A perfect storm is developing in entrepreneurial finance: crowdinvesting. It is about time for a disruptive innovation in the Finance sector - and the unique convergence of factors in the U.S. economy will quickly propel the concept forward:
Pent-up Business Demand For Equity Funding
It is estimated that traditional "angel investing" only meets about 10 percent of the demand for individual investment in private businesses. The price of entry into this elite club has simply been too steep for many, in terms of both money and time required. Plus, it is a community of individuals who engage primarily in closed-door deals, and with those that are already part of the "network." Imagine a $50 billion market that is only ten percent funded. Few sectors of the economy offer this kind of opportunity.
Pent-up Investor Demand
Treasury bills yielding less that one percent, commercial real estate slumping, and other deleterious effects of the Fed's "quantitative easing" have left numerous investors searching for better yields. Investing in start-ups is hardly a secure investment like treasury bills. It is typically a high-risk venture. Most angel investments are a minimum of $25,000. An investor wanting to diversify in this higher-risk form of investing would have to invest $250,000 just to diversify across ten deals.
Crowdinvesting Responds
So, along comes crowdinvesting, where minimum investments may be as little as $1000. Furthermore, crowdinvesting sites typically only promote a small percentage of the companies that approach them. These enterprises act as a sort of a filter that allows an individual investor to focus on the few that remain. Angel investors and their analysts review the flow of deals on a full-time basis. Most smaller investors have neither the time nor the inclination to put forth that degree of effort.
As mechanisms for crowdinvesting proliferate, capital will potentially flow to innovators and entrepreneurs. Dollars will be-redirected. Jobs will be created and innovation fueled. The journey from idea to its fruition in the marketplace will be quicker and more efficient than ever before. Such is the promise of crowdinvesting. Should it achieve only a modicum of its potential, it will inject disruptive innovation into the financial sector that should inspire a revolution of sorts.
Crowdinvesting is an exciting possibility for established and aspiring investors and entrepreneurs alike. UFOstart brings together Start ups, Investors and Experts to create an ideal marketplace to launch an idea. Crowdsourcing, with a focus on crowdinvesting, is a major element of this unique platform. For more on how crowdinvesting might be benefical for you and how we can help you get started, please contact us.
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