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Crowdfunding

Before investing in crowdfunding, be aware of the structure surrounding the platforms

Although the crowdfunding ecosystem is diverse and opens the door for those who want to start investing, it also requires a certain level of knowledge. There are six types of crowdfunding platforms: real estate, equity, donations, loans/debt, rewards and royalties, hence the importance of knowing the characteristics of each one to make a wise decision prior to your entry as an investor in these platforms.

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Last week, the National Banking and Securities Commission (CNBV) announced that the crowdfunding platform Doopla obtained its authorization to operate under the so-called Fintech Law, becoming the first in its field to be granted such authorization. As a result, these options are becoming a more and more reliable alternative for people to invest their money, however, it is important to know their structure, advantages and disadvantages.

Also known as crowdfunding, crowdfunding platforms are a method to raise capital through several people, the key element is that everything is carried out digitally.

According to the Association of Crowdfunding Platforms (Afico) there are six types of crowdfunding platforms: real estate, equity, donations, loans/debt, rewards and royalties, hence the importance of knowing the characteristics of each one to make a wise decision prior to your entry as an investor in these platforms.

“It is worth clarifying that the boundaries between each type of platform are sometimes unclear, so you may find that a platform is in more than one type,” explained Bancompara.

Find more about the crowdfunding sector and how crowdfunding platforms work with the Born2Invest mobile app. Our companion app brings you the most important business news in the world for you to stay informed.

Factors to consider when investing via crowdfunding platforms

Faced with a scenario of uncertainty due to Covid-19, which seems to have already started to come to an end with the arrival of the vaccine, how convenient is it to invest in this ecosystem? For Héctor Sosa, author of the blog Adiós a tu Jefe, there are several factors to consider, but he assures that it is a better alternative than having your savings under the mattress or in a traditional savings account.

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“There are undoubtedly opportunities that can generate attractive returns, in some cases well above traditional banking and even sofipos, although on average the returns tend to be similar to sofipos, we are talking about an average of 12 and 15% less ISR,” he said.

Although the crowdfunding ecosystem is diverse and opens the door for those who want to start investing, it also requires a certain level of knowledge.

“Crowdfunding is a very effective way to improve the situation of a person or community, make an idea real and make money, but it is not for everyone. It requires an understanding of technology, an open mind and being committed to causes we truly believe in. That’s the only way we can help or get the expected returns,” Bancompara said.

Platforms need to align with investors

The author of Adiós a tu Jefe pointed out that one of the problems surrounding crowdfunding is that its incentives are not 100% aligned with its investors, a situation that, he believes, can be improved.

“On the issue of incentives, it would be to make some changes in the business model so that the income of the platforms is more correlated to the returns generated by investors, I think that part would be good to align more, it is not in all, but in some their income comes from raising capital, the incentive is to raise capital at all costs, even sometimes sacrificing the quality of the projects they are funding,” said Hector Sosa.

Meanwhile, Bancompara stressed the importance of researching the platforms to find out which one fits your projects.

“This is a very dynamic sector, and although there are companies that already have a good reputation, new platforms are emerging all the time and not because they are new you should discard them, on the contrary, perhaps they offer advantages that others do not,” he added.

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First published in EL ECONOMISTA, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

Although we made reasonable efforts to provide accurate translations, some parts may be incorrect. Born2Invest assumes no responsibility for errors, omissions or ambiguities in the translations provided on this website. Any person or entity relying on translated content does so at their own risk. Born2Invest is not responsible for losses caused by such reliance on the accuracy or reliability of translated information. If you wish to report an error or inaccuracy in the translation, we encourage you to contact us.

J. Frank Sigerson is a business and financial journalist primarily covering crypto, cannabis, crowdfunding, technology, and marketing. He also writes about the movers and shakers in the stock market, especially in biotech, healthcare, mining, and blockchain. In the past, he has shared his thoughts on IT and design, social media, pop culture, food and wine, TV, film, and music. His works have been published in Investing.com, Equities.com, Seeking Alpha, Mogul, Small Cap Network, CNN, Technology.org, among others.