How To Pass The Seedrs Appropriateness Test

Seedrs has nothing to do with P2P lending, because it is the far higher risk startup crowdfunding. It therefore doesn't usually show up on 4thWay.

However, for ordinary lenders in P2P to upgrade to the status “sophisticated investor”, you sometimes need a few pounds' worth of experience investing in unlisted companies. That means companies that are not on the stock market.

For just £20 on Seedrs, you can get that experience by investing in two startups.

But you do need to go through the rigmarole of its appropriateness test. Normally, we accompany our explanation of these investor tests with a lot of information to ensure you're more knowledgeable than most when you get started.

But that's not our goal here and it's crowdfunding is outside our remit. Your goal is simply to get through Seedrs, put £20 in quickly, and job done. Sophisticated investor status here you come.

So I'm just going to run you through the answers quickly.

(By the way, if you genuinely want to go right up to the top of the investing risk scale by buying shares in startups, I suggest you spend a very large number of hours familiarising yourself with business models, accounting and startup investing, and that you guzzle up a lot of books, as well as industry, tech and management magazines. Don't just use our help to answer this test and then plonk a load of money in, because it's not an easy game!)

Question 1 of 7

Most early-stage and many growth-focussed businesses:

Succeed
Break Even
Fail

Question 2 of 7

If I invest in the equity of an early-stage or growth-focussed business, and the business fails:

No one will be liable to pay me back the amount I invested, and my investment will be lost
The entrepreneurs who founded the business will be personally liable to pay me back the amount I invested
The broker or finder who arranged the transaction will be liable to pay me back the amount I invested

Question 3 of 7

If I invest in the equity of an early-stage or growth-focussed business, and I decide I want my money back:

I will be able to surrender my shares to the company, and it will give me my money back
I will be able to sell my shares on a stock exchange at any time
I may not be able to sell my shares unless the business is bought by another company or floats on a stock exchange, and even if the businesses is bought or floats, a sale is not guaranteed

Question 4 of 7

Early-stage and growth-focussed businesses generally:

Do not pay dividends to their investors
Begin paying dividends to their investors within a year after the investment is made
Pay dividends to their investors from immediately after the investment is made

Question 5 of 7

If I invest in the equity of an early-stage or growth-focussed business, the business succeeds, and I want to cash in on the success:

I will definitely be able to find someone to buy my shares in the business at any point
Unless the business is bought by another company or floats on a stock exchange, it will be difficult to find someone to buy my shares, and even if the businesses is bought or floats, it may still be difficult to find someone to buy my shares
The business will always be required to buy back my shares at a set price

Question 6 of 7

If my shares represents 1% of the equity of an early-stage or growth-focussed business at the time I make the investment, and then the business issues additional shares at a later date:

My shares will continue to represent 1% of the equity of the business
Due to dilution, my shares will come to represent less than 1% of the equity of the business
Due to accretion, my shares will come to represent more than 1% of the equity of the business over time

Question 7 of 7

Best practice when investing in early-stage and growth-focussed businesses involves:

Investing a small proportion of your available capital in those businesses, and allocating the majority of your capital to safer investments
Investing most of your available capital in those businesses, with very little allocated to safer investments

Further reading:

How To Easily Qualify As A Self-Certified Sophisticated Investor To Lend Freely Through Any P2P Lending Website.

Do “Sophisticated Investors” Have Less Legal Protection?

How To Pass The P2P Lending Appropriateness Tests.

Who Can Invest In Peer-To-Peer Lending?

Independent opinion: 4thWay will help you to identify your options and narrow down your choices. We suggest what you could do, but we won't tell you what to do or where to lend; the decision is yours. We are responsible for the accuracy and quality of the information we provide, but not for any decision you make based on it. The material is for general information and education purposes only.

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