Have you ever invested in an equity crowdfunding deal? Here at InvestorPlace, we tend to talk about large-cap stocks such as Apple (NASDAQ:) and market capitalizations approaching $1 trillion. Every once in a while, my colleagues and I will get an opportunity to drive off the main drag and cover smaller companies with some exciting businesses.
Most of the time, however, you’re visiting IP to read about America’s biggest companies. And I’m plenty fine with that.
However, there’s an entire world of equity crowdfunding out there that our readers probably would enjoy hearing about from time to time. Today’s article is the beginning of what we hope could turn into something more regular.
A Few Quick Thoughts
Equity crowdfunding got its start on June 2015, so it’s been around in the U.S. for less than five years. In that time, several equity crowdfunding platforms have cropped up across the country, providing both regular investors and accredited investors with investment opportunities not available in the public markets.
Recently, StartEngine, which launched in 2015, that it had gone over the $100-million mark, the first equity crowdfunding platform to do so. That’s excellent news for the entire industry because it confirms the thesis that attracting small amounts of capital from regular investors isn’t a waste of time.
In the past four years, StartEngine has invested the $100 million in more than 275 businesses, raising funds from 56,725 investors, an average of $1,763 per investor.
I don’t want to single out StartEngine because I’d like to think I’m platform agnostic, but it’s incredible how quickly it’s gotten to $100 million.
That might not seem like a lot, but if you’re a small business from Austin, Texas, or Baltimore, Maryland, it’s more money than you could imagine.
To start off this experiment with equity crowdfunding, I thought I’d write about a couple of current investment opportunities on two different investment platforms that I believe might interest readers.
We hope you want to hear more about equity crowdfunding investments in the future.
Federation Brewing, WeFunder
If you live in the Oakland area and you like beer, Federation Brewing might be just the ticket.
Co-founders Adam Cretan, Larry Cretan and Matthew Hunter sold their first keg of beer in . In March 2017, the partners opened up a taproom in Oakland. They’re on track to produce 1,500 barrels of beer in 2019.
Federation Brewing beer is available in 175 off-site bars and restaurants. As a result of the growth, it’s generating an average of $35,000 per month in revenue.
The company’s currently trying to raise as much as $500,000 to expand its production, increase its brand awareness in the San Francisco Bay area, and open a second taproom.
While I haven’t drunk their product, the fact that they’ve already raised almost $80,000 from 65 investors suggests the Oakland beer market is ready to take them to greater heights.
What do you get for investing?
Federation will set aside 5% of the quarterly revenues for investors. You’ll receive a 1.5x payback multiple, which means if you invest $1,000, you’ll receive $1,500 back as soon as 5% of the quarterly revenue returns enough to pay back your entire $1,500.
Plus, if you invest $1,000, you’ll also get a 10% discount at its Oakland tasting room for two years. If you don’t live in Oakland, maybe you can gift that two-year discount to a friend that does.
If equity crowdfunding is going to make it to the next level of investing, platforms like StartEngine have to stay in business.
Founded in , it is the largest equity crowdfunding platform in the U.S. And as I said earlier, StartEngine got to $100 million raised in less than five years.
In 2018, StartEngine had revenue of more than $4.6 million, a growth rate of 129% annually. Something like 22% of its investors participates in more than one investment on the platform with an average investment of $1,300.
On Aug. 13, fitness apparel company Hylete, who raised on StartEngine in the spring of 2017, filed a preliminary prospectus to go public. It is the first company on StartEngine to file an S-1. It plans to list its shares on the New York Stock Exchange.
Hopefully, an intial public offering (IPO) will allow investors from 2017 to exit their investments with a nice profit.
As for StartEngine’s latest financing, it is selling up to common shares at $7.50 a share on its platform with a minimum investment of $500 or 67 shares.
You can live anywhere in the U.S. to appreciate the potential of such an investment. Just remember that StartEngine is itself a small business not yet making money.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
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