Mailbag: Vetting Startups and Preparing for Fidelity’s Crypto Trading Service

Q: How much due diligence do equity crowdfunding sites do before listing a fundraising round?

A: It varies… more widely than you think.

I was just on the phone this week with a portal executive. This portal basically lets anyone who fills out an application and jumps through the required hoops list on its site. So the quality of its offerings varies widely.

The majority of the portals we work with take a more thorough approach. It’s the system I prefer. They make sure the companies are legit. The make sure the founders are NOT bad actors. And they look at startup decks to determine if they’re compelling investment opportunities. Some portals claim they turn away 98% of applicants. Some portals even reject startups they rate highly if they believe the company’s valuation is too high.

We really appreciate everything these portals do to make quality startups available to us. It’s not an easy job, and they do it very well. Our favorite portals, in no particular order, are Republic, Netcapital, SeedInvest, MicroVentures, Wefunder and StartEngine.

When browsing startup portals, I suggest you read the Q&As between readers and founders. They have a lot of useful information.

After the portals list their vetted startups? That’s where we come in. And we vet some more.

A big part of that process is talking to the founders. You can get their basic story from the portals. But we prefer to grill them with a few dozen additional questions. This allows us to draw our own conclusions.

Remember, not all the startups that are listed on these sites are created equal. Some are better than others. And some are much better than others. Those are the ones we do our best to identify for our First Stage Investor members.

+ Early Investing Co-Founder Andy Gordon

Q: What’s going on with Fidelity offering crypto? Can I buy it in my retirement account?

A: Fidelity is offering cryptocurrency trading services through its new division, Fidelity Digital Assets. Starting out, it’s targeting “institutional” investors only. So the target market is professional investment firms (pension funds, endowments, wealth managers, etc.).

Fidelity will be buying, selling and storing bitcoin only (initially) for these clients. Fidelity Digital Assets has been operating with a “select group of clients” for a few months now and will soon open up its doors to the broader institutional world.

Fidelity is one of the largest financial firms on the planet, with more than $2.4 trillion in assets under management and $6.7 trillion in customer assets. It has one of the best reputations in the business, and we’re thrilled that a company of this caliber is branching out into the crypto world.

Fidelity Digital Assets will bring an unprecedented level of legitimacy to crypto (in the eyes of institutional investors). We expect the firm’s new division to contribute significantly to demand for crypto assets, which should be very positive for price action.

On top of this, institutional investors tend to have a long-term perspective, so it’s likely that once they buy bitcoin, they’ll hold on to it for a long time. This should contribute to price appreciation and aid stability over the long run.

So no, you can’t buy bitcoin in your Fidelity retirement account (yet). But it’s opening the world of crypto up to institutional investors, and that’s extremely bullish for owners of digital assets. And I suspect that in the not-so-distant future, you will be able to easily add crypto assets to your retirement accounts at Fidelity (and elsewhere).

However, by that time, the price is likely to be significantly higher than it is today.

+ Early Investing Co-Founder Adam Sharp