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Equity Crowdfunding à la Warren Buffet




2 min read

Tom Britton -CTO & co-founder

Not all good investments are sexy, eh, Mr Buffett?

With equity crowdfunding it's easy to get drawn in by a whiz-bang video promoting a new fad product. Shiny may attract a crowd but the Wizard of Omaha himself is often found investing in the dull and functional, so long as it's fairly priced.

The latter seems to be the case with Inform Direct, which recently raised £450,000 through equity crowdfunding platform SyndicateRoom. Although far from sexy, Inform Direct would appear to tick all of the boxes Mr. Buffett looks for in an investment. Here are his four main points for finding a good investment, which ring true whether the business is in its early days or has been around for centuries.

1.    A business you understand

Inform Direct makes dealing with Companies House easy. Anyone who has run a business and dealt with Companies House online will generally agree that interface is not the most user-friendly. Filing reports, managing shareholders records, and updating company directors are all made easy with Inform Direct.

2.    Favourable long-term economics

In 2012 there were nearly 500,000 new companies registered in the UK, and the predictions for 2013 point towards an even larger volume, as well as a long-term upward trend. However, it's not just new companies that benefit from using Inform Direct, as existing companies must interact with Companies House in much the same way. Inform Direct has already generated a good level of traction with the market and is generating revenue.

3.     Trustworthy management

Henry Catchpole, CEO of inform Direct, has experience in building a brand and successfully exiting. Henry was CEO at Suffolk Life Group, where he built the team from 8 to 200, and the assets under management from £3 million to £3.5 billion, before eventually selling the company to Legal and General for £68 million.

4.     A sensible price tag

Much can be gauged from Inform Direct's forecast to return to investors 1.9x by 2018. Most business angels will say they look for a larger return over a five year period. Inform Direct make modest promises, and while they may hope to deliver much more, they have priced the offer on the conservative side. Many playing the stock market would love 1.9x over a 5 year period, so this is nothing to gawk at. Heck, even Warren will tell you 'It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.'

Inform Direct attracted a large number of experienced investors, and though the minimum investment level on SyndicateRoom is set at £500, the average investment into Inform Direct was over £10,000. Although there is always an experienced lead investor involved in all investment opportunities on SyndicateRoom, investing in early-stage ventures is risky, and the potential to lose all of your invested money remains high (80% of startups will go out of business within 5 years).

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