In a constantly changing world, startups that address challenges and devise innovative solutions to current global problems are rising stars. Because startups introduce smarter, better, or faster ways of doing things, they can be in the limelight in times of crisis. Eighty Israeli MedTech companies took on the fight with Covid, for instance. And despite a global pandemic that hit economies hard, over 9 billion of investment poured into Israel in 2020. For a small country with a population of slightly over 9 million, the fact that it houses more than 54 unicorns (at the last counting) is quite a feat.
Understandably, many people want to get in on the action but it’s only in the last few years that startup investing has been open to a wide pool of potential investors – and it’s all thanks to new legislation regarding equity crowdfunding. If you were never content standing on the sidelines watching others get involved, now is the ideal time to hop on the startup investment train – no matter how much money you want to put in.
A privileged arena
Until 2015 the criteria to these investment was restricted and only a few were able to fit and get access.If you didn’t fit the bill, you had no chance to invest in innovative startups through this channel. Fortunately, that is no longer the case.
Since June 16, 2015, equity crowdfunding (under Regulation D) was made available to “accredited investors.” This group included people with a net worth of more than $1 million or an income greater than $200,00 per year ($300,000 for married couples). Accredited investors could also be institutions such as banks and pension funds.
Leveling the investment field
A series of recent laws have leveled the investment field. On May 16, 2016, Title III of the 2012 JOBS Act’s Regulation CF was introduced. This change in legislation allowed investors to participate in equity crowdfunding (also called “Regulation Crowdfunding”) initiatives no matter their net worth or income. It also made it possible for companies to sell shares without going public and lightened the registration requirements for equity crowdfunding platforms.
The proof of these changes lies, as they say, in the pudding, Since the new rules went into effect in 2016, more than $300
million in investment has poured into equity regulation crowdfunding.
A new kind of beast
Say the word “crowdfunding” and most people think of platforms like Kickstarter or Indiegogo – probably because millions of people give money away on these types of crowdfunding platforms every year. But equity crowdfunding is a different type of beast.
Any money you put into a Kickstarter campaign is not a typical investment for which you can expect monetary returns. Instead, you are simply paying for early access to a product. While you won’t get your original investment back, you will receive the product you were interested in buying, provided the company is a success. Most people invest small amounts in Kickstarter projects, usually under $5,000.
Equity crowdfunding, on the other hand, is a true investment as we know it. Your money acquires you shares or interests in a real business for which you can expect monetary returns if the business succeeds. As equity crowdfunding investors, you get an opportunity to grow your original investment or in some cases, receive regular dividends.
The massive upside of equity crowdfunding
Because the rules have changed, equity crowdfunding through the Internet is open to a much wider pool of investors than ever before. Even if you have a small sum to invest, it’s possible to get in on some startup action or lend your financial support to a company that’s doing something you are passionate about.
And the benefits flow both ways. The startups themselves also gain access to a much wider group of potential investors than they might otherwise have been able to tap into. This newfound diversity of the investor pool can be especially helpful for enterprises that are, for some reason, eschewed by regular venture capitalists, angel investors, or traditional financial institutions.
Play it safe
As with any investment, there is risk associated with private placement crowdfunded investments which can deter many people. It’s always up to you, the investor, to perform research and do your due diligence. Of course, if you’re investing through a reputable platform like Investination, much of the research has been done for you as only vetted companies are offered for public investment.
Another level of protection comes from the SEC (U.S. Securities and Exchange Commission) itself, which limits how much you can invest during any 12-month period. The permitted amount is calculated based on your net worth and annual income using a sliding scale.
The time is now
Thousands of innovative new companies are born every day across the world – especially in Israel. You can get a piece of the action by making an investment through an equity crowdfunding platform like InvestiNation. This is your open invitation to invest safely and securely in the future. The time is now.
