- How it works
- Why invest
- What you get when you invest
- How returns work
- Understanding deal terms
- How we select campaigns
- How to invest
- How Crowdbase makes money
- How to raise capital
- Benefits of crowdfunding
For more answers see our FAQ
How returns work
The ultimate goal of every investor is to make money on their investment. The risk and return profile of the investment will vary depending on the campaign, and there are a few ways for investors to make returns.
There are various structures of investment products, each with its own set of unique characteristics that correspond to potential returns. While some investments provide a one-time payout, others offer recurring payments.
Below, we describe how an investor can get a return by investing in private businesses.
Initial Public Offering (IPO)
An IPO is the process in which a company becomes publicly traded by listing its shares on a regulated stock exchange.
When a company is publicly listed, its shares can be much more easily sold or bought (more liquidity) when compared to a private company. The buying and selling of its shares take place on the stock exchange in which the company is listed.
In an acquisition, one company purchases the whole of another company outright. If the company an investor is a shareholder in is bought by another company, the investor can expect to receive their fair share of the transaction.
This transaction can occur in three ways: cash, stock, or a combination. Whatever the acquiring company uses to buy the acquired company, is what the investor will receive.
Secondary share sale
Investors can freely sell their shares to willing buyers at any price they agree.
Crowdbase is currently developing a Secondary Market on the platform to assist in facilitating secondary share sales. Through the dedicated page, buyers and sellers will be able to meet and agree on the exchange of shares.
One of the most straightforward ways companies pay back their investors is through dividends. A dividend is the distribution of some of a company’s profits to its shareholders, either in cash or additional stock.
A share buyback is another way for a company to pay back its investors. It is a transaction whereby a company offers to buy back shares from its investors, usually at a price above the current market price. Since the total number of shares decreases after the transaction, the price of the remaining shares increases.
Therefore, as a shareholder, if you decide to sell your shares back or not, your returns can be very similar.