In this article, you will learn How to Invest in Startups without being wealthy for as low as $100
- MicroVentures
- Wefunder
- SeedInvest
- Republic
- NextSeed
- Invest in low-initial-investment mutual funds
- Treasury securities
- Consider a 5% return with Worthy Bonds
- Invest in Real Estate
- How Much to Invest in Startups
The internet today is filled with stories of how startups have enriched many of their investors. When you go through these stories, you are already thinking of how you will become an investor and get your share of this golden opportunity.
But the challenge you face is the huge sum that might be needed for you to invest in a startup. Many individuals have the opinion that huge capital is needed to invest in a startup but in reality, you can invest in a startup with the little you have.
One of the keys to achieving this or building wealth in general is to set money aside weekly and even cut down on your spending as much as possible. It might involve starving yourself of some expensive habit just to achieve the greater good.
When you have succeeded in setting some amount aside, it is now time to invest it in a startup of your choice. But the question is, how can you invest such a small amount to help earn like the companies in Wall Street and Silicon Valley?
Putting your money to work is really a simple task, you just need to figure out the investing method that suits your finance and your lifestyle, since investing comes in different forms. Some of them might involve opening a savings account, investing in your retirement or the real estate market.
Before investing your money in any startup, it is important for you to note that many startups fail and leave investors with nothing. It is a high-risk, high-reward kind of endeavor. The good part is that some startups allow you to get your money back if a company is not successful in raising sufficient funds, and if they guaranteed the return of your money.
How Much to Invest in Startups
To help protect the amount of cash you can risk at a time, the Securities and Exchange Commission (SEC) limits how much you can invest in any 12-month period. This limit could be as low as $2,200 or as high as $107,000 depending on your income and net worth.
Some new startups will require investors to pour in a huge sum of money to sustain their business, but there are platforms that can help you invest the little amount that you are able to raise at the moment.
It is also important for you to note that even though you will not become one of the richest men on earth within a short period of time, investing in these young startup provides 2 interesting experiences. Investing helps diversify your broader investment portfolio and give you the satisfaction of supporting a young company you believe in.
Read Also: The 7 Best Investment Banks of 2020
This article is going to talk about some platforms that make it easy for you to invest in a startup with the little you have, even with as little as $100. That sounds unbelievable, right? Well stay with me and find out.
MicroVentures
MicroVentures provides you with a great opportunity to invest in a startup whether you are a beginner in the investment business or you have a measure of experience. Investment on this platform can be done with as little as $100.
The company has dozens of companies to invest in, ranging from a maker of live-action mobile sports games, a digital marketing and tradeshow company, and a manufacturer of high-end tequila.
The platform was founded in 2009 for accredited investors and was an early funder of many top companies, including Twitter. It remains quite selective about the number of companies approved for investment.
Like other platforms, MicroVentures offers information on each investment including the company’s fundraising goal, and the number of days left in the investment round.
In most cases, a startup will offer details on how it intends to spend the money it raises. Many companies will also offer perks to investors, such as free products or invitations to exclusive events.
Wefunder
Similar to MicroVentures, Wefunder has opened its door for the investor of different pocket sizes with a minimum of $100. Wefunder has the goal of funding more than 20,000 startups by the year 2029.
Through Wefunder, an average investor can inject capital into a wide range of companies. At last glance, it was accepting investments into dozens of companies including a fan-owned entertainment company, a vegan marketplace, a dog cancer cure, and a brewing company.
The platform allows an investor to purchase stock (with dividends or no dividends), convertible notes, or debt. Wefunder has accepted $110 million in investments since 2012, supporting over 300 companies.8
When you invest, money is placed in an escrow account. If the company succeeds in raising enough funds, your investment goes to the startup. Otherwise, you can get your money back.
SeedInvest
When investing in a startup, security is one thing that most new investors tend to worry about. SeedInvest takes that worry away from them. The platform accepts less than 1% of companies that seek funding through the platform.
SeedInvest is a crowdfunding platform that allows individuals to invest in early-stage companies that have been pre-screened for potential viability
The platform also has more than 250,000 investors, with more than 150 companies successfully funded. SeedInvest made sure that the platform is very easy for users to navigate. Here is how.
When you sign up for an account on SeedInvest, you are presented with a list of companies seeking money. Many companies are open to receiving investments from anyone, but some require large investments and are open only to accredited investors who had an income exceeding $200,000 in each of the past two years.
You are provided with a “pre-money valuation” as well as the total value of funds being sought and the amount already raised. Each company has its own minimum investment requirement and a time by which the money needs to be raised.
SeedInvest takes your investment options a step further by building a portfolio of investments through the company’s auto-invest feature, in case you are not interested in investing in just one startup. All that is required is a minimum investment of $200 and there is a 2% processing fee for each investment.
SeedInvest touts the importance of diversification, recommending that you invest not in a single startup, but a portfolio of up to 25 companies.
