Lately, the news has been a dark place of war updates, gun violence, inflation pain, and stock market mayhem. So, for the next five minutes, let’s turn our sites to something positive.
With the passing of the JOBS Act in 2012, the private investment landscape changed forever.
Now, everyday Americans can do more than just imagine investing early in companies that become household names like Uber, Amazon, Airbnb, or Tesla. They can actually do it and put themselves in line for incredible returns.
Of course, not everyone welcomed this new landscape. Venture capitalists had been fattening themselves up for years, as they monopolized the “food source.”
So naturally, they were skeptical at best, hostile at worst.
There was a belief that the investment opportunities hosted on these equity crowdfunding platforms were somehow lesser than.
“The only reason this company turned to the crowd is because no venture capital firms were interested,” was the word around the water coolers.
This became a common refrain from detractors of the democratization of angel investing.
VCs’ Lost Appetite a Great Opportunity for Crowdfunding
Despite their resistance to change (maybe even partly because of it), the VC landscape has been in a veritable feeding frenzy these last few years. A new startup with nothing more than an idea was simply blood in the water.
Unfortunately, this bite-first-ask-questions-later approach led to many overvalued startups.
Now, with the cost of borrowing continuing to rise, inflation persisting, and threats of a recession looming on the horizon, these VC firms have quickly lost their appetite.
That has left some startups floating in the water.
But, without capital, the vast majority of these early-stage companies will drown. To survive and grow, they must find other channels to further their runway.
That’s one of the biggest reason critics of equity crowdfunding rapidly changed their tune. In fact, in today’s landscape, equity crowdfunding is the place to be in the angel investing world – for both founders and investors.
In fact, some VC firms are actively recommending startups turn to the crowd for capital.
“A few years ago, VCs wouldn’t care about or touch companies using crowdfunding, but a lot has changed,” Wefunder founder and CEO Nick Tommarello recently told TechCrunch. “It’s hard to separate out how much of the growth is due to the increasing prestige of doing community rounds and how much is due to founders needing to extend their runway.”
The increasing prestige of doing community rounds.
Sounds fancy, but it’s real.
More and more founders are realizing that the prospect of raising money from the crowd is not just viable compared to VCs, but favorable.
Rather than answering to a VC firm and potentially giving away board seats, thereby subjecting operations to outside influence, they can secure capital while staying on their charted path.
These shifting tides are a big reason why the first five months of 2022 saw $215 million of investment through equity crowdfunding. That’s 7.5% more than was spent through the first five months of 2021, and experts expect this trend to continue.
This is the New Normal of Angel Investing
When times are tough, it’s a lot easier to write a check for $500 than it is for $500,000.
That is the inherent advantage for equity crowdfunding in this current macroeconomic landscape. It’s not important to founders whether their bucket gets filled in one heavy pour or a bunch of gradual additions. All that matters is that it gets filled.
So, as more founders come around to the new normal of angel investing, everyday investors are granted the opportunity of a lifetime.
There figure to be more quality investment opportunities than ever in the equity crowdfunding space. Better yet, this shift isn’t going to be temporary.
However, with the increased volume of deals available to investors, you must do even more due diligence before investing. More deals mean more good AND more bad ones to pick from.
Thankfully, the Angels & Entrepreneurs Network exists specifically for that reason.
And with the help of our team of financial experts, researchers, and legal team, we deliver you a steady flow of the best opportunities equity crowdfunding has to offer.
Not every startup will become Uber or Tesla, but if the next unicorn opens a Reg CF campaign, you better believe A+E subscribers are going to hear about it.
Because providing our members with the best return on investment is our one and only mission.
So don’t miss any more opportunities. In this current landscape, the sooner you’re plugged in, the better.
The A+E Network Deal Team