According to the old rules of investing, only rich people could invest in the richest deals. The chance to be an early backer (and reap the biggest profits) of a promising young startup like Uber or Airbnb was limited to accredited investors only—people deemed wealthy enough by the SEC/United States government to be able to withstand the risk involved in making an early investment. Opportunities and pitches abounded; it was up to these wealthy accredited investors to choose what to invest in, when, and why. Their reasons were varied: diversification, high risk/high reward, social capital or prestige, impact, etc.With Reg CF, Reg A+, and other recent updates to investing law, anyone can invest a portion of their income in companies raising funds via those methods. Opportunities in many forms now present themselves: you can invest in a company offering you a share of their revenues… in a company so early-stage they don’t have any customers yet… in an established business that wants to sell shares of their new location or division to their loyal fans.
An average person might have a few thousand dollars to invest. As they look out at the landscape of offerings, they will need to ask themselves: why invest?
What values are important in your investing? Do you want to buy into a company for their plan to impact the world? Or their plan to provide refreshing beer at a restaurant that popped up in your city last year? Or their rock-solid business plan that will share their next 5 years of profit with you?
Those who reflexively think, “It’s investing: all I care about is ROI,” should consider any Kickstarter or Indiegogo backing they’ve done in the past. Was your key priority in choosing a project the fact that you thought the company or group could deliver? Or did you back them because a project caught your heart or your imagination, because you were willing to take a little bit of a risk hoping to make something you believed in become a reality? Most of us do have values beyond simply making more money—it’s just that investing hasn’t tapped into those before.
The old capitalism rewarded skilled workers for specializing in a trade or industry. The early part of this decade rewarded idea mavens via app-based industry disrupters and platforms like Indiegogo and Kickstarter. The JOBS Act platforms and deals reward robust business models above all else, with a blend of investments from early-stage companies with just an idea and a prototype, to 60-year old companies that have never had public shareholders before.
If you’re looking to take your first few steps into this brave new world of equity crowdfunding, take a few moments to establish your priorities and values around investing. You might be surprised at what you discover.