Today, OurCrowd is featuring Part 2 of a special 3-part series from Matt and Wayne, the founders of Crowdability
Crowdability provides individual investors with independent research and education on equity crowdfunding. With their free service, they aim to simplify the process of discovering and evaluating crowdfunding opportunities.
In this series that they’ve created especially for OurCrowd, Crowdability will address investors’ 3 most common concerns about Equity Crowdfunding.
In Part 1 of this Series, we addressed a concern about whether equity crowdfunding makes sense for ordinary people who aren’t intending to invest millions.
Today we’ll address another common concern – namely, that early-stage investing is too difficult, or takes too much time.
These are valid questions. Early-stage investing certainly isn’t easy…
For one thing, since the companies raising funds are private, they’re not obligated to disclose details of their operations or financial results. Gathering this critical information can be challenging and time-consuming, and interpreting it can be even harder.
That said, there are many ways to make the process faster and easier…
Let’s look at three of them now.
1. Actively “Follow” The Pros
Unlike the public stock market, where investors can be secretive about what they’re buying and selling, equity crowdfunding is extremely transparent.
By paying attention to what’s happening on crowdfunding platforms like AngelList, we can see when well-respected investors invest in start-ups.
We can then follow these investors – professional investors who often have many years of experience and a track record – into deals they’re putting money into.
For example, we can see when someone like Reid Hoffman (the founder of LinkedIn, and now an active investor) writes a check to a start-up. If we like the company, we can invest too – on the same terms as Mr. Hoffman.
AngelList tracks all of this activity, making it easy for us to stay up-to-date on our favorite investors.
To see Reid’s profile and “follow” him, click here.
Although this strategy is still time-consuming, it allows you to narrow your research to companies that have already attracted strong investors.
2. A “Mutual Fund” For Start-Ups
Another way to make the investment process faster and easier is to buy a “basket” of start-ups all at once.
We recently wrote about this topic on Crowdability » A “Mutual Fund” For Start-Ups
With this strategy, you can write one check… and gain access to 10 or so different companies. It’s almost like a “mutual fund” for start-ups.
One downside to this approach is that you’re not able to “cherry pick” the companies you’d like to invest in. You either invest in all of them, or none at all.
3. Let a “Pro” Do the Heavy Lifting
Another way to simplify the investment process is to let one of the crowdfunding portals do the “heavy lifting” for you.
OurCrowd, for example, created a service for investors that automates the entire process. Here’s how it works:
Investors like us decide in advance how much total capital we’d like to allocate to equity crowdfunding deals on OurCrowd. There are 4 options, from $100k to $1 million.
OurCrowd then identifies the most promising start-ups, and does all the research and due diligence. When they find a company that’s investment-worthy, they negotiate the “deal,” invest their own capital – and allow us to invest alongside them.
If we like the deal, we’re automatically guaranteed access to it. OurCrowd uses a portion of the capital we’ve already committed.
If we don’t like it, we can “opt out,” and wait for the next deal.
Save Time – Boost Returns
Investing in equity crowdfunding deals can be a great way to diversify your overall investment portfolio and boost returns. Investing using one of the above methods will simplify the process, save you time – and hopefully maximize your returns!
>>> See part 1 of The 3 Most Common Crowdfunding Concerns <<<