Public Equity And You
Internet based trading platforms have taken the investing world by storm. Thanks to apps like Robinhood and WeBull introducing zero-commission trades and accessible user interfaces, it's now possible for everyone to own a piece of a publicly traded company and benefit from that company's growth. However, in this age of democratized finance, there has been one thing that has eluded the everyday investor: startups.
Until recently, the world of startups has been dominated by venture capital groups. These almost mythical entities have been the driving force for the startup boom in tech and finance. These VC funds offer startup capital to fledgling businesses that are seen as disruptors in their sector with large potential for growth. This capital is given to the startup at the cost of equity in the company. This is a very high-risk form of investing, but it comes with high returns should the company in question succeed.
The problem here for ordinary investors is that between the launch of a startup and its IPO, all its profits land in the pockets of VC funds. This system essentially creates a period of "dead air" for everyday investors.
This is where StartEngine comes in. StartEngine is a new kind of platform that utilizes the public to raise capital for startups, allowing the everyday investor to own a piece of early stage companies and potentially profit in what would be a period of growth normally reserved for large investment firms. Yes, these investments are very high risk – but StartEngine allows people to invest as low as $200 in these startups, which helps make these investments worthwhile.
In 2012, with the passage of the JOBS Act, the SEC now allows for the creation and regulation of crowdfunded equity groups. This style of investing creates a market where startups can sell their vision to the public and generate the capital they need to thrive.
How it works: provided they meet rigorous standards for listing, startups can list themselves to the public through a crowdfunding platform. This allows individual investors to acquire equity in the company by purchasing shares.
The difference between equity crowdfunding platforms and traditional crowdfunding platforms is that while platforms like Kickstarter and Indiegogo offer products in exchange for publicly accumulated capital, crowd funded equity groups offer you the chance to buy in on the ground floor of a startup and get returns on your investment.
Equity crowdfunding platforms are bound to shake things up in the worlds of investing and startups. As it stands, the business is growing at break-neck speeds. StartEngine has already raised over $450 million for over 500 different companies, all the while maintaining its own year-over-year growth of over 190%, jumping from $4.3M in revenue in 2019 to over $12.5M in 2020. To demonstrate the value of equity crowdfunding, StartEngine even raises for itself using this method. They've been able to raise over $40M to fuel their growth, all without any venture capital investments. All things considered, equity crowdfunding could be an exciting new chapter in your investment portfolio.