Republic
All the platforms we have discussed in this article all have one thing in common, the minimum investment is $100. Well, that is about to change with the Republic. You will be surprised to know that with as low as $10 you can invest in a startup on the Republic platform. Here is a little background information about the platform.
The company was founded by alumni of AngelList, the popular investment platform for accredited startup investors.
To assure investors of the safety of the startups registered on the platform, Republic says it selects the companies you can invest in through a four-step screening process that analyzes a firm’s founders, product, mission, and proof of growth. It then performs lengthy due diligence before putting a company up for investment.
Read Also: What to do when your Business Fails
Apart from the investment option on the Republic platform, you also enjoy features like six different investment groups and provide for discussion, ideas, and advice between investors. Group members are also encouraged to invest together.
NextSeed
NextSeed is debt financing crowdfunding. Basically, you’re making loans to startups. Their offerings are a bit more limited; as of June 27, there were just three companies you could invest in — a co-working concept, a wine shop, and a restaurant.
You don’t get any shares in the companies, but you do provide needed funding to cool companies and guaranteed returns. NextSeed is free to invest with.
Invest in low-initial-investment mutual funds
Apart from platforms that allow you to invest in a startup with little amounts, there are other investment opportunities you can take advantage of with your small cash. One of such options is Mutual Funds.
The difference between mutual funds and the earlier discussed platforms is that Mutual funds are investment securities that allow you to invest in a portfolio of stocks and bonds with a single transaction, making them perfect for new investors.
One of the factors that discourage many investors is that many mutual fund companies require initial minimum investments of between $500 and $5,000. If you’re a first-time investor with little money to invest, those minimums can be out of reach.
But the good news is that some mutual fund companies will waive the account minimums if you agree to automatic monthly investments of between $50 and $100.
Automatic investing is a common feature with mutual fund and ETF IRA accounts. It’s less common with taxable accounts, though its always worth asking if it’s available. Mutual fund companies that have been known to do this include Dreyfus, Transamerica, and T. Rowe Price.
An automatic investing arrangement is particularly convenient if you can do it through payroll savings. You can typically set up an automatic deposit situation through your payroll, in much the same way that you do with an employer-sponsored retirement plan. Just ask your human resources department how to set it up.
Treasury securities
Not many small investors begin their investment journey with US Treasury securities, but you can. You’ll never get rich with these securities, but it is an excellent place to park your money—and earn some interest—until you are ready to go into higher risk/higher return investments.
Treasury securities, also known as savings bonds, are easy to buy through the US Treasury’s bond portal Treasury Direct. There you can buy fixed-income US government securities with maturities of anywhere from 30 days to 30 years in denominations as low as $100.
You can also use Treasury Direct to buy Treasury Inflation Protected Securities, or TIPS. These not only pay interest, but they also make periodic principal adjustments to account for inflation based on changes in the consumer price index.
And as is the case with mutual funds, you can also arrange to have your Treasury Direct account funded through payroll savings.
Consider a 5% return with Worthy Bonds
For as little as $10, you can invest in Worthy Bonds. Worthy Bonds are fixed interest bonds that fund loans for creditworthy American businesses. The bonds have a term of 36-months, but interest is paid weekly and you can withdraw your money at ANY time, without penalty. Buy as many $10 bonds as you’d like.
The simple idea is that Worthy is going to take the money you use to buy bonds and invest it into companies with a greater return than 5%. They win, you win and it’s a fixed rate so you know the rate of return every day.
The platform is open to all U.S. investors and can be a great way to diversify your portfolio with a low-risk solution. Worthy only invests in fully secured loans (liquid assets having a value significantly greater than the loan amount), so the quality of loan and investment is always high caliber
Invest in Real Estate
You might think that real estate investment is for the rich and wealthy, but real estate actually presents different options to help you invest your little funds and make returns in the long run. One of such options is crowdfunding. Even if it does not appeal to you at the moment, it is an investment opportunity worth looking into.
To make this easier for you, there is Fundrise’s really easy-to-use online platform. All you have to do is raise the starting minimum investment of $500.
Read Also: 8 Places to find Investors for your Startup
So if you’re an unaccredited investor, you can buy properties without paying those very large fees that end up being a deal-breaker if you want to start dabbling in real estate. By managing your own portfolio, the fees come to just 1% and Fundrise always offers a 90 days satisfaction guarantee.
Do diversify, but choose your investments wisely. Blindly spraying and praying across every pitch any entrepreneur presents is virtually guaranteed to result in a myriad of losses, even if one win makes up for those, and more. Instead, consider going heavy into a select handful that you really believe in.
Diversify across different industries such as healthcare startups, real estate startups, and something else just to be buffered from potential industry fluctuations. But focus on funding individual companies with promise. By putting your capital and energy into fewer select firms you’ll make far more positive impact on the success of that venture.
