Big things are happening in the private equity world. The JOBS Act, signed into law in April 2012, eased restrictions on small companies looking to raise capital. For accredited investors right now, and soon with non-accredited investors, these changes are creating a new pool of exciting opportunities.
Empowering Startup Investors
One of the more significant revisions to securities regulation allows accredited investors to stake as little as $1,000 and non-accredited investors as little as $100 into startup companies through what is referred to as equity crowdfunding.
So what is equity crowdfunding? If you’re familiar with crowdfunding sites such as Kickstarter, it’s similar to those reward-based portals. But instead of rewards like T-shirts and tickets, backers receive actual shares in the business.
If the company becomes profitable, these shares would entitle you to the company’s future cash distributions. Or if the company goes on to be acquired or does an initial public offering (IPO), early investors would see their shares go up dramatically as the startup’s market value climbs.
2016 will be a game-changing year for anyone who likes investing early. This is the year that equity crowdfunding launches in the U.S. Through Regulation A+ and Title 3 legislation, it’s finally legal for everyone to invest in startups, not just accredited investors.
Early Investing and its twice-weekly e-letter offer comprehensive research into startups and the venture capital world, with commentary on current events and advice on what to look for in promising startups and their founders.
Studies show that when it comes to private equity, the more time an investor puts into due diligence, the bigger the reward. The chart to the right illustrates this point clearly…
The green bars refer to investors who put in more than 20 hours of due diligence; the blue bars fewer than 20 hours. As you can see, investors who put 20 hours or more saw far greater returns – 5.9 times their stake on average compared to 1.1 times for those who spent less than 20 hours.
We understand the average retail investor simply does not have that much time to spend on research.
That’s where we come in.
Our team of research analysts employs a wide variety of tools, including Bloomberg’s Private Equity Research platform. Our proprietary system of rating companies encompasses dozens of quantifiable variables together with additional qualitative categories.
Many of our variables are highly unusual and cannot be divulged here. But we’ll explore in depth on our site and in our communications with readers the thinking that goes into how we rate startups.
Adam Sharp is the Founder of Early Investing, a new website and e-letter focused on equity crowdfunding. He is an active investor in more than 20 startups, including Navdy, Upcounsel, Cabify, Faraday Bikes, Addy and Respondly. A former financial advisor, he also has extensive experience with Internet marketing and financial writing. Adam has worked as a marketing consultant for sites including chess.com and catalogs.com. He has built three profitable web businesses.
I made my chops as an entrepreneur and investor with over 30 years of experience at building wealth for myself and others.
I graduated from the London School of Economics a year after the bicentennial. By the way, this is the same school that produced 34 heads of state including John F. Kennedy… and another 18 Nobel Laureates…
The truth is, my education barely scratched the surface of how the real world worked.
But my diploma did help put me on the “fast track” in Washington D.C. There I worked with the U.S Department of Commerce, the CIA, and a K Street firm that monitored World Bank activities.
But I soon grew tired of D.C. politics and pandering. So I took a chance and became an international entrepreneur.
And that’s when I learned how money is really made.
I consulted on infrastructure in Indonesia… helped develop firefighting technology in China… optimized oil tanker production off the coast of Sumatra… consulted on port development in Russia… and became a power plant technology expert in Taiwan.
By the time I returned to the United States, I was sought out by well–known companies like Dow Chemical, Lockheed Martin and Bethlehem Steel to increase their profits.
I was also brought on as the economic advisor to the governor of Maryland, Governor William Donald Schaefer, the best governor Maryland ever had.
From there, I joined an investment advisory service based in Florida. I used my industry knowledge and experience working with American and overseas companies to delve into the financial records of hundreds of firms. I then recommended the ones with the best fundamentals and value.
I also tracked the U.S. and global economies and put some of my thoughts down on paper.
One of the things I said was that private equity would replace bank lending. I was proven correct. The Cleveland Fed reported that small-business lending dropped 78% from the summer of 2007 to the end of 2012. Little did I know when I made that comment back on Oct. 7, 2011, that it would lead me to a place where I would be encouraging individual investors to make up the difference by investing in promising young companies.
Independent and Unbiased
Trust and integrity are important to us. In order to maintain objectivity in our research, we do not accept any form of payment from companies issuing shares. Our coverage is 100% independent.