Equity crowdfunding is one of the best ways to find opportunities to invest in exciting startups in relatively small investment amounts. However, some of the most attractive online startup investments remain restricted to what’s called an accredited investor, in spite of the JOBS Act of 2012.
Investing through Equity Crowdfunding Platforms as an Accredited Investor
Each country has its own definition when it comes to an accredited investor, but in the main governments attempt to shield small-time, everyday investors from the risks of investing in a startup. So, non-accredited individual investors can invest in a limited selection of investment opportunities, along with restrictions on how much can be invested.
On the other hand, accredited investors – individuals with high incomes, or a high net worth that meets local criteria – can invest their money as they wish. In the US, the SEC sets criteria for accredited investors. A natural US person is considered an accredited investor when having a yearly income above $200k (or $300K together with a spouse), or a net worth above $1M (jointly with a spouse, excluding the value of one’s primary residence), but some additional regulations apply (see here). Recently the SEC has eased some of the accreditation criteria to include certain financial professionals as accredited investors.
Your country’s criteria for an accredited investor may differ – or there may be no restrictions whatsoever.
That said, equity crowdfunding platforms will often require participating investors to self-certify that they are acting as an accredited investor. In reality, this means that while the JOBS Act has opened up equity crowdfunding to the common (also known as “retail”) investor, many platforms remain restricted to accredited investors.
Moreover, to complete an investment in a startup or platform that only accepts accredited investors, you will usually have to verify your financial status with a third-party provider. Not to worry, nowadays such verification can be completed online fairly easily (for a small fee).
Accredited Investors Have Access to More Opportunities
While accredited investors have access to all the opportunities that everyday investors can access, they have a broader selection available. So the reality remains that accredited investors get the best access to startup investments. That is due to a mix of existing legislation and equity crowdfunding platforms’ interpretation of this legislation, alongside the sheer investment commitment required by the best opportunities.
Furthermore, accredited investors are not restricted in terms of how much they can invest. Non-accredited, everyday investors can quickly run into annual investment caps, but accredited investors who know their stuff can make unlimited investments – and reap the returns.
It’s often the complex legislation that enacts investor protections that simply mean that accredited investors have more options – investing in the special purpose vehicles (SPVs) used by some equity crowdfunding platforms, for example. Indeed, accredited investors can invest directly in startups – an important ability given that sometimes equity crowdfunding platforms do not act as investing or funding intermediary, simply working to connect investors and startups.
With Accreditation Comes Opportunity – and Responsibility
From one perspective, accreditation is about the ability of an investor to absorb investment losses. But, accreditation is also about responsibility: in other words, accredited investors are expected to be more educated when it comes to investments, are aware of the high risks involved in investing in early-stage startups. In other words, accredited investors can be expected to do their homework. In investment parlance, we may say that due diligence is a key part of the investment process for accredited investors.
When it comes to equity crowdfunding it means that accredited investors ought to examine the fundamentals of a startup, including its position in the market and its future prospects. Accredited investors would be wise to do this for a wide range of opportunities too – selecting the best opportunity in the process, rather than plumping for the first available opportunity.
Of course, this means that accredited investors should take a broad approach when seeking out opportunities, including evaluating equity crowdfunding platforms that are restricted to accredited investors. Doing so ensures that accredited investors don’t miss out on the very best startup investments.
For that reason, we’ve compiled the following handy list of equity crowdfunding platforms that focus on accredited investors who have the capital to participate in more exclusive funding rounds.
Top Equity Crowdfunding Platforms for Accredited Investors
Possibly one of the most well-known names on the US startup scene, AngelList acts as a broad platform for thousands of startups – offering talent acquisition, a community for startups as well as a prominent funding platform – AngelList Venture.
In line with its size and reputation, the company’s venture platform claims to have successfully funded 5,000 start-ups. Investors have several options ranging from a single-deal investment with a minimum of USD 1,000 through to a diversified fund, as well as a professional investment platform with an investment minimum of USD 500,000 per year.
Investment fees are a little more complex on AngelList Venture due to the syndicated nature of startup investments. However, investors have access to an incredibly broad range of startups, all tech-focused – ranging from B2B outfits to unique gadgets and healthcare solutions.
It’s easy to sign up with Crowdfunder – just log in with your LinkedIn or Facebook profile to join its community of 200,000 investors. The platform showcases a solid range of investment opportunities, many of which are tech-first, but there are a couple of interesting twists including homebuilding startups and CBD products.
Accredited investors both local and foreign can invest either directly with the company or via special purpose vehicles (SPVs) set up by Crowdfunder, it just depends on the offer. Investment minimums are around USD 5,000 to USD 25,000, the platform does not specify its fees for investors, but does state that it depends on whether it is a direct investment – or via an SPV.
Companies listing on Crowdfunder pay a monthly subscription fee, but no percentage fees. Foreign companies can list on Crowdfunder, but only if they meet local laws and obligations. Overall, the platform has raised over USD 180m for investors – it is clearly a serious contender.
