Have you ever watched the show Shark Tank? Great show, right? If you’re like me, you watch that show, and you immediately wish you could be a shark yourself, and invest in new, exciting startup companies. Over the past few years, technological advancements and legislative changes have made it so, yes, you can be a shark investor. Readers, meet equity crowdfunding — a recent, innovative mechanism that allows us retail investors to invest directly in the world’s hottest startup companies through online crowdfunding sites, such as SeedInvest or StartEngine.
The details of equity crowdfunding can be quite complex. The big idea not so much. It’s investment opportunity democratization. Before, only rich venture capitalists had access to investing in the next Apple (NASDAQ:AAPL) or Facebook (NASDAQ:FB) while they were still small, private companies. Now, everyone can do it, meaning you can juice up your portfolio today with some high-risk, high-reward startup investments.
On risk, InvestorPlace recently spoke via email with Laura Gonzalez, Associate Professor of Finance at California State University Long Beach, about private investing during the Covid-19 pandemic:
“The current bear market is expected to last approximately one year, compromising the employment of close to a third of the workforce according to employment by industry. By then a vaccine should be available, but the financial markets are going to assess risk differently. In globally connected markets pandemics spread quickly, and investors will factor in other likely future pandemics. The success of equity crowdfunding will depend on businesses being able to signal access to a flexible market, mastery of technological means, and ability to rely on a high-quality more domestic oriented supply-chain. In addition, volatility in financial markets will evidence further the fragility of those cryptocurrencies that are not backed by a regulator or government related financial institution.”
Why would you want to invest in a world whose fabric is sewn with risk? Because all it takes is one home run hit in the startup world to make you fabulously wealthy.
Let’s say you invest in 10 cool new startups. Nine of them will probably fail. But, if just one succeeds and returns you thousands of percent on your initial investment, then your whole portfolio of nine failed startups and one success is up huge.
How else do you explain the fact that the average venture capital (VC) fund returns around 20% per year? That’s double the annualized return of the S&P 500.
Needless to say, every investor should — at the very least — start looking into the equity crowdfunding space.
With that in mind, here’s a list of three strong startups to invest in on SeedInvest:
- 20/20 GeneSystems
Startup Companies to Invest In on SeedInvest: 20/20 GeneSystems
One of the best startup companies to invest in right now on SeedInvest is 20/20 GeneSystems.
20/20 GeneSystems is a medical diagnostics company that is leveraging big data and machine learning algorithms to create statistically superior early cancer detection tests.
Specifically, the company has a developed a pan-cancer detection blood test, OneTest, which taps into big data and machine learning to detect cancer at early stages in individuals with significantly higher sensitivity than legacy blood tests. Affiliate research funded by 20/20 found that OneTest improved cancer detection sensitivity by 2X for men and 3.5X for women over biomarkers alone.
That’s a big deal. Early cancer detection is critical to survival. If you catch a cancer early enough, your chances of surviving that cancer are significantly higher than if you were to catch it late.
So, if 20/20 can leverage its advanced machine learning integrated OneTest to create a new standard for enhanced early cancer detection, this small startup could be on the cusp of becoming a huge medtech company.
There’s also a Covid-19 angle here. Specifically, 20/20 has leveraged its expertise in creating non-invasive blood tests to make and sell tens of thousands of Covid-19 antibody tests over the past few months. While this side of the business likely won’t scale — it will probably become an afterthought once a vaccine is administered — the Covid-19 antibody testing business does inject the company with healthy revenues today while the core cancer detection business builds out.
All in all, then, investors interested in equity crowdfunding should consider taking a look at 20/20 GeneSystems today.
Another one of the best startup companies to invest in on SeedInvest is Graze.
Graze is a pre-revenue company that has developed a fully-autonomous, robotic commercial lawnmower. That’s a big deal, since the $54 billion U.S. commercial landscaping market has a few big challenges today, including high labor costs, big fuel costs, significant safety-related risks and costs, and over-pollution.
Graze’s fully autonomous, electric lawnmowers address and eliminate all of these pain-points. The mower reduces a 4-man landscaping team, to a one mower and 2-man landscaping team, resulting in 50% labor savings. Fuel costs come down to zero. Safety risks are eliminated, and safety costs come down to zero. Pollution similarly drops to zero because Graze’s mower are zero-emission.
In other words, Graze’s next-generation mowers represent the future of U.S. commercial landscaping. This future is already starting to materialize. Graze has signed LOIs from LandCare and Mainscape, two of the top fifteen commercial landscaping companies in the U.S. The LOIs are for the purchase of 400 lawnmowers, the first of which Graze expects to ship out in 2020.
But this is also just beginning of Graze’s journey. Over the next five to ten years, Graze’s mowers have a unique opportunity to achieve ubiquity across this $54 billion market.
As that happens, this $23 million startup could turn into a multi-billion-dollar company one day.
Startup Companies: CodeCombat
Last, but not least, on this list of the best startup companies to invest in on SeedInvest is CodeCombat.
Computer programming is the future language upon which our entire society will be be built. As such, it is the most important skill students need to learn today.
But if you’ve ever coded before, you know that learning how to code for the first time is not easy. It’s hard. Partly because it’s an entirely new language. And partly because the learning process is intimidating, as programming languages are riddled with unfriendly prompts, scary error messages, dark screens and unfamiliar characteristics.
In other words, for today’s students, learning how to code is simultaneously necessary and daunting.
Insert CodeCombat. The company is taking the scary coding learning process, and making it friendly and familiar, by teaching people how to code through interactive video games.
It’s a genius model. That’s gaining tons of traction (bookings were $2.2 million last year, and project to be north of $15 million in 2021). And which represents the future of how students across the U.S. — and indeed, the world — will learn how to code.
Over the next several years, CodeCombat will take this revolutionary model and expand its presence across the U.S. education landscape through thousands of elementary, middle and high school partnerships. I suspect that, within the next three to five years, this company gets acquired by Chegg (NASDAQ:CHGG), because CodeCombat fits in perfectly with Chegg’s mission to create an all-in-one, end-to-end digital learning platform for students.
Such an acquisition would likely happen at $100+ million prices. CodeCombat’s pre-money valuation today is $25 million.
Investing through equity and real estate crowdfunding or asset tokenization requires a high degree of risk tolerance. Despite what individual companies may promise, there’s always the chance of losing a portion, or the entirety, of your investment. These risks include:
1) Greater chance of failure
2) Risk of fraudulent activity
3) Lack of liquidity
4) Economic downturns
5) Dearth of investor education
Read more: Private Investing Risks
Luke Lango is a Markets Analyst for InvestorPlace. He has been professionally analyzing stocks for several years, previously working at various hedge funds and currently running his own investment fund in San Diego. A Caltech graduate, Luke has consistently been rated one of the world’s top stock pickers by various other analysts and platforms, and has developed a reputation for leveraging his technology background to identify growth stocks that deliver outstanding returns. Luke is also the founder of Fantastic, a social discovery company backed by an LA-based internet venture firm. As of this writing, he was long CHGG.