Ever wonder how you can invest in businesses without pouring a ton of money with angel investing?
Yes, by buying inventory from a company and earning profits. And no, you wouldn’t need to buy all of it.
Kickfurther is one of the latest crowdfunding platforms to enter the scene. The premise is simple: What investors do is buy into a share of the company by buying part of their inventory. Deals are then paid back monthly.
Sean De Clercq used to run a million dollar merchandising company before starting Kickfurther. He founded the company because he noticed that businesses weren’t getting a fair deal from the banks.
“When I was running my merchandising company the best financing I could find was factoring which would have cost me 15% of my accounts receivable for less than four months of financing” he says. “There was a gap in what banks were paying savers for their money and what I had to pay to get financing for my purchase orders.”
What Kickfurther aims to do is to make it more fair to people starting businesses. Unlike Kickstarter, they’re not aiming for the retail crowd, but people who want to help a company grow by investing with them.
To date, Kickfurther has funded $1.5 million worth of inventory for 116 different deals.
The Future of Funding?
Both businesses needing funding and investors looking to dip their toes into alternative investments can benefit from companies like Kickfurther. In fact, De Clercq believes that this is the future of funding because the market will decide what products they want.
“It will be very difficult for robots to predict what will humans buy and so deciding what products get funded will remain a human task for a long time in the future.” he says.
Simply put, it places more power in the hands of more people. Investors have more opportunity to generate returns that the stock market can’t promise.
Not only that, but there will be more opportunities for businesses to grow. “Businesses can create the deepest connection to fans possible by actually engaging them in their growth and success,” de Clerq says.
That means that businesses don’t have to worry about getting funding and getting products out there, but they can get a potential customer base for their products even before it hits the shelves.
Risks and Rewards
Sure, you might feel uneasy about plunking money down for a deal that may not turn out, but the rewards might be worth it. “Currently, completed offers have paid out over 3% per month, which is 36% annualized, but will probably setting closer to 20% annualized in the future” says de Clercq.
So far, the average amount of time investors get their money back is over three months. One company, Rave Nectar, a clothing company, was able to raise over $9000 with two days. They paid back the money over two months, giving investors a 8% return.
Jose Vieitez, co-founder of Boomtown Accelerator in Boulder, invested $11,000 in Kickfurther and so far is expected to gain at least $2,500 in profits. He has reinvested some of his earnings and his portfolio generates about 25% per annum.
While all this sounds great, there are risks that come with this type of investing. Inventory might not sell. What happens then?
“Inventory has intrinsic value” de Clercq says. “If the business owner fails to sell inventory that Kickfurther has funded, we can take steps to possess the inventory and sell it with the help of our users.
Even in the case of non-performance, Kickfurther users have a measure of control over their investments.”
Even if you don’t get projected returns, you’ll be amongst a number of people who want to recoup their money. You might lose a bit of your investment, but you probably won’t lose all of your hard earned money.
Kickfurther works hard to vet companies that they feel are worthy of the money. “I’m very aware of the high level of trust being placed with us,” he says.
“Handling people’s hard earned money is a huge responsibility and it’s imperative that we live up to the expectations of our user base.”
How You Can Get Started
You hear everyone and their mothers saying this, but do your due diligence. Before deciding what company to invest in, do your own research.
See their history, their line of products, how much they plan to sell it for, and how they interact with their customers. Also, think about whether or not you’d want to own their products.
If you can’t imagine yourself buying from the company, why would you bother investing in it?
Secondly, don’t invest all your money into one company, Kickfurther only has a $20 minimum, so investing in different companies is pretty easy to do.
De Clercq suggests that investors pick a few products they like and invest a little bit into each one. It will probably work out better for you in the long run.
If you’re a non-accredited investor, this can be a great way to start generating wealth from alternative investments. To find out more about current deals that need funding, check out Kickfurther’s website.