Crowdfunding has been around since 2008 with the launch of indiegogo, followed by Kickstarter which launched in 2009.
The early crowdfunding websites offered users free perks, and goods in exchange for funding their business venture. Most of these start-ups fizzled out after a few months but some of these were widely successful. One of the most notable success stories is the virtual reality headset Oculus which raised over $2.4 million on Kickstarter in a campaign that also caught the attention of Mark Zuckerberg. Shortly thereafter Oculus was acquired by Facebook for $3B. This was a monumental acquisition for a start-up with a great vision and zero profits.
Unfortunately, while the Facebook acquisition of Oculus was life changing for the Oculus team, the early backers of the project on Kickstarter received nothing, as no equity was offered for their initial backing of this project.
In 2012 the JOBS Act passed which opened the doors to crowdfunding websites offering early investors equity. Now investors from all over the world have the opportunity to support start-ups who are too small to access traditional venture funding.
These equity crowdfunding websites serve an important purpose as they are directly responsible for nurturing entrepreneurs while offering investment opportunities to investors who are not based in Silicon Valley.
#1 – SeedInvest
SeedInvest differentiates themselves by focusing on only having handpicked start-ups in upcoming industries. If you want to invest in the future of tech this is one of your best options. The industries that are often featured include:
- Augmented Reality
- 3d Printing
- Artificial Intelligence
- Space Technologies
They’ve helped over 150 companies raise capital, and the team is great at filtering out most companies that apply, to offer investors a curated list of world class companies to invest in.
#2 – Microventures
This website is different than the rest of this list as they offer two different focuses and they target accredited investors only.
The main focus is on Late Stage companies. Some of the late stage companies which have been featured include:
- Honest Company
This offers the easiest possible route to investing in phenomenal late stage companies which are often only a few years away from going IPO. The minimum investment is often in the $5000 to $50000 range, with the minimum depending on the interest level and the company.
They also offer investment opportunities in Early Stage companies with minimum investments in the $3000 to $5000 range. These companies are often in Fintech, robotics, 3-D printing, etc. The quality of these Early-Stage companies is high and is also handpicked.
#3 – WeFunder
They were responsible for helping to write the JOBS Act, and are one of the oldest companies in the crowdfunding space. There’s been some huge success stories on this website.
In April 2013 Zenefits raised at a $9M valuation, and only 2 years later in May 2015 they raised an additional $500M and were valued at $4.5B. This means if you had invested $10000, you would have received a cool return of $500,000 in a 2 year period.
WeFunder came out of the Y Combinator accelerator program, which is the most famous and successful accelerator program in the world. Some success stories from here include AirBNB, DropBox, Stripe, coinbase, etc.
The reason this is important is that Y Combinator companies support each other in what is a giant ecosystem. Many of the start-ups on WeFunder are Y Combinator graduates (such as Zenefits).
#4 – Fundable
One of the oldest platforms on this list, Fundable launched on May 22, 2012. Since then they have been offering access to a notable list of companies in every industry that you can conceive of. I’ve seen everything from solar power fields to revolutionary 3D printed prosthetics.
Fundable is a crowdfunding website which offers an extensive live of companies to choose from.
#5 – StartEngine
Over 90M has been raised by 265+ companies. They even recently successfully raised a$10M STO for themselves.
While this is a great platform they are not as selective as the rest of the equity crowdfunding websites on this list, so you do have to be more careful and perform extreme due diligence in who you invest in. That being said there are some gems to be found. Hackernoon recently successfully completed a $1.07M raise. I do find that they have too many companies listed, which makes perusing the list a bit exhausting.
These are the top 5 crowdfunding websites which I believe offer investors the best access to investment opportunities. You should always perform proper due diligence, and understand that Early Stage investing is high risk, and that you are more likely than not to lose access to all of your capital. You should also expect that it takes 7 to 10 years to earn a return on any of these investments.
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StartEngine Makes Inc Top 10 California Companies List
This week, StartEngine CrowdFunding raised eyebrows across the entire blockchain sector after making the 2020 Inc. 5000 Series. The list shows the top 10 fastest growing companies in California over a two year period. The firm secured the tenth spot after showing a two-year growth of 1,418%. Consequently, this news demonstrates how fast the blockchain crowdfunding sector expanded over the last two years.
Importantly, StartEngine is the largest investment crowdfunding platform in the US. The platform has held a key position in the US market since its founding in 2014. StartEngine developers entered the market with the goal to democratize access to capital. Since that time, the firm raised over $100M for over 275 companies.
