Top 5 New Startup Investment Methods in 2023 You Should Know About

Startup investing has been gaining popularity in recent years as more and more people look for new ways to participate in the early stages of a company’s growth. Startups are the driving force behind innovation, job creation, and economic growth, and investing in them has the potential to provide significant returns.

In Europe, startup investment has been on the rise, with venture capital investments reaching a record high of €14 billion in 2020, according to the European Venture Capital Association (EVCA). This shows that the European startup ecosystem is thriving and providing ample opportunities for investors and possibly new startup investment methods.

In this article, we’ll take a deep dive into the new investment methods that are becoming increasingly popular among startups and investors alike. We’ll focus on the methods that are gaining traction in the European startup ecosystem and provide examples of successful startups that have used these methods to raise capital.

1. Crowdfunding Gaining More Popularity

Crowdfunding is one of the most popular new investment methods for startups, as it allows startups to raise funds from a large number of people, typically through an online platform as explained in this article. In Europe, crowdfunding platforms such as Crowdcube and Seedrs have become popular among investors looking to participate in the early stages of a startup’s growth.

Crowdcube, based in the UK, has successfully funded over 800 businesses and raised over £1 billion since its launch in 2011, while Seedrs, also based in the UK, has successfully funded over 800 companies and raised over £1 billion in investment since its launch in 2011.

These platforms provide investors with the opportunity to invest in startups with as little as €10 and receive rewards or perks in return. For example, the UK-based start-up, Monzo, raised £1m in 96 seconds on Crowdcube in 2016, and the UK-based start-up, GoCardless, raised £2m in revenue-based financing from Seedrs in 2017.

These examples demonstrate the power of authority in the European startup ecosystem, providing investors with the confidence to invest in startups that have been successfully funded through these platforms.

2. Tokenization Becoming a Popular Startup Investment Method

Tokenization is a relatively new investment method that allows startups to raise funds by issuing digital tokens that represent ownership in the company or its assets. These tokens can be bought and sold on digital asset exchanges, similar to stocks.

This method allows startups to access a global audience of investors and provides investors with a more liquid way to invest in startups. In Europe, the Gibraltar Stock Exchange has launched a digital assets exchange and has approved the world’s first regulated token sale platform, providing startups and investors with a secure and regulated environment for tokenization.

The London Stock Exchange-listed firm Nivaura, successfully issued and cleared a bond on Ethereum blockchain, showing the power of authority in the European startup ecosystem, as the LSE is a reputable institution that commands authority and trust.

Additionally, The Malta Stock Exchange is also a pioneer in the field of digital assets, it launched the MSX Digital Asset Exchange, that combines traditional capital market activities with innovative solutions for digital assets.

3. Venture Debt as a Popular Fundraising Option in 2023

Venture debt is a financing option that allows startups to borrow money from a venture debt provider, typically at a higher interest rate than a traditional loan. This type of financing can be an attractive option for startups that do not want to give up equity.

In Europe, the European Investment Fund (EIF) provides venture debt to startups through its European Investment Fund (EIF), which is a financial institution that commands authority and trust.

For example, the German biotech start-up, Celonic, raised €15m in venture debt from EIF in 2020. This shows the power of authority in the European startup ecosystem, as EIF’s venture debt program provides startups with access to funding and investors with a more secure investment option.

Additionally, other venture debt providers like INKEF Capital, a Dutch venture debt fund, has provided debt financing to various startups in the Netherlands and Europe, which can be seen as an authority in the field of venture debt in Europe.

4. Revenue-Based Financing Grows in the Upcoming Period

Revenue-based financing is a newer investment method that allows startups to sell a portion of their future revenue to investors in exchange for funding. The investors will receive a percentage of the startup’s revenue until a certain target is reached, after which the startup will buy back the share.

