Equity crowdfunding is one of the most popular nontraditional startup financing options for early-stage businesses because it offers a compelling win-win proposition for investors and founders.
Equity crowdfunding platforms like the ones on this list give risk-tolerant investors access to equity offerings that, if the companies making them find success, could dramatically increase in value over time — especially if the raise eventually leads to an initial public offering (IPO). And they provide capital-hungry entrepreneurs with vital backing at a stage when risk-averse banks, private equity firms, and even some venture capital investors are loath to get involved.
Some equity crowdfunding portals are better than others, however. The best options for founders and potential investors alike offer a range of deal structures, some with investment minimums that are manageable for everyday investors.
Equity Crowdfunding Sites for U.S. Investors and Business Startups
These are the best crowdfunding platforms available to U.S.-based equity investors and companies raising money early in the business life cycle. All leverage the benefits of the JOBS Act and Regulation A+, which collectively modernized and democratized smaller-scale private equity investing in the United States.
While all platforms accept accredited investors, only some accept non-accredited investors. Many aren’t clear on this point, and a particular platform’s investor requirements may change at any time. Prospective investors should contact their platform of choice to determine its current policy.
In all cases, investors need to provide their identity, income, and asset verification to register with the platform and participate in listed companies’ funding rounds. Unless otherwise noted, these crowdfunding investment platforms don’t charge fees to register or maintain membership as an investor.
Founded in 2010, AngelList is one of the oldest and most established equity crowdfunding platforms. It was originally conceived to broker connections between cash-strapped technology entrepreneurs and angel investors — high-net-worth, tech-savvy backers, many of whom earned their fortunes by selling out of their own successful startups.
AngelList remains true to its roots today. There are three main ways to invest in companies and funds on this platform:
Registered investors can partner with investor syndicates led by notable lead investors — usually venture capitalists with extensive Silicon Valley experience.
Syndicates generally exist to invest in specific companies. They can have dozens or hundreds of investors who pool their resources to make low-six-figure investments. (The average check size is $200,000 to $350,000 per deal.) The minimum individual investment is $1,000.
Be aware that single deals are by definition not diversified, so if you’re looking to build a customized angel portfolio, you’ll need to invest in a dozen or more individual deals across multiple market segments.
Also, you need to do your own due diligence — it’s not wise to take the lead investor’s word on the deal’s suitability, even if their reputation precedes them.
AngelList Access Fund
The AngelList Access Fund offers access to dozens or hundreds of individual deals. All are vetted by AngelList, cutting down on your due diligence responsibilities — although you should still vet all component companies yourself.
The minimum investment is $50,000, so this isn’t for everyday investors.
This service is limited to high net worth individual and institutional investors (including family offices) that can afford to invest at least $500,000 at once. Professional investors get their own AngelList representative, plus rare access to company founders and executives.
Separately from these three investment models, AngelList also operates a high-end job board that connects developers, engineers, marketers, medical professionals, and other talented job-seekers with early-stage companies looking for help. You don’t need to register as a crowdfunding campaign participant to use AngelList’s job board.
Microventures is a full-service investment bank with a robust equity crowdfunding arm that caters both to non-accredited and accredited investors. Offerings span a wide range of industries with a bias toward consumer-facing opportunities (like beverage and sporting equipment startups) and opportunities in high-growth niches like cannabis and biotechnology.
For non-accredited investors, investment minimums can be as low as $100, although some offerings have higher minimums. Certain offerings are available only to accredited investors, generally with significantly higher minimums.
Microventures has an unusually lively secondary marketplace as well, giving early-stage investors the possibility — although by no means the guarantee — of an early exit.
Fundable offers rewards-based crowdfunding, a la Kickstarter or GoFundMe, as well as equity crowdfunding.
For companies interested in equity crowdfunding, Fundable provides hands-on help with onsite profile building, pitch construction, and even business plan development. Now operating under the aegis of TheStartups.co, whose portfolio businesses include virtual assistant platform Zirtual, Fundable’s wheelhouse is software, hardware, and consumer products startups.
Fundable’s basic company profiles are available to everyone. Registered users can request a prospectus and make nonbinding funding pledges through the Fundable platform.
However, Fundable isn’t set up to broker direct investments. You need to contact potential investment targets directly, and all money and shares actually change hands outside the platform. Unless otherwise noted, the minimum investment amount is $1,000.
StartEngine offers a hodgepodge of investment opportunities in both consumer- and business-facing startups. High-potential industries like robotics, space exploration, and renewable energy are heavily represented here, but more prosaic niches like craft beverages and home automation aren’t entirely absent either.
Many offerings, including those in high-cost sectors, have very low investment minimums — under $250, in some cases.
StartEngine has another value proposition not shared by many of its peers: It is itself growing rapidly, making the Inc 5000 list of the fastest-growing California-based companies in 2020 and earning vocal backing from high-profile celebrity investors like Kevin O’Leary.
