The days of seeing handsome returns from public technology companies seem to be on the decline, as more new technology giants continue to stay private. Because of that, the biggest returns seem to be trending towards early investors in private high-growth companies. Wish you would have invested? Well, you probably would not have been able to even if you tried.
Before equity crowdfunding launched in May 2016, you were required to be an accredited investor or have an income of $200,000 as an individual or $300,000 joint or net worth of $1,000,000 to be able to invest in private companies. Title III of the Jobs Act extended this qualification to unaccredited investors, marking democratized access for all Americans to participate in the same investment opportunities angel investors and venture capital firms have been reaping the benefits of for years. While this opportunity seems like a massive step forward for American investors and small businesses, the question is why have some seasoned tech investors tried to dissuade the general public from this asset class?
Investing In Startups Is Hard
The digital era of 15 second videos and 5 seconds snaps have led many of us to be disillusioned by the framing effect. Instagram, Facebook, and Snapchat show us things at face value, but rarely illustrate the behind-the-scenes of how people rise to success. This same principle can be translated into the startup investment world. If a new investor searched for startup investing online, they would see stories about how an early investment in companies like Apple, Oculus, or Amazon turned many people into a millionaires. What you would likely not see is the deeper story of those same failed investments that probably challenged their will to invest in startups at all.
While rustling their honeypot may be one contributor to their lack of enthusiasm for Title III, the seasoned professionals see what many impressionable new investors do not: time, risk, and the higher probability of failure that go into landing a successful investment. But don’t let that discourage you, as it is usually the harder things in life that produce some of the best results.
In the coming weeks, we will dive into a list of guidelines that some of the top investors use when crafting their startup investment strategy. These guidelines will help prepare you for this new investment asset class, and enable you to:
- make educated investment decisions
- learn how to spot trends in the current equity crowdfunding market
- See what goes into creating a startup portfolio.
- While other platforms offer automated investment tools, we highly recommend that you make your own decisions. As we learned in one of our previous posts, one of the worst decisions you can make is relying on others to create your success
For weekly updates on our investor series, you can subscribe in the box above or create an account at FlashFunders. If you are still waiting to make the leap into startup investing, you can always bookmark this page and come back for weekly updates on the topics below.