Tech stocks have been big winners this year, as seen with Zoom Video (NASDAQ:ZM), Okta (NASDAQ:OKTA) and Mongodb (NASDAQ:MDB). But how can investors get shares in early-stage startups? Well, there are a variety of equity crowdfunding platforms, which make it easy and affordable to get allocations. And one of the leaders in the space is Netcapital. Note that the typical investment size is a mere $100. OK then, so how does this all work? To see, let’s get a Netcapital review.
The founder and CEO of the firm is Jason Frishman, who has an interesting background. Keep in mind that he was a medical oncology researcher at the Dana Farber Cancer Institute and cognitive neuroscience at the University of Miami.
But a few years ago, he wanted to make a big change in his career. He sought out to mentor entrepreneurs in their journeys – and he thought the best way to do this was with equity crowdfunding.
Netcapital Review: How It Works
On the Netcapital website, there is the following message: “Be an angel investor. Private jet not required.”
Yes, this is a pretty good way of summing up what the company is all about. For the most part, there are no restrictions on who may invest.
Although, in cases where the amounts exceed certain limits, a person needs to be classified as an accredited investor (this is according to the federal law). This means that he or she has earned an income of $200,000 a year (or $300,000 for a couple) for the past two years and expects the same for the current year. There must also be a net worth of more than $1 million (this does not include the principal residence).
So with Netcapital, you can browse the current offerings. Each has an extensive profile that includes a background on the company’s products/services, the market opportunity, marketing strategy, competitive landscape, team and so on.
Here are some examples:
- ecoText: This is a rental service for digital textbooks and titles from Open Educational Resources (OER). The company is taking a similar strategy of Spotify Technology (NYSE:SPOT).
- Millennial Fertility: This startup is developing a low-cost fertility treatment, which is for home-use.
- Infinovate: This is a sophisticated system that helps to determine the performance of investment assets. The target market is for financial advisors, family officers and analaysts.
Note that Netcapital has a partnership with Techstars, which is a top tech incubator. The relationship has meant access to high-quality deals.
However, there is no Netcapital review of the startups. This is up to the investors themselves. But the legal documents are streamlined for easier analysis. For this, there is a dashboard that centralizes everything.
Netcapital also recently expanded the payment options for the investments. Now you can use a credit or debt card. This is an addition to ACH transfers and wire transfers.
Bottom Line on the Netcapital Review
From the Netcapital website, there are no stats on the traction of the company. Although, it has funded a variety of deals, including one for $10 million.
The company also has an impressive advisory board. Just some of the members include: Bill Harris, who is the founder of Personal Capital and the former CEO of PayPal (NASDAQ:PYPL) and Intuit (NASDAQ:INTU); George Bell, who is the former managing director at General Catalyst; Dan Hesse, who is the former CEO of Sprint; Ivan Seidenberg, who is the former CEO of Verizon (NYSE:VZ); and Alan Matthews, who is the founder of Rapid7 (NASDAQ:RPD). Such business leaders are not only a good source of strategic advice but also for deal flow.
But as is the case with any platform that offers early-stage investment opportunities, there are considerable risks. So it is important for all investors to make sure any investment is consistent with their risk tolerance and diversification requirements.
Tom Taulli (@ttaulli) is an advisor and author of various books and online courses about technology, including Artificial Intelligence Basics, The Robotic Process Automation Handbook and Learn Python Super Fast. He is also the founder of WebIPO, which was one of the first platforms for public offerings during the 1990s. As of this writing, he did not hold a position in any of the aforementioned securities.