What is Equity CrowdFunding?

Think of Equity Crowdfunding as an online version of Dragons’ Den. A company seeking to raise new money to finance its growth plans offers a fixed number of shares to the ‘crowd’ in return for a fixed amount of money. The crowd then subscribes for shares in the company and if the target amount of money is reached the company issues new shares to the investors.
How does my investment work?

If you invest in a company on Spark CrowdFunding you will become a shareholder in that company. The amount you invest and the amount of equity that is released by the company in the fundraising round will affect the percentage of ownership in the business.

These investments are long-term and are used by the company to grow. All the shares on offer by Spark CrowdFunding are A-Ordinary shares.

Investing in early stage businesses is high risk (please see our Risk Warning). The majority of start-ups fail or do not deliver a return for the investor. The liquidity of the shares (i.e. the ability to sell your shares) is very limited and relies on the company being sold or floated.

As such, you as an investor, should ensure that your portfolio of investments is diversified across a number of different business to give you greater peace of mind that your investments will be sustained.

How does the nominee structure work?

All companies on the Spark platform issue shares to investors via a nominee.

Rather than issuing shares to the you, the investor, directly, the shares are issued to a nominee company. The nominee company is named in the company’s register of shareholders and will be the legal holder of the shares. The company will communicate directly with the nominee and but may also send you updates directly.

The nominee will hold the shares on trust for you, the beneficial owner, and the nominee company will administer the holding to safeguard your rights and entitlements.

What is Spark CrowdFunding’s due diligence process?

We review every pitch on the site to ensure that all the information presented to you is fair, clear, and not misleading.

We conduct a robust due diligence on the company, its legal structure and directors. We also verify evidence supporting any claims being made by the business to ensure the information provided is accurate.

What are the risks of investing?

All investments carry varying degrees of risk, and investing in early-stage and growth- focused businesses is no different. The main risk associated with investing on Spark CrowdFunding is that the business will simply fail, and investors won't get their money back.

Illiquidity is another consideration because, even if the business succeeds, investors are unlikely to receive dividends or be able to sell their shares for a number of years.

There is also a risk of dilution: if a business requires further capital in the future (a highly likely scenario), and issues more shares in exchange for that capital, the percentage of equity held by earlier investors will decrease.

What is EIIS?

The Employment & Investment Incentive Scheme (EIIS) is an initiative from the Revenue Commissioners. It is a tax relief used by trading companies to attract equity-based risk finance from individuals.

Qualifying companies that wish to raise finance under EIIS must issue ordinary shares to the investor. These shares are in respect of the amount invested. Companies cannot use invested funds for debt repayment.

The investor can claim Income Tax relief on amounts invested, provided they keep the shares for at least four years. The tax relief is 40%, all of which can be claimed in year 1.

How do I make a return on my investment?

There are typically 3 mechanisms to obtain a return on your investment.

Management Buyout (MBO) – this is a form of acquisition where a company's existing managers acquire a large part or all of the company from the private owners (the shareholders).

Initial Public Offering (IPO) – This is also known as a stock market launch. It is a type of public offering in which shares of a company are sold to institutional investors and usually also retail investors.

Trade Sale – This is a common means of exit to a trade buyer. It is mostly used in the context of venture capital funded businesses and refers to the sale of a company in its early stages.

It normally entails the disposal of a company's shares or assets and even liabilities, in whole or in part. This may refer to a strategic buyer who intends to grow their business or to a financial buyer who wants to generate a financial return on their invested capital at the time of exit. Trade sales are the most frequently used as an exit vehicle for start-up companies.

Will I receive updates from the businesses in which I have invested?

Companies are obliged to give you annual updates. However, we encourage companies to keep investors updated with regular progress reports every quarter or through a more dynamic “investor” page on their websites.

Raising Funds:

Raising finance through equity crowdfunding.

If you wish to raise funds through our platform firstly drop us a quick line telling us a bit about you using our online form, here.

If you are suitable for the platform and you wish to continue with our on-boarding process we will send you an application form which will give us all the information we require to assess the business.

If your business is approved to raise finance on Spark’s site, you can start writing your pitch, creating your video and developing your promotion plan.

When everything has been verified and approved, we agree a launch date and your campaign will go live on the Spark platform.

When your pitch is live your focus should be on actively promoting your crowdfunding campaign. This includes ongoing marketing of the campaign to your own network of customers and contacts, promotion via your website and social channels, as well as regular updates on your Spark pitch page.

Am I suitable to raise funds with Spark CrowdFunding?

Not every company is suitable for equity crowdfunding. Investors will only purchase shares in a company if they believe the company will be worth a lot more when it is eventually sold or floated on the stock market.

Companies which can demonstrate scale potential, ideally in an international context, are ideal businesses for equity crowdfunding. Consumer products and technology applications would be ideal examples.

Why should I raise finance with Spark CrowdFunding?

CrowdFunding is an excellent way to raise funds for your business. Money can be raised in a relatively short period of time. It creates a great deal of positive PR that other mechanisms cannot. You attract a wide spectrum of investors that now have “skin in the game” and as such will spread the word about your business. The process is streamlined and transparent and it democratises investment.

What are the fees?

There is no fee for listing your business on Spark CrowdFunding, a success fee of 7% (exc. VAT) is only charged on the amount you successfully raise. We operate on a “no foal, no fee” basis.

We also pass through the charges from our third-party payment provider. These are typically between 0.5 and 2.8% of the transaction fee.

How much can I raise?

Our minimum raise is €50,000. There is no maximum to what you can raise.

How should I set my valuation?

The valuation of your company has to be set on a fully-diluted basis.

There is no right or wrong way to value a business. Unfortunately, it’s highly subjective and the ways of valuing a business have been widely debated.