What is an Alternative Investment?
An alternative investment is an asset that is not conventional, as opposed to stocks and bonds. Within alternatives private equity and venture capital (VC) has evolved into one of the most significant asset classes due to high returns. Startup companies are achieving billion dollar valuations at faster and faster rates, netting investors returns far outpacing traditional assets.
Alternative Investments historically have been used for diversification and hedging risk. Alternative Investments typically have different costs or fee structures as well as tax considerations. Mercury Capital has a great set of videos helping explain different classes of alternatives.
What has changed and what is the Opportunity?
Investing in alternatives is heavily regulated and up until recently was limited only to wealthy individuals. It was necessary to fit the SEC's bar for wealth. If you fit their requirements you can become an accredited investor.
These regulations are changing. Typically investors in these alternatives have been individual angel investors, fund managers of venture capital, private equity, and hedge funds.
New forms of access to these risky, and therefore rewarding assets are arising through these changing regulations. Platforms providing access to equity and initial coin offerings continue to be built for those willing to go on the entrepreneurial adventure. The market is ripe for someone with their eye fixed on tomorrow, like yourself.
What is Equity Crowdfunding?
Regulation Equity Crowdfunding refers to public investors that are not accredited getting a slice of the equity in businesses raising money in exchange for cash through an online platform. The major difference between traditional crowdfunding that is rewards based and equity based crowdfunding is the potential for large returns on your investment. We wrote an article that goes into more detail on the differences between Equity and rewards based crowdfunding.
FundWisdom is an equity crowdfunding information engine. We collect, analyze and aggregate current and historical equity crowdfunding deals from top crowdfunding Websites like AngelList, CrowdFunder, WeFunder, and more. We make your investment decision process more efficient.
This enables investors to simply source crowdfunding deals that meet specific investment criteria and helps startups with finding the right platform to list on. Investors are able to increase the likelihood of attractive returns, while entrepreneurs seeking capital are able increase the likelihood of meeting funding targets.
How do you buy shares in a startup before the Initial Public Offering (IPO)?
Due to the level of regulation and legal and accounting challenges with this type of investment, investing portals have been built to make the purchase and management process much easier. For detail on how to buy we wrote this article. For an understanding of comparing early stage investing to IPOs we wrote this article.
How do Investors using Funding Portals Make Money?
The draw to early stage investments and innovative projects, companies, and asset types like startups, cryptocurrency, and real estate is the high risk and high reward. Capital appreciation on these offerings are typically much higher than public company equity or stock. Often the return seen or money made is multiples 2, 3 even 100 times the initial investment. A majority of time companies in their early years do not make it and the investment is lost. The period of time to hold the investment is typically much longer than public equities as well. If you are willing to wait and take the risk the rewards can be bountiful. For more detail on Why to invest we wrote this article. We also look to help you find return data with our Market Insights section.
What are the regulations that govern who can invest?
There are laws and restrictions, based upon wealth requirements, to invest in early stage high growth companies. We are based in the United States so much of our focus is on platforms, investors, and regulations that serve this regional market.
Historically the only way to invest in these offerings was to have a connection to the founders, through the "friends and family round." That has recently changed with several regulations like the JOBS Act Title III. The regulated equity crowdfunding sites or platforms bring everyone access, while several portals still cater to the high net worth, accredited investors. At Fund Wisdom we believe that open access to this type of investment is beneficial for society.
What is the best website to start investing?
We wrote this article to showcase a rank of portals. In it we also share the best way to chose which portal is right for you.