Last updated 12-12-2019: one of my startups has gone bankrupt, namely viviDoctor where I had invested 525 EUR in. After the tax incentive this leaves me with a loss of 300 EUR. Just a reminder that this is indeed a high risk investment
“Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value.” – Warren Buffett
I mentioned in an earlier of my posts (check it here) I invest in startups. This is mainly because of the 45% Tax incentive that the Belgium government is providing. In this blog I will give an overview of the startups I have invested up to date, show how they are doing so far, and eventually will explain you how you can invest in if you are still interested after reading this blog.
How does it work?
I invest in startups using a site called Spreds. Spreds is a crowdfunding site for startup company’s (so called Seeds).
To be able to get funded, firstly a company needs to apply to Spreds to be able to apply for a funding round. Only 3% of all company’s that apply actually go trough to the next round.
Then this company can search for investors. They need to market both to single investors (such as me/you) and find at least one professional investor.
One interesting note is that professional investors invest at the same conditions as you. So if 100 euro is worth 0,0001% equity this will be the same value to you. Apart from this, this gives you the certainty that someone professional with probably more experience then you will also check the startup.
This does not mean that you do not need to do your homework of course. Check the Financials, team, plan of the Startup before you invest!
Read bellow on how you can invest yourself if you are interested in trying it out yourself.
Long term / High Risk
“Chase the vision, not the money; the money will end up following you.” –Tony Hsieh, Zappos
Keep in mind these are long term (6-8 years) and high risk investments (30-40% of the startups fail according to statistics!). There is no guarantee you will see any of your money back (apart from the Tax incentive) , so do not invest anything you cannot afford to lose! I see this partly as a hobby, and that makes it easier when I would lose my money.
List of my investments
In total you can see 15 startups I invested (or tried to) invest in. The very first startup I invested in (Slimbox) actually did not get a professional investor on board, so failed its crowdfunding. I did notice such an occurrence is quite rare.
I do plan to purchase a few more Startups this year. I am both reinvesting the Tax Return I got this year (800 EUR as you can read on my goals progress page). I do not know how high it will go, but the expectation is my portfolio will go above 5000 EUR and I do hope to be able to share a success story with you guys in 1 year from now.
I told one guy from Poland about the Tax Shelter we have in Belgium. His reaction was…”What? If they had this hear I would just invest all my money into startups” .
Of course I would not recommend to follow my Polish friend’s advice, but its an interesting perspective.
Multiple rounds of Financing
Interesting is that some startups undergo multiple rounds of financing. This is actually not uncommon for startups, and one startup I invested in has gone trough this. If you have already invested in a startup you get first choice to invest again. If I recall correctly this happened to Shiftmeapp. I decided not to invest in the second round, although looking at it back now, I probably should have. One other of my investments is considering a second round (nirli). Not because they are doing bad, but simply to fund their growth faster. And if they do I would invest again.
For those who do not know, ROI means Return on investment. I realize my calculation is not correct. I would be better off to wait until its realized and then calculate it per year. But as I am an early investor and nothing is realized I decided to use a simpler method of my own.
So far I have an unrealized ROI of 11,5% return per year. Although I am aware this means very little, it is just an indication. The only thing that was realized is the Tax return I got. Once I have the first startup that actually gets sold out I will change the calculation of this column, and keep date of investment in mind so you can see the ROI per year.
ROI if you invested in 124 startups
Spreds showed an interesting calculation on their website. If you as a person invested 100 euro in all 124 startups that were shown on their website so far then combined with the Tax Shelter you would have an IRR of 6,12%. Which is not bad in the current market.
There is a flaw in their calculation however and that is that I have the impression that they did not include the 5% fee every time you invest. They didn’t really put down a detailed calculation so its hard to figure out how they came to a 6.12% IRR and if its a total amount of a yearly ROI. Yearly it would be quite low since the site has been running for a while (4-5 years?), although the Tax Shelter is only from 2016.
Patience is needed
You usually have to wait for that which is worth waiting for – Craig Bruce
That being said it does take 6-8 years for startups to mature, and I prefer that the startups mature to get a higher valuation then a quick sell at a small profit margin. The buy outs have been low so far (maybe just 5 startups out of 124?). As I said I see it partly as a hobby, and I have only invested small amounts. The only certainty is the Tax Shelter.
You need to be aware your investment can turn out negative
In the early days when Spreds was still called Microinvest on of the first buyouts was for the news site called Newsmonkey. Newsmonkey is still alive and running, I think doing fairly well, but at the time of the exit it was not doing so well and investors ended up making a (small) loss. This was also before the Tax Shelter was in place, and it wasn’t until that came up that I decided to start investing. Before that I never would have invested.
Successes are where you least expect them sometimes
Starting your own business is like riding a roller coaster. There are highs and lows and every turn you take is another twist. The lows are really low, but the highs can be really high. You have to be strong, keep your stomach tight, and ride along with the roller coaster that you started.–Lindsay Manseau, photographer and entrepreneur
Some of the companies I chose not to invest in because they didn’t fall under my main sectors I like to invest in I saw having a succesful exit in the end. One example is Jumpsquare. Jumpsquare had an exit that gave investors a 35% profit only 9 months after the crowdfunding closed! Jumpsquare is a trampoline hallway. I didn’t see the idea as rapid scalable but it turned out that there was a huge demand for this.
So morale of the story, don’t put all your apples in one basket and spread out your investments. Nobody can predict what startups will do well in the end, its better to invest a little bit in many startups then a lot in just one.
How can you invest?
If everything you read here has not scared you and you want to try it out, if only to support a company you believe in and want to follow it then head over to Spreds and try it. And remember I do not get any benefits from posting this, if anything I will now have more competition!
On the main page you can see different startups.
You can recognize the Tax incentive to this icon:
It will either say 45% (for Seeds – really small startups) or 30% for bigger startups. If it doesn’t say anything.
Once you click on a startup you will always see a short movie, and more in detail what the idea is, how the market is, financials and discussions.
Once you are convinced this is a good investment click “Invest Now” and the system will take you trough a wizard to invest. The minimum amount is 100 Euro. Spreds takes a 5 euro fee to every note you buy. You do not actually buy equity you buy a participatory note. Its Spreds who holds the actual Equity.
Dont forget to click Yes to invest in the Tax Shelter.
Should you have decided to invest, remember to file the amount of investments once you file your taxes! If you forget to report it when you do your taxes you will miss your return!
Find more information about the Belgian Tax Shelter
Should you like to know more you could read more about this incentive on the site of the Belgian Goverment:
Interesting to note is that Spreds is not the only approved site where you can invest. You also have Bolero Crowdfunding and LITA.co
I know that I am not alone investing in Startups, and a lot of people will have a more diverse and bigger portfolio then me. I am eager to hear about your experiences with Startups . So please mail me or comment bellow!
Since this blog is focused on the Belgian market (where I have most experiences) I am also eager to hear experiences from other countries, and if there is any Tax Incentives there. Also if you want to testify about any good or bad experiences with Spreds or any other startup site, let me know!
And remember… subscribe if you want to be informed about the successes or failures of the startups I invested in
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