Dear Startup Investor:
The startup scene is about to experience explosive growth.
And I want you to take full advantage.
We’re getting closer and closer to D-Day.
Pretty soon every adult American will be able to invest in startups. Right now that’s not the case. You have to make over $200,000. Or have personal assets of at least $1 million. And you can’t include your own home in that calculation.
There are currently 372,000 active accredited investors. When the government issues the new rules, about 230 to 240 million Americans will become eligible to buy shares in startup companies.
Of course, not all of them will. But if just 1% does, it will flood the startup space with 2.3 million new investors.
How much money is that? Employing very conservative assumptions, here’s the math.
The last census report on median income was published on September 17, 2013. It reported that Americans made a median income of $51,017. If they invest just 1% of this amount, that’s $510.
So multiply $510 by 2.3 million new startup investors. You get an injection of $1,173,000,000 into startups. Now here’s the key part.
By law, only companies that raise funds on portals that meet the requirements of the SEC and FINRA (Financial Industry Regulatory Authority) will have access to that $1,173,000,000.
These new regulations are coming, sure as day follows night. The timing is pointing to the late summer or fall.
The only thing you can question about these numbers is how low they are. They’re probably way too low. But, as I said, I wanted to be conservative.
Now, knowing all this, what is the highest-odds investment opportunity you can make?
Without a doubt, it’s the top startup portals. Here’s why…
Portals are the indispensible and only legal linchpin between trillions of investor dollars and the thousands of startups that will be seeking funds.
That’s a fact. It’s also, rather unbelievably, a barely recognized fact. For some reason, portals are flying under the radar.
I predict one day soon this country will wake up. We’ll see dozens of portals being created to get their hands on the trillions of dollars flowing from your pockets to the startups.
When that happens, you better watch out.
Many of them will take their inspiration from Bernie Madoff. Bernie is doing a 150-year stretch for bilking investors out of $65 billion, give or take a few million. He told a fellow inmate, “Screw my victims. I carried them for 20 years, and now I’m doing 150.”
It might be a little chaotic at first, but the crowd will soon figure out which portals are legit and which ones are scammy.
For our investment purposes, that’s too late. The time to invest in the best portals is right now.
The best portals are still cheap. But they won’t be for long. Once their critical role is recognized under the new regs, their value should skyrocket.
We’re not waiting. We’re recommending three of the top five portals to you. Why not all five? Well, two of them aren’t raising funds at the moment.
We recommended one of them already. It was Wefunder. We hope you acted on this recommendation. We believe that Wefunder is a keeper.
And we’re convinced that SeedInvest is, too.
The two portals differ in important respects.
SeedInvest currently charges no carry fee but we expect it will change to the traditional “carry” VC/portal model soon. Getting “carry” means when a startup is bought out or IPOs, VCs and portals get a percentage of the profit, typically in the 10% to 20% range.
If a startup wants to fundraise on SeedInvest’s portal, it pays an administrative fee of $250 a month. And if it wants to stay on the site after the fundraise, it pays $150 a month.
SeedInvest also makes a commission. If a startup wants to be featured on the site’s “vetted” section, it must agree to work with SeedInvest’s partner, North Capital Private Securities. North Capital is a registered broker-dealer with the SEC. It’s also a member of the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation (SIPC).
Once the round is successfully closed, North Capital gets a percentage of the fundraiser.
This revenue model is different from VC companies and most portals. They usually don’t earn a commission until their startups IPO or are bought out. That can take years. A fundraise only takes a few months.
So SeedInvest has set itself up to get a steady flow of revenue as it completes one fundraiser after another.
In March alone, SeedInvest helped companies raise more than $2 million. Let’s assume that at least 80% goes toward successful fundraisers. North Capital gets a commission on $1.6 million within two to three months.
On top of that, SeedInvest gets $150 to $250 a month in fees for the listing itself.
And this is just the beginning.
Traction Getting Stronger
SeedInvest’s listings are starting to pour in. In February, over 100 companies applied for a slot on its site. As listings grow, we can already see the amount of funding being sought explode upward from month to month…
Here’s a small sample of SeedInvest’s recent fundraisers…
- Virtuix: $1.2 million raised in five weeks
- Scoot: $280,000 raised during the holidays last year
- Vengo: $720,000 raised in March alone
- Knightscope: Filled its $150,000 allocation in a week.
Searches for “SeedInvest” on Google are rising exponentially, as you can see in the chart below:
(I pulled that chart from Google Trends. It’s a very useful tool when conducting due diligence.)
The Secret to Identifying the Best Portals
Okay, I’m going to let you in on a little secret. It’s not that hard to separate the legit portals from the riffraff. Just remember this rule. The top portals make it very difficult for startups to raise money on their sites. And the portals just wanting to make a quick buck make it very easy for startups to list.
SeedInvest puts startups through a tough series of tests. See if you agree…
- Get published.
- Show fundraising traction (including commitments for 20% of their round from bonafide VCs/angels offline).
- Verify yourself (followed by SeedInvest doing an identity check via third party partners).
- Populate the Data Room (including a presentation, financial model summary and financials, annual P&L projections, cash flow projections, and a capitalization table on a fully diluted basis).
- Investment documents (including term sheet and all financing documents and agreements).
Like Wefunder, SeedInvest prioritizes protection over profits. It’s something we insist on at Startup Investor.
The Team
Both co-founders got their MBAs in Entrepreneurial Management from Wharton.
CEO Ryan Feit has founded multiple startups. On the investor side, he worked at Carlson Capital and Wellspring Capital Management. At Lehman Brothers he financed and managed dozens of businesses.
Nobody knows the regulatory side of the startup space better than Feit. He co-founded the Crowdfunding Professional Association. He serves as a Board Member of the Crowdfund Intermediary Regulatory Advocates group. And he’s also co-chair of the Crowdfund Portals Committee.
Co-founder James Han is a technology guy. At Francisco Partners, he focused on technology investment opportunities. He was also a member of Morgan Stanley’s technology investment banking group.
The Investment Opportunity
Venture funds have already committed $2 million to SeedInvest. I suspect they helped determine SeedInvest’s “pre-money” valuation of $15 million. SeedInvest itself says, “Valuation and other terms are established with offline investors who are often professional angels or venture capitalists.”
SeedInvest’s goal is to raise a total of $3 million in a Series A round. Your minimum to invest is $25,000. Unless you’re buying at least $100,000 worth of these preferred shares, you’ll be put into a single-purpose LLC investment vehicle.
Your money will be held securely in an independent escrow account. Once the funding target has been met, the money will be released to SeedInvest. If the funding target is not met, investments will be returned promptly by the escrow agent.
Neither SeedInvest nor North Capital receives or holds any investor funds during this process.
To invest, go to the SeedInvest investment page here and click on the blue box on your right. Then click on the “Begin Investment” box where you will be asked to verify your accredited investor status and create an account. Once that is done, you can make the investment.
If you plan on investing – do it soon – this round could close any day.
Sincerely,
Andy Gordon
Startup Investor Portfolio
