Become an Owner

For over 80 years, only accredited investors – the top ~7% of rich American – were legally allowed to invest in private companies. In 2012, as part of the Jobs Act a new era began allowing “unaccredited” investors – i.e. 93% of Americans – to legally invest as little as $100 in startups and other private companies.

This form of investing was always the ultra-rich’s secret weapon for growing extreme wealth – investing in the public stock market is the path to moderate wealth if done right, but building extreme wealth often comes through investing in private companies at an earlier stage than those that are publicly traded.

Whereas investing in the stock market is investing in “publicly held” companies, investing in companies through crowdfunding is investing in “privately held” companies.

This just means that a few individual people or entities own the voting shares of the company, verses the greater public owning the majority of the shares in a public company.

Publicly held companies have stricter financial reporting requirements – i.e. quarterly, and have to put out a report to the public on how their company is doing. For private companies, this isn’t required, as they’re allowed to keep their financials… you guessed it… private.

When investing in public markets, in most cases, you have the option to buy or sell their shares every working day i.e liquidity. In the private market, you cannot sell your shares on any day you choose.

Your return on a private company investment is often realized three to seven years down the line when the company has a ‘liquidity event’, which means when they go public or are acquired.

What you get in return for the lack of liquidity is the opportunity for a far greater overall return on your investment. When investing in the public market you hope to double your money 10-20 years after putting it in i.e 2x. When investing in private companies you hope for 10x, or more, on your money within three to seven years.

Like anything in life, with higher upside potential, you also have a higher downside risk – i.e. your investment could also equal $0 in three to seven years. Just like in the stock market, no investment is ever a guaranteed win. (You should only invest as much as you have the ability to comfortably lose).

This is Equity Crowdfunding not “Rewards Crowdfunding” like Kick Starter or Indie GoGo where you get a mug, a t-shirt or the product for an inflated price.

Rather, this is Equity Crowdfunding, also known as a “Community Round”, where investors get the opportunity to actually own a piece of the company they love, and to ride that [hopefully] successful rocket 🚀 to stardom together.

In Community Rounds, alongside the offering of equity in the business, the issuing company can also give product “perks”, like in Rewards Crowdfunding, in order to sweeten the deal.

Many of the same things that you look for when investing in public companies on the stock market are what you should be looking for when investing in private companies as well. Notably, the financials and the market potential.

Both of these are nearly impossible to judge as a novice investor… yet we invest in public companies with all our life savings, every single day, completely blind. Thankfully, investing in early-stage private companies gives you the opportunity to judge a few even more important factors with the knowledge that we all possess, regardless of our business background:

Team – What is the team’s prior background? How do they present themselves, the company, and their value proposition in their campaign? How organized do the founders, page, and campaign feel in the video and deck?

Traction – Does it seem like they have accomplished a meaningful amount of work? Do their milestones seem achievable for the size of the team they expect to have?

Execution means much more than just ideas. Team and traction will paint you a solid picture to base your decision.