How To Invest in Startups as an Everyday Investor
It's easier than you think
The JOBS act of 2012 was a Bi-partisan bill passed that eased restrictions on various securities allowing everyday investors such as you and me to buy ACTUAL shares in startups. While several companies advertise these opportunities on their websites, it’s nearly impossible and somewhat futile to go searching website to website for the opportunities.
There are a few websites that do this, and you can check them out and use one, or all of them to search for the best companies. The big ones are StartEngine.com, Wefunder.com, Seedinvest.com, and Republic.co.
Personally, I prefer StartEngine for the most part. I still branch out occasionally, but they offer a host of options that other sites simply don't, from the owners bonus, to Secondary, they have a great user experience.
Further, It’s the leader in the space. It has the most opportunities because it's the biggest, best, and in terms of bringing in investors, people want options. You can go on their website right now (Startengine.com) and browse hundreds of phenomenal companies, and potentially invest in these companies. They have a chat section for each investment page, SEC filings, great UI, and much more.
They are the only I have seen planning on branching out from the immediate space of just “letting retail investors buy startups”. They currently have their own mini stock market called "StartEngine Secondary". It’s in its heavy infancy, which means you can only buy shares in their website, Startengine.com from the hours of 1–3 pm 5 days a week, but nonetheless, proof of concept is a big deal. Owning your own stock market has it’s perks.
If you plan on throwing any sizeable amount of money into some of these, you should DEFINITELY look into their “Owners” program. It's basically, you put 1000$ into their stock, or 275$ a year and you get up to 10% extra shares whenever you buy shares in certain companies, and some other smaller benefits. I’m sure these perks will grow as this progresses, but this is definitely something to look into if you decide to go down this path.
Whether you decide to buy stock in the company or simply use it, I don’t think it's going anywhere. The founder is a co-founder of Activision, yes that one, with Kevin O’Leary jumping on as their most recent big-name investor. While their names carry a lot of weight, it also shows there's commitment to this, and they have the money and connections to make sure this doesn't fail. So, personally, I feel pretty good about this site, as compared to others. If you feel the same way, and see yourself using the site often, consider buying shares of the company on their exchange!
As far as the other companies, SeedInvest probably has the best companies consistently, but it also has the fewest options, because they're all heavily vetted. I am not a fan of Wefunder personally, but Republic is my second favorite, as they have tons of their own unique features, including investments in Crypto, Property, and Gaming, which StartEngine is lacking in.
While there are plenty of great companies on there, make sure to do your own research. Every company has a comment section, and an SEC filing stating their most significant risks associated with their business. Most of these, don't expect to make any money for AT LEAST a year. Quite literally, some of these you ARE NOT allowed to sell for at least a year. Don’t invest anything you're not able to lose, but this is definitely something to consider. If you want to invest in the space, but still want the liquidity, consider using their in-house market to buy and sell shares of their own company even.
While holding for a year (or more) might seem rough for some, it does have its perks though. Ever bought shares in a stock you were confident in was worth more, only to have it go down immediately for the next weeks or months, then sell at a loss? Well, here, if you're right, you're right. You have done your research and decided it’s a good investment opportunity. You put your money in there and forget about it, hoping in a couple of years you bought the next Amazon for pennies on the dollar.
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