Where would I go to invest in startups or emerging companies?
The first question you need to ask is “What country are you in?” and the second is “Are you an Accredited Investor by that country’s standards?”
If we’re talking about the US and you are NOT at the Accredited level ($1 million in investable assets, or $200,000 annual income), then for the moment you are actually not allowed to invest in privately held startups (emerging publiccompanies, of course, you can buy on the stock market like everyone else.)
This will be changing next year, however, because of a new law called the JOBS Act of 2012, which establishes a new, limited type of Crowdfunding for small companies and non-Accredited investors. Once the U.S. Securities and Exchange Commission gets around to writing and releasing the rules for this program (aaaaaaaaaaaaany day now), you will be able to go online to one of many new ‘crowd funding portals’, where startups looking for equity investments will list themselves (similar to the way project crowd funding sites like Kickstarter work today.) Subject to specific rules and dollar limits (10% of your income in aggregate for all investments per year, etc.) you will be able to invest online, just as easily as buying books from Amazon
On the other hand, if you already are an Accredited investor, you can legally invest in startups today without much hassle, putting in as much or as little as you and the company agree on (the average angel investment per company is about $25,000.)
The challenge with this, however, is that while you are allowed to invest, right now the company is not allowed to tell you that it’s raising money! That’s why one of the best options for you today is to join a local angel investor group, where you will work collegially with 25-250 other investors to hear pitches from companies, do your due diligence homework, and then—if you are interested—pool your money with the others to make meaningful investments.
Most angel groups today are connected on a single Internet platform called Gust(of which I happen to be the CEO), which allows their members to easily collaborate both internally and externally on finding and executing investments. As the primary international platform for angel investing, Gust is also used by over 200,000 startups to manage their investor relations, making the industry increasingly efficient.
If you want to strike out on your own, though, there are several online platforms that have recently begun to offer selections of curated startups to Accredited investors. While this has been a bit problematic given the current rules, as of late September 2013 (also thanks to the recent JOBS Act) it will finally be legal for companies to publicly announce that they’re raising money (technically this is called General Solicitation).
Some sites are already offering individual investments to Accredited investors, and hundreds more are gearing up to launch in the coming months. Among the better known ones already in business are AngelList, Funder’s Club, SecondMarket,SeedInvest, Realty Mogul, and Bolstr.
So, the bottom line is that this is a great time to start thinking about investing in high growth startup companies! Whether you’re an Accredited angel investor or a non-accredited crowd funder; whether you want to invest with a group or on your own; whether you want to meet founders in person or do everything online; whether you want to invest $1,000 or $1,000,000; whether you want to lead an investment syndicate or participate along with other investors; there are—or shortly will be—groups, platforms and services that will be delighted to help you get into the game!
*original post can be found on Quora @ http://www.quora.com/David-S-Rose/answers *
This article is intended for informational purposes only, and doesn't constitute tax, accounting, or legal advice. Everyone's situation is different! For advice in light of your unique circumstances, consult a tax advisor, accountant, or lawyer.