New crowdfunding rating agency launches
How are the new equity ratings calculated?
At present investors have to rely on the information provided by the crowdfunding platform they use in order to make their decisions. As this information is not from an independent source then investors are left to judge for themselves the risk and potential reward of any investment.
In order to calculate a rating the new crowdfunding rating agency applies a four step assessment process:
- data compilation
- checklist style systematic scoring
- thorough review by experienced professionals
- final compliance review
The results are then summarised and presented in a one page, easily understood, factsheet giving investors an independent view and comparable ratings across all potential investments.
What is crowdfunding?
Crowdfunding is the practice of funding a project or venture by raising finance from a large number of people. Typically those looking for investment will set up a profile of their project on a crowdfunding platform and investors can then invest in this project directly through the platform.
There are typically three types of crowdfunding investment:
Donation/Reward
People will invest because they believe in the project or have some personal connection. Rewards can be given but they are typically in the form of an acknowledgement (on an album cover or book) or tickets to an event.
Debt
The investor will receive their money back with interest after the agreed period, this is also known as peer-to-peer lending.
Equity
People will invest in exchange for equity in the business and if the business is successful then their investment will grow as the value of each share increases.
Image: Sujin Jetkasettakorn
