By Lee Sherman
Suffering from FOMO because you missed out on the initial public offerings of Uber (UBER), DoorDash (DASH), Airbnb (ABNB) or Snowflake (SNOW)?
Suffer no more. It’s never been easier to invest in future unicorns. Due to new rules established under the 2016 JOBS Act, you don’t even need to be an accredited investor to get in on some pre-IPO action. You can now invest with as little as $100, a far cry from the $1 million dollars you’d need as an accredited investor. And you no longer have to be an established angel investor with a good network to find the best deals. With new rules established in 2016, the playing field has been leveled for average investors.
There are two reasons for the changes. First, startup companies need more capital than ever to compete in such fields as artificial intelligence, biotech, and data science. The next Google has to compete not only with Google itself but with companies started by ex-Googlers. Second, locking out average investors no longer makes sense in a market that is breeding unicorns on a daily basis.
Because the minimum investment is so low, you can do what the smart money does and hedge your bets across multiple companies. According to Investopedia about 90% of startups fail. But the expectation is you’ll make it all up on the big one.
As you might’ve guessed, the secret to making all of this work is crowdfunding. You’ll pool your resources with other investors in order to invest in a small piece of the pie. Your share of a company might be small but if lightning strikes, you’ll still make real money.
You may already be used to investing through a broker or brokerage firm but to find pre-IPO deals, you’ll be better off using one of the many online crowdfunding portals that have popped up for this purpose.
Wefunder has taken the early lead in equity crowdfunding and has seen some big successes already, such as Zenefits, worth $9 million in 2013 and $3.5 billion today! It has a good selection of deals available and low fees (5% total).
Previously SeedInvest was only open to accredited investors but that’s changed and they now offer a number of early-stage and Regulation A+ listings (up to $50 million).
AngelList, is a leading portal for accredited investors and Republic is its sister site. What’s particularly sweet about Republic is that many of the deals on AngelList find their way over to Republic where it is possible for ordinary investors to help a company complete an early-stage investment round.
These new portals are all about access. While being able to invest without a huge influx of capital is certainly appealing, it’s finding and getting in on the deals that has always been the hardest part of investing in startups. Of course, always confer with your financial advisor prior to making any investment to get a second set of eyes on new opportunities.
Lee Sherman is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Lee is an experienced journalist and editor with over 30 years of expertise with a significant history of writing in the personal finance and technology arenas.