Introduction

 

 

Crowdfunding has emerged as a popular way for entrepreneurs and startups to raise funds from a large number of individuals rather than traditional means like venture capitalists. With the passage of the JOBS Act in 2012, crowdfunding was opened up to non-accredited investors as well. This allows everyday individuals to invest small amounts in startups and companies they believe in.

Here is a look at some of the best crowdfunding sites for non accredited investors:

Kickstarter

Kickstarter is one of the largest and most well-known crowdfunding sites for non accredited investors. It uses a reward-based model, where backers pledge money to projects and receive rewards, perks or products in exchange.

Key Features:

• Well established site with high traffic and visibility for projects
• Rewards-based (backers do not receive equity)
• All or nothing funding model – projects must reach their goal to receive money
• Broad range of projects from technology, games, food, music, films and more
• Allows creators from US, UK, Canada, Australia, New Zealand, Netherlands, Denmark, Ireland, Norway, Germany, France, Spain, Italy, Austria, Belgium, Switzerland, Luxembourg, Hong Kong, Singapore, and Mexico

Indiegogo

Indiegogo offers both rewards-based and equity crowdfunding options. It allows anyone to invest in startups and companies globally.

Key Features

• Rewards-based and equity models available
• Flexible funding – project creators keep the money even if they don’t reach their goal
• Large community of investors and backers
• Global platform with campaigns from over 225 countries and territories
• Wide variety of categories including tech, design, film, music, charity, small business, and more

MicroVentures

MicroVentures provides equity investments to startups and emerging companies through crowdfunding. It offers a more curated approach than some other platforms.

Key Features:

• Accredited and non-accredited investors can participate
• Startups undergo due diligence and vetting before listing
• Investors can browse and screen startups online
• Low minimum investments ($100+)
• Focus on tech, biotech, fintech, blockchain, medical devices, AI

NextSeed

NextSeed offers debt-based crowdfunding opportunities. Investors can lend money and earn interest on repayments.

Key Features:

• Debt-based model – invest via loans, earn interest
• Low minimum investments ($100)
• Focus on real estate and small business lending
• Projects vetted for credibility
• Offerings only available to Texas residents initially but expanding nationally

Fundable

Fundable is a rewards-based platform that also offers accredited investors the ability to invest in startups for equity.

Key Features:

• Rewards-based with equity offerings through Fundable Equity
• All or nothing funding model
• Educational resources for entrepreneurs and investors
• Focus on technology, consumer products, restaurants, medical, entertainment and more
• Offerings open to US-based companies only

Republic

Republic operates two online investment platforms – Republic and Republic Real Estate. It offers investments in startups and real estate to both accredited and non-accredited investors.

Key Features:

• Invest in startups and real estate offerings
• For non-accredited investors, minimum investment is $100
• For accredited investors, minimum is $10K
• Company profiles, pitch videos and deal terms provided
• Automated online investment process
• Startups go through due diligence and vetting
• Offerings meet SEC rules under Regulation CF

Small Change

Small Change focuses on crowdfunding for real estate. It allows individuals to invest in real estate projects and developments.

Key Features:

• Real estate specific platform
• Offerings open to both accredited and non-accredited investors
• Minimum investment $100
• Projects vetted and must meet criteria
• Debt and equity offerings available
• Focus on urban development and socially responsible real estate

CrowdCube

Crowdcube is a UK-based equity crowdfunding platform open to everyday investors. Note investments may only be available to UK residents.

Key Features:

• Equity-based crowdfunding
• Allows non-accredited investors to buy shares in startups and companies
• Minimum investment is £10
• Companies go through due diligence and approval process
• Investors become shareholders and may receive dividends
• Wide variety of companies and industries represented

WeFunder

WeFunder offers startups a way to raise funds from non-accredited investors for equity. It is open to US-based investors only.

Key Features:

• Equity crowdfunding from non-accredited investors
• Startups apply and go through approval process
• Investors can browse startups and invest online
• Investors receive equity and may participate in future rounds
• Minimum investment as low as $100
• Focus on tech, consumer products, food/beverage, healthcare, energy, education, transportation, manufacturing

AngelList

AngelList started out focused on accredited investors but now also allows non-accredited investors to participate via AngelList Access Funds.

Key Features:

• Platform for startups to raise funds from angel investors and VCs
• AngelList Access Funds open to non-accredited investors
• Minimum investment of $1K for access funds
• Investors can browse startups, investor profiles, deals
• Startups undergo screening and due diligence
• Broad range of industries represented – consumer, healthcare, fintech, crypto, big data, transportation, edtech, and more

Honeycomb Credit

Honeycomb Credit offers a debt-based crowdfunding model for investors to loan money to small businesses.

