Investing Trend

Crowdfunding party carries real risks

The economics of crowdfunding platforms means investors could lose every penny. Source: Fotolia

Some 300 private real-estate investors in Berlin just had a very bad day.

These unlucky individuals had piled into a crowdfunding project organized through Zinsland, a fledgling online fintech. On Wednesday, the curtain came crashing down on the venture after a Munich court opened insolvency proceedings against the project developer, Conrem-Ingenieure GmbH, which had planned to build two apartment blocks in Berlin’s Tempelhof district.

Sadly, when it comes to bankruptcy cases, holders of so-called subordinated debt are at the back of the line. The Zinsland investors are on the deeds to subordinated loans totaling €1.25 million ($1.47 million). Instead of receiving the tantalizing six percent return offered in the crowdfunding deal, their entire investment will evaporate.

The chances of losing it all has done little to deter German investors – an odd development in a country famous for its aversion to risk. Some Germans, it seems, do get a frisson from betting on risky business. “If I invest in stocks I’m just an unimportant cog,” complains one investor, who instead, has put money into 15 start-ups through the platform Seedmatch.

Want to keep reading?

Subscribe now or log in to read our coverage of Europe’s leading economy.