2020 Inc. 5000 Series
StartEngine making Top 10 on Inc’s 2020 Inc. 5000 Series is a huge deal. For one, this report is Inc.’s first annual ranking of America’s top businesses in California. Additionally, the firm needed to meet strict criteria to even receive consideration. Just to be eligible, firms must be U.S.-based, privately held, for-profit, and independent. Importantly, the actual ranking is according to the percentage of revenue growth experienced between 2016 to 2018.
A quick look at StartEngine’s growth and you can see why the firm was chosen. A recent report highlighted the developments in detail. The platform saw a 67% increase in funds invested. In 2019 alone, StartEngine saw total investments equaling $43,718,660. These funds come from 55,577 investments made on the platform, which is an increase of 99.5% over 2018.
Of all the statistics listed in the report, one piece of data really sums up the impact of the platform so far. The platform had 19 firms raise more than $1M in 2019. This number is even more impressive when you consider that the platform launched 145 STOs that year in total.
How StartEngine Works
Much of StartEngine success can be attributed to the firm’s inclusive approach to the market. Literally, anyone can become an angel investor using the platform. You can invest in startups for as little as $100. Consequently, this strategy lowers the entry barriers for new funding to enter the market. As such, it creates more liquidity.
How to Use Start Engine to Fund Your Company
StartEngine features a very easy interface. The platform allows you to create your investment pitch in the form of a web page. Here, investors can become familiar with your firm. Your concept, pitch, and webpage are how you raise capital on the platform. Additionally, businesses gain access to a strong community of like-minded entrepreneurs when they join.
StartEngine utilizes a number of different types of crowdfunding techniques to accomplish its task. In most instances, the firm files Reg CF and Reg A+ funding rounds. In certain scenarios, such as side-by-side offerings, StartEngine will also utilize Reg D funding.
Congrats and Well Deserved StartEngine
It would be hard to think of a team that deserves to make Inc’s 5000 series more than StartEngine. These developers continue to push the envelope in terms of technological and financial developments. You can expect to see this recognition provide StartEngine with even more momentum moving forward.
Genobank to Bring Privacy to DNA Testing with Blockchain
We live in an age of connectivity. Technology has enabled us to stay in constant contact with the world, in real time. This connectivity has transcended communication, however, and changed the way we view our connectedness with others.
One company, by the name of Genobank, provides its clients with the ability to discover their origins, and connection with others. This is done through the examination of DNA.
What sets Genobank apart from the competition is their approach towards data ownership/privacy.
Deoxyribonucleic Acid (DNA) refers to the molecules held by all humans, which contain their unique genetic coding. By examining this code, we can learn about an individual’s ancestry, predispositions to mental and physical ailments, and more.
DNA first became popularized, and a household term, when it began being used as a means of identification – particularly in crime scenes.
In an effort to continue developing their product/services, and carve out their place in the industry, Genobank is currently hosting a crowdfunding campaign through equity investing platform, Republic.
This event, which has seen Genobank bring in roughly 175% of their minimum target, at the time of writing, is scheduled to remain live until March 14, 2020.
Investors partaking in the event will be compensated with a ‘Crowd Simple Agreement for Future Equity (Crowd SAFE)’. This is a form of agreement created by Republic, better structured towards use in crowdfunding campaigns than a traditional SAFE.
Essentially, those that hold a SAFE do not immediately acquire equity in the company. Transfer of equity only occurs when certain pre-set parameters are met, with regards to future progress/developments.
Our understanding of the insights, which the examination of our DNA can offer us, has led to a boom in companies such as Ancestry Health, 23andMe, and more. The data generated from services such as these represent the most important and intimate data of all – it represents you.
Unfortunately, we have seen time after time, in recent years, that data is abused, stolen, and generally misused. Naturally, this has resulted in large movements advocating for better privacy practices surrounding data generation and use.
Empowerment over your own data is the driving force behind Genobank. The company notes that they specifically make use of blockchain technologies to anonymize usage of their platform – allowing for clients to discover more about themselves, while retaining power over their most intimate data.
The company states,
“We use blockchain at its full potential by registering your DNA data as a unique digital asset also known as a non-fungible-token (NFT). This grants you exclusive ownership over it.”
For Better or Worse
While a lack of privacy may justifiably scare many, there are instances where access to DNA databases have proven beyond valuable.
A perfect example of this occurred in 2018, when one of the United States most infamous serial killers was identified and captured. Known as the ‘Golden State Killer’, Joseph DeAngelo was identified when a relative of his used a DNA service. This data was then able to be cross examined with DNA found at his crime scenes – providing authorities with enough information to deduce who their killer was.
While this particular instance had a positive outcome, it raises questions surrounding access to such data. If individuals who have never even used such a service can now be identified and tracked down, are any of us truly safe?
