One of my favorite entrepreneur TV series is Shark Tank. If you're not familiar, it's a show where entrepreneurs and startup companies present their product or service before some of the world's most well-known entrepreneurs in efforts of getting them to invest in their company.
Entrepreneurs such as Mark Cuban, Daymond John, Kevin O'Leary, Barbara Corcoran, Lori Greiner, and Robert Herjavec, along with other featured investors, analyze each deal before investing.
Have you ever wondered how to invest in small businesses just like Shark Tank? You can! The sad thing is most people aren't aware of how or where to start. These seven platforms I discuss below are for investors who are seeking out investments in small businesses of all kinds with the ability to invest as little as just $100.
7 Ways To Invest In Small Businesses
Traditionally, only accredited investors and high net worth individuals were able to become a part of networks for private investors in small businesses and startups.
Now, multiple websites and platforms bring both businesses and investors together in one place. Companies seeking money to fund their venture create an offering for investors to contribute to and invest in.
Imagine if you were one of the original investors in a company like Facebook, Amazon, or Tesla? Many significant companies originally started on popular crowdfunding platforms like the seven crowdfunding websites below.
NextSeed is a crowdfunding investment platform that allows investors to invest in local businesses. Businesses can be anything from new startups to veteran local restaurants needing money to fund their latest project. NextSeed also features many real estate companies that manage large apartment complexes as well.
Investors can create a free account and fund it with $100 to start investing. Available account types are individual investment accounts, entity investment accounts, and self-directed IRA investment accounts.
Some investments are only available for accredited investors (investors who meet individual income or net worth requirements), and some investments may require more than $100 to invest.
SeedInvest is another platform that allows investors to invest in small businesses. This platform focuses mainly on funding for new companies in the startup phase.
You can start investing by setting up a free account and fund it with enough money to meet the investment minimums of each company listed. The minimum investment amount on SeedInvest is $500, but some companies have minimum requirements of $1,000+ for their specific offering.
SeedInvest offers multiple types of investments including debt investments and equity investments. It seems that most available offerings are Regulation A offerings.
In short, a Reg. A offering is like a mini version of an initial public offering (IPO) but not listed on a public stock exchange. It's a convenient way for startups to raise money from the public without having to be listed on a major stock exchange.
FundersClub is a venture capital like firm but provides a platform for investors to invest in startup businesses and startups to raise money. They partner with some of the top startup incubators like Y Combinator and First Round Capital. They also have connections to significant investors and affluent networks.
FundersClub only lists less than 2% of the startups that wish to raise money on their platform. That means they thoroughly vet each company raising money to ensure top quality investments.
Because FundersClub is such a high-quality platform, it is only available to accredited investors who meet income or net worth requirements.
Speaking of Shark Tank (if you read the article intro), Start Engine is a fast-growing platform for investors and startups to connect to invest and raise money. It's paid spokesperson is Shark Tank star Kevin O'Leary, aka Mr. Wonderful.
Required minimum investments range from as low as roughly $60 to as high as $250+ depending on the listing.
Furthermore, Start Engine is on a venture to be the first platform to have a stock market like feature where investors on the platform can buy and sell their private shares to one another, much like a major stock exchange.
WeFunder is a trusted crowdfunding platform for investors and small businesses. They have an extensive list of investment opportunities available as compared to other platforms.
They list companies in nearly every industry, with investment minimums of just $100 or more. Upon account opening, they will gather details about the type of investor you are and the interests you have to customize your experience using their platform.
MicroVentures is a popular platform for small businesses to seek funding for their startups, allowing investors to have ownership stakes in new and growing companies.
Perhaps one of the most enticing things about MicroVentures is their portfolio of past investment opportunities. Some of the large name brands that have been on MicroVentures are:
- And many more…
Another popular feature of MicroVentures is the ability to list your privately owned shares for sale on their platform to other investors if you wish to liquidate your investments.
OurCrowd is another popular crowdfunding platform for investors and small business startups. They have also featured some top brand names funded on their platform such as:
- Beyond Meat
The companies available to invest in are highly vetted by their team of professionals and network of investors. OurCrowd is only available to accredited investors who meet specific income requirements or net worth requirements.
How Do You Sell Or Liquidate Your Crowdfunding Investments?
When investing in private shares or debt investments with startups and local businesses, how do you get your money back and when?
Investing in startups and small businesses come with the price of having your money tied up for potentially years at a time. Some platforms provide you the option to list your shares for sale by other platform members giving you a way to liquidate your money.
Otherwise, to liquidate your investments, you will need to wait for the company to be acquired, become publicly traded on the stock market, or raise another round of funding.
Items To Consider Before Investing In Small Businesses
Before investing in startups or local businesses, you must become familiar with the terms and risks associated with your money. Consider the following:
- Long Term: Crowdfunding investments are long term investments that you should expect to have your money tied up for a long time with little liquidity.
- Risk: As with all investments, you could quickly lose all of your money. The risk is even higher when investing in small startups.
- Due Diligence: As with any investment, be sure you perform thorough due diligence on your own. Just because the crowdfunding platform vetted the company does not mean it's going to be a fruitful investment.
- Understand Your Investments: A sound investment strategy often taught by Warren Buffett himself is only investing in companies and industries you understand. There is no use in investing in a biochemical company if you have no idea about how that company or industry works.
With the right expectations and proper due diligence, an investment in a startup could be a massive payday for you in the near future. Imagine the return on your money if you had invested in Facebook or Spotify from the beginnings?!