What I Learned After 5 Years on Kickfurther

I started investing on Kickfurther over 5 years ago and over the years I have learned quite a bit. For those who are not familiar with Kickfurther as an investment platform, it is simply a consignment opportunity (Co-Op) model that enables small businesses to purchase inventory using pooled capital from investors. The inventory is then owned by the Co-Op until it is sold and then the proceeds are returned to the investors. Investors are repaid periodically as inventory is sold, which is comprised of both return of the principal and a share of the profits. Usually the businesses that utilize the platform are consumer brands that have limited free capital available to purchase inventory, so a platform like Kickfurther appeals to them as a way to leverage investors to purchase the inventory and then repay the investors once the products have been sold.

What Are My Returns So Far?

After 5 years investing on Kickfurther I have completed exactly 300 Co-Ops with an annualized Co-Op profit (ACP) of 2.69%, which is significantly lower than the 10% plus often advertised on the Co-Op pages. Some of the biggest losers were:

These are just a few of the Co-Ops that ended in a loss. I have over 15 in my account where the Co-Op was closed unpaid or was canceled.

Lessons Learned

I am going to list out some of my major learnings from investing on Kickfurther below:

• Diversification is key – While chasing the highest profit Co-Ops is tempting, the way to avoid catastrophic losses that can completely wipe out your profits is to invest reasonable amounts into a large number of Co-Ops thereby diversifying the risk.
• Focus on stable, boring, repeat demand products – Most of my major losers has been from fraud (Bob’s T-Shirt Store), and trendy, fashion oriented companies. Also, many of the losers have been first time Co-Op participants, which may suggest that they could be less credit worthy and established than companies that have completed several successful Co-Ops. I have had a higher success rate with companies like CPG (e.g., nutrition bars, snacks), lower priced essential use products (e.g., key chains, scissors, etc.), and supplements (e.g., vitamins).
• Avoid chasing returns – Many of the more risky Co-Ops are ones where they advertise a high (10%+ return), or a long repayment period (9+ months). These companies often tout high growth, and a huge upside, but often fail to deliver on their promises.
• Lean toward Co-Ops with repeated success – Occasionally you will see Co-Ops that have a history of repeated successful completion. While there is always a fraudulent owner like Bob’s T-Shirt, there are more often successful businesses that have learned how to adopt Kickfurther’s financing model in a way that benefits their business and investment returns. These Co-Ops are often not only repaid on time, but often early.