One cool development in the investment landscape recently has been the rise of crowdfunding equity.
I first came across this concept maybe 2-3 years ago, and since then it seems to have blossomed into a very common and legitimate way to raise capital.
Think of equity crowdfunding as a kind of Kickstarter or Indiegogo, but instead of donating and receiving gifts or rewards, you’re actually investing in stock. Previously investing in ground-level startups was a privilege reserved for the ultra rich or connected, but now any Mum and Dad investor (and even teenager or student!) can get in at the ground level.
Below I’m going to introduce you to a few cool websites based in New Zealand and Australia, so you can begin your startup investing career in just a few clicks.
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While these sites are going to look pretty snazzy and cool, remember that this is still real money. It’s not like a meaningless game of basketball where you can go out, get an ass whooping, and then wake up tomorrow and everything is okay again.
Investing is more like a fight to the death – once your money goes, it’s really gone forever.
Therefore I’d recommend for most people to stay away from this type of investing, until you’re well versed in at least the financial basics. Do you know how to read a financial forecast? What about a balance sheet and a P&L? Cash flow statement?
All of these are basic skills you need to know before you start throwing your hard earned cash at someone else’s business idea. If you can’t read basic financial statements, I’d highly recommend sticking to window shopping on these sites. Money is made and lost very quickly in the startup scene.
Instead, park your cash in an index fund or a term deposit. One of the absolute best skills an investor needs is the ability to not lose money. If you’re not confident in your ability to digest forecasts, pitches, prospectuses and financial reports, sit on your cash so you don’t lose it. That’s not punking out – in many cases – it’s an extremely wise investment decision.
Anyway, let’s see what we’ve got.
Pledgeme is a very fun, trendy website that manages not just equity crowdfunding projects but also loans and donations. It’s a really interesting site to just browse through, to see what kind of things people are getting up to in New Zealand. Everything from albums to movies to non-profit projects all way up to multi million dollar business funding is found on the platform.
The site is the brainchild of Anna Guenther, who started the project as part of her postgraduate thesis. Since 2012, they’ve helped Kiwis raise of $27 million. Pretty impressive!
If you do plan on investing in any projects, I highly recommend using their Q&A feature. Sometimes the information that projects provide is lacking, so it’s always good to ask as many questions as possible so you have all the information you need. In my experience, project leaders are usually very good at responding to investor queries on the site.
Equitise is an Australian website which also allows for Kiwi projects to be listed.
The site was started in 2014 by a bunch of guys well connected in the venture capital scene. I’ve actually heard from some old colleagues who have met much of the Equitise team and say it’s a really tightly run ship with lots of good brains around the table. Always good to know!
This actually comes through in the way Equitise do things – the site is much more corporate flavoured and so are many of the projects that tend to come through there. It’s interesting to see how this works – startups are often so connected to their images and values and therefore tend to gravitate toward the crowdfunding platform that suits their image best. Not surprising but still interesting to note.
One thing I’m not a huge fan of with Equitise is there different investing classes. In my opinion crowdfunding is about democratising the investing process, yet Equitise does put restrictions on certain investors, or require you to have a certain net work or accreditation for some investments. I understand there are legal reasons for this, but it still takes away from the concept at large.
Regardless, it’s still a great site with a lot of interesting opportunties.
Snowball Effect is another NZ equity crowdfunding site, although is less accessible to the everyday investor than the others.
From what I’ve seen, the site tends to gravitate more towards private offers with minimum investments, usually in the range of $10,000+.
I do check in here every few weeks to see what’s going on, but most of those offers tend to fall outside my price range. They do have public offers with lower minimums too, but it’s the site I’ve used the least since I discovered this space.
Still, it’s worth keeping on your radar.
Microventures is an American site launched by the team behind Indiegogo. While Indiegogo focused on crowdfunding for charitable causes and/or pledging money to people with cool ideas, Microventures focuses on actually offering equity in startups and fast growth companies. As you can imagine, the amount of opportunities that come through this site is a much higher volume than what you see on the NZ websites, which makes it all the more interesting!
One thing you need to be careful of is the terms of investment for these projects. Some of them are only selling bonds (loans), some are selling convertible notes and some are selling outright equity. It’s important that you know the difference before you start throwing money at them.
There are also some limitations on who can invest. Most allow overseas investors, and you can simply fund your investment with a credit card. Others only allows US citizens.
I have thrown a hundred bucks at a few projects on here, but generally I try to keep my money on NZ shores unless I see an absolute slam dunk. This is mostly for legal reasons, but if you’re comfortable with holding stock in a US company, that’s cool too.
Remember, invest smart, have fun, and always do your homework 😉