How to Pick the Best Equity Crowdfunding Investment That WORKS
Equity crowdfunding investments are huge these days. They’re flexible, and can be a great way for new investors to get into some great companies with huge future potential. Plus, with government leaning more towards deregulating them, the window of opportunity for a great equity crowdfunding investment is about to become wide open. According to a recent article in Entrepreneur, Securities and Exchange Commission chair Mary Jo White says that her agency will finalize the regulations for equity crowdfunding – efforts by entrepreneurs to sell equity to many people – sometime “in the near term.”
This means that choosing what type of investment is right for you is critical right now. With the SEC leaning towards making crowdfunding more accessible, if you’re new to the game, you’ll need to start preparing ahead of time. Here’s how.
What exactly is equity crowdfunding
Equity crowdfunding is one of the best ways to invest without going through an IPO. In essence, it’s a type of investment where participant investors receive equity or company ownership in return for their investment. With equity crowdfunding, the expectation is that investors will receive a dividend or appreciation on their investment; based on the arrangement they have with the company. Equity crowdfunding platforms allow businesses to raise capital on a peer-to-peer level, which has huge benefits for non-affiliated investors and venture capitalists.
How do you know which investment is best for you?
Picking the right equity crowdfunding investment isn’t an exact science, but there are many ways to help make your decision easier. The first step you need to take is to network with the right companies. In the digital age, this is much easier, but it’s still a critical part of the process that can’t be ignored. Once you’ve found the companies that peak your interest, it’s time to do your homework. Get to know the founders. Get to know their business. And most importantly, ask the right questions. Why are they going the crowdfunding route? What is their plan for sustainability? What is their work history before this company? Remember, equity crowdfunding is a bit of an alternative investement, so thinking out of the box is absolutely essential.
Risk vs. Reward
Critics of equity crowdfunding investing will tell you that it’s high risk. They’re not necessarily wrong. When you make a sizeable equity crowdfunding investment, you are betting a large percentage of your investment capital directly into a company that you feel will turn big dividends. Unlike a stock, a company looking for this type of investment is looking for a handful of big investors, rather that a lot of small ones. The upside to equity crowdfunding investment is that if successful, the returns can be huge. And even better, you’re not limited to as much red tape as you would be with market investing. Yes, it’s high risk, but it’s a calculated one if you’re prepared. It’s also, as many believe, the future for alternative investing, especially with small companies who have big ideas, and the ambition to grow.
To learn more about finding the best fit for you, in equity crowdfunding as well as a variety of solid alternative investment options, contact us today. Also, be sure to check out our platform, and tell us what you think.