When the SEC announced last November that equity crowdfunding would become legal in May 2016, a lot of folks started talking about the opportunities available. If you’re 18 years or older, you can invest in early stage startups, based upon how much your net worth is. Until now there hasn’t been a platform where you go to invest quickly, have a platform for communication, and manage your investments. Thankfully Republic is democratizing investing four companies you can invest in initially.
While investing in early stage startups is extremely risky you can have significant returns, and when you invest in a startup, you feel like you have more at risk in the company’s success by sharing and getting friends and family to use the service or product. This means business looking at crowdfunding can turn loyal customers into invested brand ambassadors.
Either way, crowdfunding is going to open up more funding for startups that are having trouble raising money from traditional venture capital firms in Silicon Valley. However, startups looking for crowdfunding are not all technology related and might include restaurants, bookstores, or new media company.
What is crowdfunding?
The crowdfunding we are talking about isn’t the same thing you’re doing when you’re backing a Kickstarter campaign. Instead, when you make an investment in a company through Republic, you’re giving them money to make capital investments into the growth of the enterprise. You’re not looking to get a product right away, but you’re looking for a return on the money you’re investing. The amount of money can be as little as $10 or depending on your income as much as 5 to 10 percent of your annual income.
Should you invest?
This is a huge change to how investing has traditionally happened with anyone making hundreds of thousands of millions of dollars investing in companies. Now anyone can try and become a part of a startup with any amount of money they can offer up. This doesn’t mean you’ll make millions or even get a return. A lot of times startups burn through the money from investors or pivot their product completely. This means you could lose all of the money you invested or never see a return.
If you have extra money in savings or came into some this could be a chance to have a long-term investment in a company you believe in. This isn’t going to be a get rich quick scheme, as there are regulations in place where you have to stay invested in a company for 12 months. Then after that period you may never find a buyer who wants to invest in the company you took a chance on.
If you’re okay with giving someone money to build their business, and them wasting it on their road to success or failure. Then I say invest!
Am I investing?
It’s early in the crowdfunding market, but I love the idea that I can invest in startups that I am interested in. Once more companies see the potential of having anyone invest in their businesses there will be a flood of businesses on sites like Republic. The other problem I see with investing in these early stage companies is how to vet them. VC’s who invest on a daily basis understand what to look for and what might become an overnight success, but I wouldn’t know what to look for. I would want to invest in technology companies that I understand fully, and have a grasp on the overall market.
Either way, I’m looking at investing in startups one way or another. I do have worries about not getting to talk to the founders or vetting the company with talking to someones. There is documentation, and you can do your research, but it’s hard to find info because these are such young and early startups.