While you may not be able to control the actions of others, you can control your own data. Genobank plays to this, stating,
“Since there is only one private DNA Wallet per user, third parties will never have access to your DNA data without your explicit consent (digital signature). Only you can grant/revoke access and modify/delete biodata & records. YOU are in control!”
While Genobank has various plans for the usage of funds raised through their crowdfunding campaign, one of their more interesting plans is the launch of DNA kit ATMs.
These kiosks would deliver exactly what their name implies – a kit allowing for the analyzing of one’s DNA. The goal of which is to provide these services to everyone, as no personal information is required.
Genobank indicates that these ATMs represent one of their two projected revenue streams. The other will be a ‘white-label’ version of their kits, which is sold to health clinics, hospitals, etc.
Founded in 2014, Genobank maintains headquarters in Palo Alto, California. The company specializes in developing solutions which allow for analyzing ones DNA in a privacy centric manner.
CEO, Daniel Uribe, currently oversees company operations.
Equity Crowdfunding in North America
Since roughly 2009, crowdfunding in North America has grown steadily. The continent, however, is a large place, with clear discrepancies in regulatory approaches between Canada and the United States. The result is that these variances have led to U.S. crowdfunding becoming a runaway market, relative to Canada.
What is it?
As the name implies, crowdfunding is a means of raising capital from a large pool of investors/donators, rather than select venture capitalists.
Crowdfunding started off simple enough – give a wider audience the chance to help young companies out of the gate. However, when first capturing the attention of many, securities laws prohibited issuers from compensating non-accredited investors/participants with equity in their companies; Meaning that participants weren’t really investors at all, but simply contributing to the growth of a company with the promise of potentially getting a product one day.
Fast forward to 2012, and a group of companies surrounding the industry successfully worked with regulatory bodies in the U.S. to amend existing laws. These efforts eventually resulted in the formation of, what is known as, the ‘Jumpstart Our Businesses Act’ (JOBs Act).
What the JOBs Act did was open the gates for the general public to gain exposure to true investment opportunities. Until it was enacted, securities were only able to be sold and distributed to accredited investors.
The goal of this was primarily to help young companies, as one of the largest obstacles a start-up will face is attaining funding (regardless of potential) for the development of their products and services.
Previously, to attain said funding, regulators required that a detailed prospectus be filed and approved for the sale of any asset deemed a security. This is a cost prohibitive, and time consuming, undertaking – meaning it is most likely not feasible for a small start-up. While this undertaking may be inconsequential for a company raising millions upon millions of dollars, start-ups looking for modest amounts may find it a steeper hill to climb.
Naturally, this new act came with restrictions. In an effort to maintain appropriate levels of investor protection, safeguards were put into place. The following are only a few examples of these:
- Capital generation events must be moderated by registered broker/dealers
- Net-worth based investment limits
- Generation caps on crowdfunding hosts
While this may sound restrictive, what this did was open the doors, ushering in a time where investment opportunities were no longer restricted to those that were already wealthy.
That brings us to the United States’ northern counterpart – Canada. While crowdfunding exists in Canada, the flexibility and freedom for issuers/investors is simply not the same as it is in the U.S – despite being years removed from the advent of modern crowdfunding.
The main issue is the fact that there is no nationwide ‘rulebook’, similar to the JOBs Act, in Canada. Each of the various provinces and territories may vary slightly in the structuring of their regulations, making it difficult to comply with all at once.
This segregation among Canadian regulators, means that issuers are often limited in their investor pool, as they are not necessarily eligible to host their offering in all regions – somewhat defeating the purpose of crowdfunding to begin with.
However, with the moves taken by the U.S. government over the past decade widely viewed as a success, the Canadian government has indeed taken notice. It was announced in early 2019 that they would be reviewing their policies; the goal of which is to eliminate the current segregation among regulators, by creating their own variant of the JOBs Act.
With the Supreme Court of Canada opening the door to the potential national securities regulator in 2018, and plans to develop a national crowdfunding rulebook announced in 2019, the great white north looks primed to play catch-up.
With all of this talk about crowdfunding, many in the U.S. may be wondering where access to such investment opportunities are offered. In an effort to answer these questions, securities.io’s very own, Antoine Tardif, recently penned an opinion article discussing his favourite portals offering equity based opportunities.
For those in Canada interested in equity crowdfunding, the following are a few of the more notable portals active today.
In Other News
Always striving to adapt and improve with the times, the Securities and Exchange Commission (SEC) has recently announced a proposal which would see access to more traditional investment opportunities become even easier for investors.
This proposal is based upon the restructuring of what defines an accredited investor. With the vast majority of investment opportunities restricted to those fitting the bill, broadening the definition, to reflect the modern world, will ideally democratize investing to an extent.