5 Tips for Everyday Investors Participating in Equity Crowdfunding
Equity Crowdfunding under Title III of the JOBS Act is coming to fruition next week. Many questions remain and a steep learning curve is inevitable for both investors and entrepreneurs. Under the new guidelines anyone can participate in equity crowdfunding instead of just accredited investors who meet sufficient levels of wealth. Now anyone can become a startup investor.
Amro Albanna, CEO of ieCrowd, a startup with six years of experience and over 17 Million dollars already raised, has tips to help the everyday investor make smart decisions if they decide to jump in and participate in equity crowdfunding. ieCrowd currently has two products coming to market – Kite natural mosquito repellant that blocks mosquito CO2 receptors from detecting human blood and the Nuuma air pollution sensor to create a digital nose in smartphones.
“On May 16th and beyond, a large number of startup companies are going to try to raise money using equity crowdfunding,” said Albanna. “Having been in this business for several years now, I can offer the following attributes the everyday investor should look for as they choose a company to fund.”
Already raised capital. Most of these companies are going to be raising money for the first time. If you can find one that has already been in business for a while and raised capital, you can rest assured they have already learned some of the hard lessons of starting a business.
Has a Board of Directors. Typically most startups begin as a one or two person show. Single entrepreneurs can have a one track mind and it isn’t always moving in the right direction. Companies with a solid Board of Directors can demonstrate that professionals have done their due diligence and are on board to help with strategic direction.
Knows how to deal with investors. There is going to be a steep learning curve with equity crowdfunding, both for entrepreneurs and investors. Any company that already has investors knows how to keep them informed and meet their expectations.
Diversifies its offerings. Investors can diversify by investing in several different companies, or by investing in one company that has products and interests in several different markets. Initially the risk for equity crowdfunding is fairly high but the best bet for success is diversification.
Has an exit plan. A startup that already has plans for an IPO or a purchase has more potential for a successful exit where everyone makes money.
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