What you should know when investing in Equity Crowdfunding deals?

Feb. 26, 2020

Equity crowdfunding investments are essentially investments in private companies, also commonly know as private equity. Investors should consider the following main characteristics of Equity Crowdfunding Investments when adding such investments into their portfolios.

1.    Limited Liquidity: Equity crowdfunding investments are typically long term and limited liquidity due to the fact that it is difficult to find an agreeable buyer for private equity in the early years of the investment. Investors with a long investment time horizon and do not see a need to liquidate the investment in the coming 5-7 years, this should not necessarily be a cause of concern.

2.    Reduced Volatility: Private equity investments are generally not subjected to the high and frequent price volatility like publicly traded stocks, as a result, the value of the equity crowdfunding investment avoids speculative pressures. This benefits the investors because the main focus then lies within the intrinsic value and business model of the company, the management team, the dividend distribution and the exit price.

3.    High Returns: When private equity investments are realised (through exits via acquisitions or IPOs), the returns are typically higher than most other asset classes. This is why private equity remains popular as an asset class and private equity continues to meet investors’ expected portfolio returns.  

4.    J-curve Effect: Investors will typically experience a “j-curve” effect, where the high returns are projected to be realised at a later timeframe. There  will be an initial negative cumulative cashflows, as cash is committed for investments. As investments mature and returns to investments are realised, the cumulative cashflows will start to turn positive and investors receive distributions and realise their investments in the form of exit (such as IPO or acquistion from another company).

5.   Valuation: Private equity valuation is usually a complex process and is not as simple as valuating a public company due to the lack of market prices to refer to. Valuation of private equity is typically based on multiple logical assumptions input into a valuation method such as Discounted Cash Flow method. Private equity investors should understand that no one valuation method is the definitive accurate way to value a private company.

We will not be able to cover the entirety of equity crowdfunding investments’ intricacies in this short article, but armed with the information above, we believe that investors will be in a good position to engage with interesting equity deals, sample feedback and enjoy new investment opportunities on Sinwattana. If you would like to find out more on equity crowdfunding at Sinwattana, do drop us a call at 02-233-3723 or email us at supportequity@sinwattana.com

Investors who register on the Sinwattana platform will experience a deep dive into Thailand’s investment landscape and enjoy multiple new investment opportunities in the coming year. To join Sinwattana as an investor, click here.

About Sinwattana: Sinwattana is Thailand’s Securities Exchange Commission (SEC) approved equity crowdfunding platform for local/international retail and accredited investors. Managed by a team of seasoned investment professionals and led by serial entrepreneur, Hong Sin, Kwek, Sinwattana filters and curates companies for investors to invest. Sinwattana provides support to its portfolio companies by creating growth opportunities through its network of strategic partnerships. Sinwattana’s goal is to revolutionize the business economy by evolving the sources of funding, organised around the belief that “Never Let Funding Be Your Showstopper”, empowering the next generation of businesses and investors. For more information, go to https://equity.sinwattana.com/.