Operating as a funding platform since 2005, EquityNet claims to offer one of the largest funding venues. One aspect of EquityNet you’ll note straight away is the large funding goals. Companies listed on EquityNet seek funding in the tens of millions of dollars, not hundreds of thousands.
Only accredited investors can invest in EquityNet. Foreign investors can invest too as long as they comply with local laws. Interested investors need to set up an investor profile, the platform’s software uses the completed profile to find appropriate investment opportunities.
Investments are made directly with the entrepreneur and EquityNet does not charge fees to investors. Companies listing on EquityNet pay a subscription fee but pay no charges on the amount raised.
EquityNet appears to be a broad church, with companies of all shapes and sizes looking for investment via the platform. You don’t need access to the platform to view current opportunities. At the time of writing, companies listed on EquityNet included CBD businesses, a range of tech companies and property and hotel investments.
With over USD 500m in successful investment rounds Fundable is clearly a serious player in the equity crowdfunding field. There’s a real high-tech feel to the startups listed on Fundable – think AI, data, and automation. As well as a range of tech hardware startups. The platform accepts listings from foreign companies as long as there is a US-registered presence.
Investors must self-certify as accredited when registering on Fundable. Sign-up requires a LinkedIn account, you also need to complete an investor profile.
Current opportunities are not visible unless you’re registered, but the site displays several recently funded companies. Fundable does not publish any fees for investors. Companies seeking investment pay a monthly listing fee but there are no fees on funds raised.
In return for the monthly subscription fee, Fundable acts as a central hub for fundraising – with a strong social media aspect. Companies with an existing product or a product close to fruition can also opt for “reward” crowdfunding – instead of equity, investors receive a product or special edition in return for their investment.
Looking to invest in cutting edge tech? FundersClub has more than 251 active companies in its portfolio, and listings are resolutely tech-first. Think SaaS, B2B solutions, and AI. Even the consumer goods companies on FundersClub are web or app-based. The full listing of FundersClub companies is available to view by the public.
The company acts as an investment fund. Accredited investors sign up, complete a profile and discuss their investment goals on a phone call. FundersClub offers a range of funds – some single-company, some containing several companies.
Fees are two-fold. A 1% to 30% carry fee plus annual management fees of 0.25% to 3%, depending on the fund. International investors can participate. The platform says it behaves like a typical venture capital firm in terms of fees for startups. With no percentage fees on funds raised, but the platform takes a share of profits.
Moscow based AltaClub markets itself as a co-investment platform. But it essentially comes down to equity crowdfunding as thousands of investors have already clubbed together to provide USD 150m in funding to over 200 startups.
Companies in the AltaClub fold include everything from logistics and mobility through to insurance and instant messaging platforms. Investors are charged an initial 10% fee on their investment to cover legal and administrative expenses, with a further 20% to 30% charged on any profits made.
The platform appears to accept international investors, and has a base in Russia, Israel and Austria. Investors have access to two portfolios: AltaIR Capital, with 180 startups and AltaClub, which contains 30 startups.
For many investors, investing is not just about making returns – it’s about doing good as well. The crowdfunding platform from Triodos Bank is focused on listings that can deliver change for the better. Think community platforms, renewable energy investments, and charity trusts. It’s clearly a specialist platform with less in terms of listing volume, but Triodos does display a clear track record.
The platform is open to investors in the UK who can self-certify as either high net worth or as a sophisticated investor. UK investors will be glad to know that Triodos offers investments via the innovative finance ISA, which holds tax benefits for many investors. Furthermore, Triodos does not charge fees to investors – all fees are charged to the fundraising organization.
Investors in iAngels can choose between directly investing in startups from as little as USD 10,000 per investment, or to opt for a managed and diversified investment account. You have to register to see available deals in iAngels, but it’s easy to do so. Just use your social media login, or register with your email address.
That said, previously funded companies are very much high tech in shape. Investors looking to invest in the latest technology trends are in the right place with iAngels. No food and beverage or property developers here. Instead, find everything from online marketplaces to FinTech, enterprise software, and the latest IoT applications.
To invest in Israel’s leading startups investors pay a 10% initial investment, alongside a 20% fee on investment returns. International investors can participate. On the flip side, the startups listing on iAngels do not pay percentage fees.
The statistics appear staggering for an equity crowdfunding platform. OurCrowd claims it has USD 1.3bn in committed funds across over 200 portfolio companies while representing investors and companies in 183 countries. It’s clearly a sizeable platform and visitors can get a taste of what’s on offer. Listings cover the high-tech remit, from novel healthcare solutions to cybersecurity, 3D printing, and mobility.
A full list of companies on OurCrowd is available to investors only. Accredited investors from anywhere on the globe can sign in via LinkedIn or by completing the website form. The platform offers startup equity investments via an SPV, but also multi-company funds for investors who prefer to diversify.
Investor funds are subject to three fees. A 4% once-off admin fee, annual management fees of 2% for the first four years. A carry fee on profits of 20% (up to five times the amount invested). In return, the platform says it reviews over 3,000 companies every year – selecting just 1% to 2% for the platform.