Investors FAQ

 

 

Our answers to your most frequently asked questions

What happens if the start-up does not raise the minimum amount of capital required to end the financing round?

The minimum amount of capital is defined at the beginning of the fundraising round. Keep in mind that the commitment is non-binding until the Financing Round is over and Term Sheets are signed.

If the minimums are not met then there are options for how to proceed based on the situation:

  1. Adaption of original business plan to function with less funding
  2. Extending the financing round
  3. Closing of the finance round with no funds transferred
  4. Other options depending on the situation, investors and start-up

investiere will work with investors and entrepreneurs to ensure that the minimums required are raised. As of today, 94% of all start-ups featured on our platform were able to successfully close their financing round.

How do I register?

Click here for our registration page for investors.

Do you charge a fee?

Joining investiere is free of charge. As an investor you only pay once you make an investment. When you make an investment we take a 1.5%-4% transaction fee depending on the size of your investment. On successful investments, investiere receives 15% of the profits from the investment (carried interest). However, this only applies when an investment makes an annualized total return of at least 5%. If the annualized return is below 5%, investiere does not receive a carried interest.

Is investiere a crowdfunding site? What is the difference?

No. investiere is not a crowdfunding site.

Crowdfunding is a vehicle that has proven successful for many art projects and non-profit organizations, however we like to think of ourselves as a hybrid model with a more traditional venture capital approach.

Often, crowdfunding sites simply act as a listing service where entrepreneurs display their start-ups hoping to get funding from the "crowd" (investors). There is little if any due diligence done on the part of the crowdfunding site for the start-ups listed. Minimum investments for crowdfunders average ~US$250, where our minimum is usually US$10,000.

Wait a second, investiere is a Swiss company, how come the website is not in German, French or Italian?

English serves as a lingua franca as we think that all our French, German or Italian speaking investors need to be able to communicate with each other. We hope that you are not inconvenienced by the use of English as the official language of our website.

How many start-ups are successful?

Success rates and statistics differ greatly and will among other things depend on the country and ecosystem that the start-up is in. However, a very rough, generally accepted distribution is the following:

Percentage Term Multiple
5% High-flyers 20x
15% Successful 10x
30% "Money back" 1x
50% Unsuccessful 0x

With respect to Switzerland's high-tech start-ups, there is a paper on the performance of spin-offs at the ETH Zurich in our library.

So, how do I make money?

Let us start with a general note on start-up investments: It is important to know that investing in start-ups bears a high risk. If worst comes to worst, you can loose the entire investment. However, if you invest in the right start-ups, profits can be a multiple of your investment. For this reason, we recommend to diversify across multiple start-ups. An investment typically lasts 3-6 years. So in short, you should only invest money that you don't need in the next 6 years and that you could afford to loose completely.

So how can you make money? In most cases, you will become a shareholder of the company. As such, there are three ways to profit from your participation:

a) "Exit" - the start-up is acquired by another company or goes public (i.e. starts to trade its shares on a public stock market) - this is by far the most important way to monetize your investment. If this happens, the return of investments in the start-ups presented on investiere is likely to be 5 - 20 times your initial investment. This so-called "multiple" can be best guessed if one looks at market comparables, in other words companies with comparable business models and/or markets that successfully "exited".

b) Selling your shares at a higher price - As with all shares, their value goes up and down and by selling at a higher price than you bought, you can make profits. Please note, however, that there is no liquid market for these types of shares, meaning that it may require time and effort to find a buyer and to negotiate the price for the shares. And if the company is developing rather badly, it can be very difficult to find a buyer at all.

c) Dividends - dividends are not typical in a start-up situation, as any profits are usually re-invested and not distributed to shareholders in the first years. However, depending on the company and up to the shareholders, some dividends might be paid out, but vary rarely before "break-even".

What do you need my contact details for?

Investments are a matter of trust. The entrepreneur is prepared to give you insight into his business idea. In return it is crucial for us to be able to assure the entrepreneur that this information is only made accessible to investors who are prepared to identify themselves, at least towards us. Your identity is only shared with the entrepreneur, should you decide to request the full business plan. 

We may contact you to verify your identity or for coordination purposes, once you have indicated an interest to invest in a company. 

What is the valuation of the company?

If the investment terms state that the company valuation is "pending", the valuation will be done at a later stage. Here is why.

In general, a so-called lead investor is in charge of negotiating the company valuation.

Usually, this lead investor is an institutional venture capital investor or a private investor with lots of experience in both, the sector the start-up operates in and with start-up investments. It is quite typical for investment proposals on investiere, that such professional co-investors are on board.

Thus, investors on investiere benefit from an independent and professional third-party valuation - even in case they are quite inexperienced. The lead investor is in charge of performing an independent valuation of a company and to engage with co-investors along the process. investiere is involved in that process and will represent typical small investor interests.

So, a “pending” valuation can imply (a) a lead investor is not yet identified, (b) the lead investor has not yet concluded the valuation process. Our entrepreneurs are recommended to announce the likely lead investor in the Bulletin as soon as possible.

Only in exceptional cases, investiere (although just representing its investors) will take on a coordination/syndication to ensure a fair valuation can be found.

In closing, we would like to underline that the perceived importance of valuation is commonly overrated in case of early-stage companies. In most start-up situations, a precise assessment of the company value is simply not possible. Thus, the investor focus should be the question “do I think this company will be successful” rather than “do I get a good deal?”.

In this context, we recommend an excellent blog post by Paul Graham, who states that “in early stage investing, valuations are voodoo” but nevertheless gives some very pragmatic rules of thumb.