2P crowdfunding platforms, Funderbeam makes it quite simple for investors to sign up. All you have to do is fill in your email, country of residence, first name, last name, choose a password, and accept the terms and conditions. You’ll then go to your email and click on the link sent to you by Funderbeam to verify your email.
How to Get Verified
Verifying your account not only permits you to invest through the platform but also gives you unrestricted access to the platform. Here’s how to get verified:
- Go to your dashboard and click “verify my identity”
- Decide whether you want to invest as an individual or as a company
- Complete the application and click “submit the application for review”
- The short video below shows how to sign up and verify your status.
How to Invest in Funderbeam through Syndicate
Once your identity has been verified and you’ve obtained your investor status, you can look for an open syndicate of your choice and submit an indication of interest. Keep in mind that an indication of interest in any syndicate is not legally binding but simply an expression of interest in that particular syndicate.
The picture and video below show how to sign up, get verified, and invest under perfect conditions.
Can Anyone Use Funderbeam?
Needless to say, you have to be 18 years and above to be able to invest or trade on Funderbeam. With the exception of a few countries, most notably the USA, Funderbeam can allow almost anyone to invest on the platform as long as they sign up and verify their account as required by Funderbeam.
So no matter your country of residence, you’ll only know if you can invest on the platform if you try it out and know for sure whether or not you’re allowed to use the platform based on your country of residence.
What are the Risks of Investing through Funderbeam?
Like with any other P2P crowdfunding platform, various risks come with investing through Funderbeam. That’s essentially why it’s important to understand the risks involved before you start investing.
Given that Funderbeam mostly helps fund early startups, there is a potential risk that the startup could fail. That’s why the platform encourages investors to seek independent professional advice to fully understand the risks that come with investing through the Funderbeam platform.
So without further ado, here are some of the potential risks of investing through Funderbeam.
Loss of Investment
One of the biggest financial risks or investing through Funderbeam is the likelihood of losing your entire investment. Keep in mind that the platform generally invests in startups with an unproven track record and the risk of the business failing is quite high! For this reason, you could lose your entire investment if the startup you invest in fails. The fact that Funderbeam doesn’t offer any guarantee makes it riskier.
Risk of Dilution
Generally, Funderbeam offers startups the chance to seek funding from the platform more than once, especially if the first round was successful. If this is the case, then investors may be entitled to shares in the startup’s equity, depending on the investment opportunity.
Unfortunately, the issuance of equity to new investors may have a diluting effect on the percentage of the initial shares, which may not be favorable to the original shareholders, especially when it comes to voting and pre-emption rights.
Rarity or Low Dividends
Generally, startups rarely pay dividends to investors because profits are typically reinvested into the business to enhance growth. As a result, it’s highly unlikely that investors will get worthwhile returns on their investments, especially in the short term.
Differences in currencies can also be another major risk of investing through Funderbeam. The fact that the platform only allows EUR, GBP and SGP can limit investors from countries that do not use these currencies. Again, currencies often appreciate and depreciate and there’s a possibility of your investments being affected by these fluctuation rates.
In essence, there are several risks associated with investing through a platform such as Funderbeam .
It’s, therefore, always advisable to perform due diligence and make sure that it’s worth the risk.
Is there Minimum Investment?
Funderbeam doesn’t put a lot of restrictions regarding minimum investment. Once you’ve signed up and verified your identity, you can start trading or invest with as little as €1!
Are There Any Fees?
While Funderbeam doesn’t charge any fees to trade or invest through the platform. There’s is a fee charged by the lead investors in syndicates, as well as the platform when there is a successful exit.
Funderbeam is one of the few P2P lending platforms that offer secondary markets. However, the platform’s secondary market works differently in the sense that buying and selling orders are not matched. To sell a given amount of shares, you can either sell to buy offers or simply place them on the market with a sell order. The same applies when buying. When an order is matched, the buyer will be given a 7-day deadline to transfer funds.
The platform also gives you the chance to hold digital tokens instead of equity. You can put the digital tokens on the market and transfer them to the buyer for cash at any point.
Some of the platform’s competitors include Monner, Finstart, CrowdCube, Seedrs, Funding Circle, Growthfunders, Funding Tree, Lending Crowd and many more.
- Easy access to startup investing;
- There are no minimum investment requirements (You can start with as low as €10);
- There are no fees;
- The platform offers secondary market;
- The website is friendly and easy to use;
- There are plenty of startups to choose from;
- The startups are thoroughly vetted.
- The risks involved are quite high and profits are not guaranteed;
- There’s no buyback guarantee;
- There’s a 3% carry fee on every successful exit or buyout;
- It can be hard to invest without syndicates.
Funderbeam is an excellent crowdfunding and trading platform that looks to operate in a similar way to the stock market but for startups. Through a unique model known as Funderbeam syndicate, investors can pool together and invest in startups companies by purchasing digital tokens, which can be exchanged for cash at any point.
While Funderbeam brings to the P2P lending industry a new and unique business model, there are a lot of risks associated with investing through the platform. This is because the platform doesn’t have any guarantee that investors will make profits. For this reason, it’s important to perform due diligence, seek professional advice, and invest only when you’re so sure.
My investments at Funderbeam
As of 15th November 2019, I’ve invested a total of 3130,31€ into 5 different Funderbeam syndicates. Ampler Bikes, Bikeep, La Muu, Tanker and UpSteam.
By far the best investment I’ve made so far at Funderbeam has to be UpSteam, which has risen from 340€ to 1683€ in just a YEAR!