Smart money goes into investing is a fact. Many startup companies converting the invested money in a huge profit and making their investors moneyed. We understand that to invest in the business while it’s sprouting results to be remunerative but the question is how to plan investment or how to invest in a company? It is a myth that only cash-rich community can make the investments.
In 2012, it has been made easier to invest in any business by an average Joe through the section of the JOBS Act. JOBS Act released some strict federal security regulations and it became easier to seek investors. In 2016, the Securities Exchange Commission also vested in adopting rules that support crowdfunding.
Understand How to Invest in Startups
Investing in a fledgling company is not serene because there are always chances that the startup may fail and investors are left with no profit. While the investment can result in the high-reward it also reflects high-risk. Investment in the startups can get you back your invested money if the company fails to raise the required funding unlike other forms of investment. The startup investments cannot be traded and the investor holds the shares of his investment until the startup is acquired by the founder or someone else.
Along with the relaxation in the investment regulations, there are also some rules to be followed by investors. Because of the risks associated, the Securities and Exchange Commission has settled an investment limit for 12 months. The investment limit varies according to the net worth of the investor, for an investor of low net worth and the income it could be up to $2,200 while for the moneyed investor it could be up to $107,000 depending on the income of the investor.
There are a few crowdfunding platforms that provide a sampling of the approaches available for the investors to help them with a better investment with limited funds. Although these platforms cannot make you the next billionaire, surely can help you broaden your extensive investment career. Also, it helps you invest in the company you are more likely to believe.
This crowdfunding platform offers help to the individuals for investing in early-stage companies after they have been analyzed for the potential of surviving the market. A very few companies seeking investment are accepted through the platform which is less than 1%. SeedInvest has more than 259,000 registered users and has successfully funded 220 plus companies
After signing in to SeedInvest account the user gets a list of the startup companies asking for the funds. Some of them are exposed to every investor while some demand huge investment of about $20,000 or more and only exposed to authorized investors. The investors will be provided with the pre-money valuation and also the value of the funds being asked for plus the value of the funds already gained.
An investor can invest in several companies according to his choice and can develop his portfolio of investments using the auto-invest feature. For every investment, there is a processing fee of 2% of the investment amount.
WeFunder, this crowdfunding platform has aimed to attain the goal of investing more than 20,000 companies until the year 2029. The company will achieve this goal by accepting small funds as well. WeFunder helps an investor to invest his money into a broad range of startup industries. WeFunder offers the investors with an option of purchasing stock, exchangeable notes, and debt.
The company has acquired an investment of over $84 million since 2013 and financing 250 companies. When an investor invests his money through WeFunder the invested capital will be added to the escrow account and will be invested in a particular startup if the company gains required funds. If not the money will be returned to the investor.
WeFunder has accepted investments into several companies like an application of swim training program, minor league soccer club, and a craft whiskey maker.
Republic has been founded by the alumnus of AngelList which is a well-known investment platform for authorized investors. This online platform allows investors to buy a share in a fledgling company. The investment amount can get as little as $10.
The selection of the companies which seeking the investment is completed in a four-step procedure which includes:
- Analysis of the founder of the company
- Screening and analyzing the company product
- Scanning the mission of the company
- And lastly, the scope of the company growth
Republic also offers an extra feature along with the investment solution that is six different investment clubs where the members can discuss their ideas and advice. The club members can also invest together if they want to.