Coop jumps on the crowdfunding bandwagon

A smart new way to involve companies and small investors, or a case of ‘caveat emptor’?

The Danish co-operative concern Coop, which owns both a supermarket chain and a bank, is the latest company to take the plunge into crowdfunding, Børsen reports.

Crowdfunding has become an increasingly popular way to raise capital to develop an idea when traditional banks won’t get involved because they see the project as too risky. The participants either get a dividend and/or a concrete product when the project gets off the ground.

READ ALSO: Siblings set Danish crowdfunding record with new eBike

Coop has 1.7 million members and the head of the concern, Peter Høgsted, thinks that the idea has great potential. Accordingly, he has launched a crowdfunding platform in which he is offering 2 different products.

In on the ground floor
One of the products supports food or drink producers financially in exchange for certain extra benefits. For example, if you give an organic whisky distiller in Ærø 2,000 kroner, you will receive one of the first bottles when the product is ready.

This form of crowdfunding has the advantage that companies can build up a close relationship with their customers and the customers are able to support companies that they like and have an influence on the goods produced. Coop receives a small fee for facilitating the deal.

Banking on making a profit
The other kind of crowdfunding offer is different. Here, members can lend money directly to companies via a platform (crowdlending). They receive a rate of interest of 3-4 percent for lending their money for up to 5 years. This is done in co-operation with the crowdlending company Lendino.

Lendino is one of the better-established crowdlending companies around but in January, they were criticised by the consumer council for the way they were marketing their loans.

Lendino was accused of giving companies a credit rating but not taking any responsibility if a loss ensued, even though they had assessed the company as a safe investment. The same modus operandum seems to be being used on Coop’s platform, where Lendino are actually performing the ratings evaluations.

Both Coop’s and Lendino’s websites state that it is up to the consumer to evaluate the company themselves, so maybe read the small print before committing yourself.