This is no small thing for investors and founders seeking a reliable equity partner with which they hope to do business for years to come.
Founded in 2005, EquityNet bills itself as the “original equity crowdfunding site” and claims to hold the only patent for the concept.
Its listed entity mix shows emphasis on consumer products and social enterprises. EquityNet also appears to attract single-asset projects, such as assisted-living facilities and medical clinics, as opposed to product-based startups or multi-asset funds. High-tech business-to-business concepts — enterprise-grade software security solutions, next-generation lithium-ion batteries, “smart” glass coatings — proliferate here too.
EquityNet features detailed entity profiles visible to the general public, but requires registration to view full prospectuses and audited financial disclosures. Registered users message listed entities directly through the EquityNet platform to arrange a nonbinding funding pledge or binding commitment. In all cases, funding transactions take place off-site.
EquityNet doesn’t have an explicit investment minimum, but it’s rare to find minimums lower than $1,000. Higher minimums are commonplace. In a recent survey of the site, the average ranged from $5,000 to $25,000. Convertible debt offerings — debt issues that can be exchanged for equity at some point in the future — are common as well.
Wefunder‘s co-founders were heavily involved in the debate over the JOBS Act and claim some credit for the crowdfunding-friendly measures that made it into the final legislation.
Whereas most competitors require investors to put up at least $1,000 per company or fund, Wefunder offerings’ minimum investment thresholds can be as low as $100 — although many offerings require at least $500 or $1,000.
Listed offerings range from funds invested in 10 to 15 early-stage companies to individual startups in the biotech, green energy, insurance, logistics, retail, and packaged food segments.
Wefunder’s comprehensive listings include detailed sales metrics (often including easy-to-parse graphs and charts), summarized business plans, interviews with leadership, and a “Why We Like This Company” section written by Wefunder staffers.
Thanks to an integrated question-and-answer system, registered users can communicate directly with company founders or executives, too. Funding transactions occur on-site, with funds held in escrow until the company reaches its fundraising goal.
Localstake connects investors with revenue-generating small businesses. Listed companies tend to be involved in consumer-facing enterprises, such as brewing, food production, and apparel manufacturing. Minimum investment thresholds typically range from $250 to $500.
Localstake offers four investment options:
- Revenue Share Loans. Revenue share loans have open-ended maturities and return fixed amounts to each investor — typically an amount equal to 1.5 times principal. For instance, a representative loan offered to an individual investor might have a $1,000 principal, a total repayment amount of $1,500, and a five-year maturity — equating to a 10% annual return on investment. The offering entity makes monthly payments on each investor’s loan, based on loan principal and the company’s revenues that month. Repayments continue until the rate of return has been reached.
- Convertible Debt. Convertible debt offerings function as traditional loans until the offering entity’s next fundraising round, at which point they convert to equity at the then-current valuation.
- Preferred Equity. Investors own shares in the company, either directly or through an intermediary, and may receive regular dividend payments after a set period of time.
- Traditional Loans. Investors receive principal and interest payments according to a set schedule. Time horizons vary by company.
SeedInvest is a more buttoned-up platform that specializes in “highly vetted investment opportunities.” The platform claims to accept just 1% of applicant companies.
Although its company profiles are mostly invisible to the general public, registered investors have access to a wealth of descriptive and financial detail about each listed entity, plus direct access to founders or executives.
The majority of listed companies are individual technology startups, although there are some options from other sectors, as well as a handful of multi-company funds. SeedInvest has an escrow system that allows users to invest in companies directly through the platform, although some funding transactions may occur outside the platform (at the discretion of each participating company).
SeedInvest was once open only to accredited investors. Certain offerings (known as Reg D offerings) remain exclusive to accredited users. Non-accredited investors can invest as little as $500.
PeerRealty also focuses exclusively on real estate, mostly commercial and multi-family residential. Most opportunities are specific projects, such as already-completed apartment buildings and planned or under-construction office buildings. Multi-property portfolios are available as well. Note that investing in planned or under-construction projects may present additional risks.
Most PeerRealty opportunities require minimum investments of $5,000, and occasionally higher. Funding transactions typically take place through the platform’s escrow system.
PeerRealty is one of the only equity crowdfunding platforms that operates a secondary exchange where current investors can sell their shares to other PeerRealty investors. This provides investors with some liquidity, although PeerRealty doesn’t guarantee an active market for shares in any particular project or property portfolio.
Due to regulatory uncertainty and the inherently volatile nature of the early-stage startup ecosystem, the equity crowdfunding landscape is constantly evolving. Platforms routinely enter and exit the space, from relatively obscure failures like the now-defunct Crowdfunder to higher-profile names like Indiegogo, which tried equity crowdfunding for a while and then moved on.
Before launching or investing in a new offering, investors and founders alike should do their due diligence on a range of available platforms to ensure they choose a stable vendor that meets their needs. As in other aspects of business, relationships between investors and founders are stronger when they’re based on mutual trust and shared goals.