Key Features:

• Debt-based crowdfunding – investors loan money, earn interest
• Minimum investment $100
• Businesses must meet lending criteria
• Loans backed by Collateral Trust
• Automated investing for lenders
• Focus on established small businesses looking to grow and expand

Crowdfunder

Crowdfunder is a leading equity and investment crowdfunding platform based in Los Angeles.

Key Features:

• Equity and debt offerings for investors
• Minimum investment $500+
• Companies are screened and vetted
• Investors can view business plans, financials, pitch decks
• Broad range of industries – technology, consumer products, entertainment, manufacturing, retail, restaurants, medical, cannabis
• Focus on California-based businesses and investors

Also Read:

https://metawaynow.com/tips-for-buying-your-first-investment-property/

 

How Crowdfunding Works for Non-Accredited Investors

Equity and investment crowdfunding for non accredited investors opened up following the passage of the JOBS Act in 2012. Some of the key features include:

• Lower investment minimums – Compared to platforms focused on accredited investors, sites open to non-accredited usually have minimums from $100 to $500. This allows everyday individuals to get started.
• Offerings listed online – Investors can browse offerings on the platform website and sign up for an account to start investing. This makes the process easy and accessible.
• Vetting of companies – Platforms will screen companies, conduct due diligence, and ensure SEC compliance before listing offerings to protect investors.
• Electronic processes – The investment process from account opening to finalizing the transaction is done electronically online via the platform.
• Access to private deals – Startups and early-stage companies raise funds through these sites, allowing non-accredited investors access to investments not available publicly.
• Portfolio investment approach – Investors are encouraged to build a portfolio across multiple companies and offerings to mitigate risk. Many platforms have auto-invest features that spread funds across offerings that fit designated criteria.
• Unlisted shares – Investors receive shares in private companies that are not publicly traded or listed on a stock exchange. The shares can be held until a future liquidity event like an IPO or acquisition.
• Equity, debt, and rewards models – Different platforms offer different investment models – equity (stock), debt (lending), and rewards (perks).

Limitations for Non-Accredited Investors

While crowdfunding for non accredited investors opens up many new opportunities, there are some limitations to be aware of:

• Investment caps – The SEC limits how much non-accredited investors can put into crowdfunding investments in a 12-month period based on their income and net worth.
• Illiquid investments – These are not publicly traded stocks. They must be held for a period of time with no easy way to sell or cash out.
• High risk – Startups and early-stage companies have a high failure rate. These are speculative investments.
• Complex company documents – The prospectus, capitalization tables, and other legal documents may use complex terminology not suitable for non-professional investors.
• No investment advice – Platforms cannot provide specific investment advice or recommendations to users. Investors must evaluate deals themselves.
• Challenging due diligence – Individual investors may not have the expertise to conduct deep due diligence into the companies.
• Equity dilution – Share ownership gets diluted as the company raises additional rounds of funding in the future.

Tips for Investing in Crowdfunding as a Non-Accredited Investor

If you are interested in exploring crowdfunding for non accredited investors, here are some tips:

• Stick to investment caps – Do not over-invest beyond what the SEC guidelines allow based on your income. Spread funds out over time.
• Diversify across offerings – Invest small amounts in multiple companies instead of a large amount in one or two. Use auto-invest features on platforms if offered.
• Look for existing traction – Evaluate company metrics like revenue, customers, products already launched when deciding what to back.
• Review offering materials – Read through all available company information and research owners, founders and management team.
• Consider local offerings – Investing in companies in your city or state allows you to better conduct due diligence and evaluate credibility.
• Plan a long-term hold – These are highly illiquid investments that often take years to produce returns. Avoid investing any funds you may need short-term access to.
• Lend when possible – Debt-based crowdfunding often has lower risk than equity, as loans are repaid from company cashflow.
• Use rewards platforms first – If new to crowdfunding, start with rewards-based platforms to get familiar with the process before investing for equity.

Conclusion

Crowdfunding has opened up a new asset class for non-accredited investors to gain exposure to startups and private companies. The passage of the JOBS Act enabled legal frameworks for platforms to facilitate these types of offerings to everyday investors under SEC rules. While limitations exist on investment amounts and risks are high, crowdfunding diversifies beyond traditional public market investments. Using these tips and conducting thorough due diligence, non-accredited investors can responsibly participate. The key is spreading out investments over multiple companies and setting expectations for long holding periods until liquidity events like acquisitions or IPOs occur.