There is no doubt that startups are exciting. New ideas that have the potential to disrupt markets, impact our day-to-day, and spur innovation are appealing to novice and experienced investors alike. That said, investing in startups is high-risk, and new startup investors must not be blinded by their enthusiasm for new, exciting ideas.
To arm new investors with some of the tools necessary to make informed investment decisions, we have put together a quick guide on the process of investing in startups.
Investing in Startups
Traditionally, startup investments have required higher capital. Thanks to Title III of the JOBS Act, that is no longer the case, and both accredited and non-accredited investors have the capability to make startup investments. Due to this demand, investment portals, like MicroVentures, have worked to make the investment as simple and as streamlined as possible.
Due diligence is integral to the investment process and should be conducted thoroughly before any investments are made. Depending on where you’re investing, the platform or organization you’re investing through has likely already conducted their own due diligence on the investment opportunity. That said, it’s recommended that investors also do their own research as well by looking into the company, its market, and by asking the executive team questions.
Here is a brief guide for conducting your own general due diligence:
- The market opportunity
- The product itself
- How the company plans to allocate the proceeds of the raise
- The business model
- User traction
- Historical financials (when available)
- The industry at large, including key competitors
- The executive team
- Past financing
The funding documents we provide for each offering hold a wealth of information, and investors should read them thoroughly before making an investment as part of their own due diligence process. In addition to reviewing the fund summary, we urge investors to consider whether startup investing is appropriate for them, do their own research, and ask questions through the Investor Q&A section on each offering page, or by getting in touch with our Investor Relations team.
Legal Paperwork & Documentation
For accredited investors, legal paperwork confirming your status as an accredited investor may need to be completed prior to making any investments in private companies.
To complete an investment, an agreement that outlines the terms of the investment will need to be executed for both accredited and non-accredited investors. In some cases, the investment may be held until specific conditions are met.
Release of Funds
The documents and investment funds are released to the company only once the conditions of the investment process have been completed.
Investing in Startups on MicroVentures
MicroVentures offers investors a platform to browse investment opportunities in early-stage startups, as well as secondary investment opportunities. Now, non-accredited investors can access private investment opportunities, sometimes for a minimum of just $100.
Upon signup, you will be asked to fill out a questionnaire that will help our team personalize your investment experience. It includes your citizenship status, whether or not you’re an accredited investor, and the industries you may be interested in.
Review Offerings & Documents
Once your account has been activated, you’ll be able to view the current offerings available to you. On each offering page, you’ll have access to the funding documents for that opportunity.
Once you’ve decided on an investment opportunity, you can begin the investment process directly from the offering page by clicking “Invest.” From here, you’ll be walked through the simple investment process.
Offering Closing & Funding
Once the investment opportunity you’ve selected has been funded and closes, the offering documents will be available for you to view at any time on your portfolio page.
New investors may find it helpful to review our education center. In it, you will find the answers to frequently asked questions, as well as information about crowdfunding, early- and late-stage investing, convertible notes, diversification, debt vs. equity, and common terms you should familiarize yourself with. And if you can’t find what you’re looking for or have additional questions, shoot us an email – our Investor Relations team is happy to help.