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Investors have been warned to question the valuations of companies using crowdfunding to raise finance, as research suggests that the model could leave them vulnerable to paying too much.

An analysis of hundreds of companies who have used equity crowdfunding to raise money directly from the public showed they were typically parting with a much smaller stake than those seeking funding elsewhere.

SyndicateRoom, one of the biggest equity crowdfunding sites, is this week launching an online “Investor Academy” in tandem with the law firm Taylor Wessing to inform people about key concepts in early stage investing.

These include valuations and how they are calculated; the site also tackles pre-emption rights, which enable investors to “follow their money” in future funding rounds if they do not want their stake to be diluted.

“We know that there is a huge lack of information on the investors’ side,” said Goncalo de Vasconcelos, chief executive of SyndicateRoom.

“This is about helping investors to make well-informed decisions, including to walk away if it’s not for them.”

Read the full article here.