The numerous benefits of equity crowdfunding make it an incredibly exciting industry compared to traditional investment opportunities. Equity crowdfunding is democratising investing, making the investment in startups and early-stage businesses accessible to all whilst simultaneously offering an alternative route to raise capital for these businesses looking to scale and grow. Like a lot of the companies raising capital, equity crowdfunding is an innovative process looking to disrupt an industry long overdue for a shake-up. Here are some of its top benefits.
Get behind exciting, brave and innovative start-ups
Equity crowdfunding gives investors the ability to invest in some of the most exciting companies that are challenging the status quo and helping to bring innovation to the industry. Investors can back companies they believe in, and as shareholders stand to profit if the company pays dividends or an exit event occurs such as listing on the ASX or NZX.
Minimal barriers to entry
Part of democratising investment is not only the access to these innovative early-stage businesses but also the low entry price. Each offer sets its own minimum investment amount however it usually starts from around $250. This means, unlike other investment routes, it’s highly accessible to everyone. Without hefty transaction fees (we charge nothing to invest) or high minimum investment thresholds, equity crowdfunding provides an excellent opportunity to start your investment journey or diversify your portfolio.
Anyone can invest
Equity crowdfunding enables everyday investors to access unique and previously inaccessible investment opportunities. With the attractive area of private company finance traditionally locked away for wealthy and highly connected investors, recent regulation means that any resident over 18 can now get involved.
Diversify your portfolio
Diversification means investing in different assets in order to spread the risk. Equity crowdfunding provides an easy and powerful way to diversify your portfolio. Within equity crowdfunding, there is no limit on the number of companies you can invest in. Combined with low minimum investment levels and no hidden fees, this means investors can easily diversify their holdings across industries and stages. Private company investments also provide a great way to diversify your overall portfolio. Since they are not traded on a public stock exchange, they are often less correlated with the ups and downs of the market as other shares are and whilst riskier, can also veil higher returns.
Before launch, a company has to go through a rigorous due diligence process in order to be accepted by the platform. As an intermediary, there are certain due diligence checks we are legally required to undertake. On top of that, the Equitise analyst team aims to select companies that have the highest chance of success for potential investors by spending weeks to months looking at the financials, team, business model, offer specifics and future plans. Only a fraction of the thousands of companies we analyse each year end up conducting campaigns on the platform. Nonetheless, despite our best efforts, we can’t predict the future with early-stage companies failing for various reasons. Make sure you consider the offer document and risk warning before making your investment decision.
Potential for high returns
Similar to venture capital, investing in private companies through equity crowdfunding can carry greater risk, but it can also bring greater returns if the business is successful and provides an exit opportunity. Getting in early means investors can potentially experience significant gains as the company grows (imagine investing in Apple or Google from the start!), however can similarly face a higher chance of losing part or all of their investment if the company fails. For more information on returns, click here.