A NEW EQUITY crowdfunding platform has been launched in Ireland that will allow investors to take a stake in startups with only small amounts of money.
Dublin-based Spark Crowdfunding says it will provide a low-cost avenue for people to get involved in startup investing.
The company’s chief executive, Chris Burge, said that the platform will open up investing in young firms to a wide range of backers, with individuals able to put up as little as €25 in return for shares.
Campaigns normally run for 30 days and startups need to raise the full funds they’re looking to receive from investors in order for the campaign to be completed.
Spark, which is itself self-funded, will take a 6% cut of all money raised on the platform. Burge also owns energy consultancy Bravo Energy, while Spark’s owners include Michael Foley, a former director at collapsed betting firm Worldspreads.
Unlike in the UK and US, crowdfunding platforms aren’t regulated in Ireland, meaning people putting their money into either equity-based investments or peer-to-peer loans don’t enjoy the same protections as those available for more traditional financial products.
Burge said Spark Crowdfunding carried out due diligence on both the companies that were looking to raise money and the investors looking to back them.
“When people are pledging there are no immediate checks,” he said.
“But when we get to the point where we are actually taking money, when the campaign has been successful, we do full AML (anti-money laundering) and KYC (know your customer) checks on them to make sure they are who they say they are and the money is not dirty money.”
Several peer-to-peer lending platforms, which offer investors an interest return on their money when they back a company, rather than shares, are already operating in Ireland.
The government published a consultation paper earlier this year in advance of regulation for the sector.
“We’re very eager that the Central Bank does do something about (regulation), and it will formulate a good environment to actually do the work that we’re doing anyway,” Burge said.
“We are doing a lot of the work that we need to do in advance of the legislation or the regulation coming down the line.”
In the UK, equity crowdfunding platforms such as Crowdcube have been in operation for several years, proving popular with both investors and growing firms. However the industry has also suffered some notable flops.
Irish-founded mouldable glue-maker Sugru, for example, which raised £5 million on Crowdcube, was recently sold for a fraction of its valuation – cementing losses of up to 90% for its investors.
Three companies have already used Spark Crowdfunding’s platform to raise a combined €130,000.
It recently launched a new campaign on behalf of Dublin person-to-person car sharing app Fleet, which is trying to raise €275,000 at a pre-money valuation of €1.1 million.
Founded last year, the startup is selling up to 20% equity in order to fund its expansion across Ireland and into the UK.
Fleet chief executive Maurice Sheehy said that the equity crowdfunding model provides more than funding and “ensures that new investors are likely to also become brand advocates for the business which will help with developing the business”.