Crowdfunder is one of the top equity crowdfunding platforms. It allows individual investors to invest in startups, which is done by browsing listings on the company’s website. Although, compared to other crowdfunding platforms, the deals are larger. They usually have minimums of $25,000 to $50,000.
Because of this, you need to be an accredited investor. The requirements for this include:
- You have a net worth of over $1 million (excluding your primary residence) or
- You earn income of more than $200,000 per year or $300,000 if you file a joint tax return.
Founded in 2012, Crowdfunder has a network of more than 130,000 investors and entrepreneurs. The platform has funded over 100 deals at an average size of $1.8 million. Crowdfunder also has an index fund of early stage investments.
So what are some of the interesting listings on the site? Let’s take a look at three:
Invest in Startups: Digitzs
Started in 2015, Digitzs’ founders did not rush into the development of the software. Rather, they spent considerable time interviewing about 300 CEOs.
The result? Well, it was the development of a platform that allows for the easy implementation of payments into a merchant software platform. This meant having gateways to Visa (NYSE:V), MasterCard (NYSE:MA) and American Express (NYSE:AXP). There was also the creation of features for splitting payments, allocating commission and processing transactions. Digitzs calls its platform a payments-as-a-service (PaaS).
In terms of the applications, they are extensive. Note that Digitzs helps with ticketing for events, fine payments for city governments, tuition for schools, transactions for car dealerships and so on. In the U.S., the company estimates the market size at $7 trillion.
Digitzs has not disclosed its financials, but the revenue spiked by 126% in Q1 to Q3 in 2019, compared to 2018. The company has also recently launched its enterprise edition, which should expand its market opportunity.
As for the equity crowdfunding round, Digitzs is issuing a convertible note for a total of $2.5 million (the minimum investment is $25,000). This type of instrument is converted into stock when there is a trigger event, like a subsequent round, IPO (Initial Public Offering) or acquisition.
Real Estate Nexus
Real Estate Nexus develops software to help real estate, mortgage and insurance companies increase the conversion rates for their marketing and sales leads. Interestingly enough, the founder of the company, Isaiah Colton, has first-hand experience with this, as he once owned a real estate brokerage business. While growth was strong, he would sign up with many marketing providers. This lead to sprawling data, less transparency with metrics and higher costs.
The Real Estate Nexus platform, which was launched last year, is more than just lead management. For example, it also helps with databases, brand building and workflow optimization. The system even leverages artificial intelligence.
No doubt, one of the difficulties with an application like this is the integration with other programs. To help address this, Real Estate Nexus was built on a web services architecture.
Then what about the business so far? There are 200 users and the sales are at $2 million. There is also positive cash flow. Although, because of the novel coronavirus, there was a slowdon and the company took $465,000 in Paycheck Protection Program financing.
To invest in this startup, Real Estate Nexus is looking to raise $2 million and the minimum investment is $50,000.
FinClusive has developed a software platform that helps companies manage their compliance for financial crimes, such as money laundering. The company calls this technology CaaS or Compliance-as-a-Service.
A major opportunity for FinClusive is that there has been an explosion of growth in non-bank financial services platforms. They include fintech operators, peer-to-peer systems, crowdfunding platforms and even nonprofits. And yes, to be effective, they need to have effective compliance.
Of course, this can be expensive and time consuming. But with FinClusive, it is possible to automate key parts of the process, such as with watch lists for sanctions, validation of IDs, litigation research, news and social monitoring and background checks.
The company has not provided its financials. Although, in the investor profile, it mentions that revenue generation started in May 2019, which is when a bank signed up for the service.
In terms of the terms of how to invest in this startup, the crowdfunding is for a Series A. The goal is to raise $5.9 million at a pre-money valuation of $30 million and the minimum investment is $25,000. Already FinClusive has gotten traction on the financing, as there are reservations for $5 million.
Tom Taulli (@ttaulli) is an advisor/board member for startups 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.
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