Finally everyone can be an investor in promising startups and fast-growing small businesses. We do realize that it takes some experience to identify good investment deals and make smart investments. Startwise team members have expertise in venture capital, portfolio management, business funding and the risks associated with investing. So we decided to make some research and put together a useful checklist to help you navigate the investment game.
When it comes to crowd investing, there are two main options: equity and debt. In equity-based crowdfunding, investors fund a business in exchange for equity - the ownership shares in the company. In this model, they usually get a return on their investment in a one-time payment and only when and if the business is acquired or goes public (‘has an exit’). Unfortunately, statistic shows, that only 1 out of 10 companies get acquired or go public, and there is always the chance that the value of purchased shares could fall below the original purchase price.
Today, the new crowdfunding rules enable every American to invest in small businesses and startups while getting a financial return - instead of a t-shirt or a product. One of the models gaining popularity is investing in companies in return for a share of their revenues. This is a perfect model for business owners who run local companies - like that cool coffee shop you work from every other day or that awesome artisan making the unique jewelry everyone compliments you on. The best part is that you need less money to start investing than traditional methods - investing as small as $200 could pay for a few extra cups of coffee in a few months.
Crowdfunding and other forms of alternative finance are quickly redefining the capital market as we know it, by granting investors unprecedented access to previously exclusive markets. And with the passage of Title III, the crowdfunding’s reach has been expanded even further to include non-accredited investors. Here are some basics of the way the new crowdfunding works.