Part 1b: Best-practices for a reliable crowdfunding investment platform

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In the first part of best-practices for a reliable crowdfunding investment platform, we discussed the company’s structure, financial capability and reporting. In this blog post, we give an overview of what to keep in mind when researching the management and key people.

Read ‘Part 1a: Platform operator’ here.

Platform operator – Management and key people

It is often said that the companies are the reflection of their owners and their management. Crowdfunding platform operators are no exception.

As crowdfunding platform’s main role is the sourcing, evaluating and selecting the best Sponsors and their investment opportunities, the operating company has a fiduciary duty towards the investors, and the company’s management is responsible for the execution of this duty.

The crowdfunding platform also manages the community of tens of thousands of investors, sometimes from more than 100 different countries, keeps up the communication between Sponsors and investors, and takes care of complex legal contracts to protect all parties involved.

In order to manage such complexity, the operating company should be managed transparently by a highly skilled and experienced team.

While evaluating the team and its professional and managerial competence is probably the most complicated part of platform’s due diligence, the following guidelines might help you in tilting your investment decision towards one or another crowdfunding platform.

Main things to keep in mind when looking at the company’s management and key members of the team:

1. Does the platform operator publish the names, photos and other relevant information on their management and key team members? You would like to know, who are the persons you are trusting your hard-earned euros and dollars. There is no real excuse to avoid introducing the management and key members of the team to the investors. Avoid investing with crowdfunding platforms which do not disclose the identities of their management and key team members.

Crowdestate is proud of its team and all relevant information is published on our website. You can also hook up with our key team members on LinkedIn.

2. Take a look at key persons’ Linkedin profiles to verify the information that is published on the platform. Be suspicious of the Linkedin profiles that have been created recently, have just a few connections and do not provide detailed information about the person’s professional experience. Other indicators of suspicious profile include somebody else being on the profile photo or complete lack of portrait photo, incomplete profile, doubtful work history or even poor grammar and unprofessional use of language.

You can hook up with our key team members on LinkedIn.

3. Google persons’ names to see what they have said in the past and what others have said about them. Avoid investing in platforms where the key team members have been involved in questionable situations. Lack of information is also a negative sign.

PS. A piece of interesting information should you miss it! Crowdestate’s CEO Mr Loit Linnupõld has been managing regulated fund management companies and a commercial bank from 1996 to 2013 (until the establishment of Crowdestate) and serves currently as the Chairman of the Supervisory Board of Tuleva Funds AS (since 2016), and such, has been and is currently the subject to Financial Supervision Authority’s “fit and proper” requirements.

4. Who are the members of the company’s supervisory board? Having an operational supervisory board is a sign of a platform operator growing up and recognizing the need for independent supervision, guidance and control. Search LinkedIn and google the names and track record of the members of the supervisory board to understand their background and potential contribution to the company.

Since becoming a joint stock company last year, Crowdestate has an independent supervisory board consisting of 3 professionals. The chairman of the supervisory board is Mr Aavo Kokk, currently serving as the partner at Catella Corporate Finance, the largest Baltic real estate advisory company. Mr Rait Ojasaar has an extensive IT and VC background, and as a CEO of NodeSWAT, he is ensuring our IT strategy and developments are going into the right direction. Mr Hannes Küün is an attorney-at-law and the partner at Tark Legal, a full-service law firm headquartered in Tallinn.

5. Who are the beneficial owners of the platform operator? All companies have ultimate beneficial owners, reaping the potential rewards of investing into that business. Disclosing the direct corporate shareholders of the platform does not provide adequate transparency when the true beneficial owners remain hidden behind several layers of corporate shareholders. Do not invest on the crowdfunding platforms where the ultimate beneficial ownership is not disclosed to the investors.

The major (97,88%) beneficial shareholder of Crowdestate is its founder and current CEO, Mr Loit Linnupõld. The beneficial owner of minority stake (2,12%) is Mr Indrek Stahl, a retired businessman currently residing in Spain.

6. Is the management team located and working at the company’s registered address? It might need some skill to identify the nationality of a team member by his name, but the research might pay off, if you find the person being a foreign national, having no visible ties to the company’s registered address. Do not hesitate to reach out to the platform operator to understand the reasons for the management team not working at the registered address.

Crowdestate has always been and is currently operating at its official addresses in all of its business locations.

7. Is the management team fully committed to operating the company or is this just one of their nice-to-have side businesses? In order to ensure the proper management of the company, the members of the management team should allocate adequate time for the management activities. Visit LinkedIn and Google search the members of the management board to identify their involvement in other projects or endeavours. Avoid investing on the crowdfunding platforms where the members of the management team are “jacks of all trades, master of none”, actively running several parallel projects in different business areas. 

Crowdestate’s management and key team members are devoting 100% of their time to Crowdestate and taking care of its investors’ investments. Mr Loit Linnupold, CEO of Crowdestate, is also serving as the Chairman of the Supervisory Board of Tuleva Funds AS, a crowdfunded pension fund management company.

8. Does the management or key team members have potential conflicts of interest with the crowdfunding platform itself or with the investment opportunities published there? Disclosing actual or potential conflicts of interest is an essential part of ensuring transparency and platforms avoid ending up in business situations where the key member of the team could have an incentive to prefer his own interest to the investors’ interests. A typical conflict of interest might arise when the owners or key members of the management team are running a real estate crowdfunding platform while simultaneously being beneficial owners in real estate development projects, and are using the platform to fund their own projects.

Crowdestate is strictly avoiding any potential conflicts of interests and is operating as an independent crowdfunding platform matching international investors with professional real estate companies. The situations where the conflicts of interest might arise are regulated by Crowdestate’s internal document “Conflicts of interest policy”.

9. Are the members of the management team enough experienced to operate a crowdfunding platform? Again, do a Linkedin search or google them to understand their skills and previous professional experience. Would you trust someone with no financial or industry experience to provide you qualified investment ideas? Avoid investing on the crowdfunding platforms where the management team has too short or no relevant experience.

While we believe we have the adequate professional and managerial experience to successfully run a real estate crowdfunding platform, the true assessment can and would be carried out by our investors. You are welcome to take a look at our LinkedIn profiles and decide yourself.

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