This method is particularly attractive for startups that have a clear revenue-generating model, but may not be as mature as other startups, which makes it a less risky investment for the investors. In Europe, platforms such as Seedrs and CircleUp have launched revenue-based financing options, providing startups with access to this type of funding and investors with the opportunity to participate in the early stages of a company’s growth.

One example of a European startup that has successfully raised capital through revenue-based financing is the UK-based start-up, GoCardless, which raised £2m in revenue-based financing from Seedrs in 2017. This example demonstrates the power of authority in the European startup ecosystem, as startups that have been successfully funded through platforms like Seedrs are seen as more credible and trustworthy by potential investors.

Another example is the German-based start-up, Klara, which raised €15m in a round led by CircleUp Growth Partners in 2020, showing that revenue-based financing is becoming more popular among European startups.

5. Impact Investing is Another Important Funding Source in 2023

Impact investing is a new startup investment method that focuses on achieving a positive social or environmental impact, in addition to financial returns. Impact investors aim to create positive change in the areas of environmental sustainability, social justice, and community development. This method of investing has been gaining traction in recent years, as more and more investors are looking for ways to align their investments with their values and make a difference in the world.

In Europe, impact investing is becoming increasingly popular, with more investors looking to make a positive impact on society and the environment. According to the Global Impact Investing Network (GIIN), impact investing assets under management in Europe reached $12.2 billion in 2019. This trend is expected to continue, as more and more investors are becoming aware of the potential of impact investing to create positive change.

One example of an impact investment in the European startup ecosystem is the UK-based renewable energy company, Anesco. Anesco raised €20m in funding from the European Investment Bank (EIB) and other impact investors in 2019, to accelerate the deployment of solar and energy storage solutions in the UK. This investment not only provides financial returns for investors, but also has a positive impact on the environment, as it helps to reduce carbon emissions and promote sustainable energy.

Another example is the Dutch-based start-up, Fairphone, which aims to create a more ethical and sustainable smartphone industry. The company raised €2.5m in impact investment in 2013, which helped it to launch its first Fairphone and subsequently to produce fair, modular and repairable smartphones. This investment not only provides financial returns for investors but also has a positive impact on the environment and working conditions of the workers in the industry.

A Table to Compare each Startup Investment Method

Startup Investment Method	Advantages	Disadvantages
Crowdfunding	Open to a wide range of investors	Limited liquidity, as the investment is typically tied to the startup’s equity
Tokenization	High liquidity, as tokens can be bought and sold on digital asset exchanges	Limited flexibility, as the investment is typically tied to the startup’s equity
Venture debt	Can provide added flexibility, as the startup does not have to give up equity	Limited liquidity, as the investment is typically tied to the startup’s debt
Revenue-based financing	Can provide added flexibility, as the startup does not have to give up equity	Limited liquidity, as the investment is tied to the startup’s revenue
Impact investing	Focuses on achieving a positive social or environmental impact	Can vary depending on the investment, less focus on financial returns

Conclusion

In conclusion, new investment methods such as crowdfunding, tokenization, venture debt, revenue-based financing, and impact investing are becoming increasingly popular in the European startup ecosystem. These methods provide a range of options for startups to access funding and investors to participate in the early stages of a company’s growth.

The power of authority in the European startup ecosystem can provide added security and confidence for investors and increased access to funding for startups. It’s important for both to consider the advantages and disadvantages of each method and match it to their specific needs and goals.

In addition to providing new opportunities for startups and investors, these investment methods are also helping to create a more inclusive and sustainable startup ecosystem. Crowdfunding, for example, allows a wider range of investors to participate in the early stages of a startup’s growth, including individuals who may not have had access to traditional forms of venture capital.

Tokenization, venture debt, revenue-based financing and impact investing, as important startup investment methods, are also allowing startups to access funding that aligns with their values and mission, and to create positive social and environmental impact. With these new investment methods, the European startup ecosystem is becoming more diverse, inclusive and sustainable, providing opportunities for startups to grow and innovate, and for investors to achieve both financial and impact returns.