They consider several decisive agents, such as management, the size of the market and whether the product has what it takes to make money. Furthermore, they look for opportunities with the lowest risk factors.
The way that VCs measure, evaluate and try to minimize risk can vary depending on the type of fund and those making the investment decisions. Their goal is to tone down the risk while reaping in big returns.
This is where online investing platforms come and lend a hand. What these platforms do is facilitate investments and assist in the funding process with transparency and ease.
Even though equity crowdfunding platforms such as FundersClub, and AngelList have facilitated online venture capital investing, this trend still remains at its early stages. Most VCs still prefer to invest in startups at their latter stages after they must have had their products approved by the crowd.
For instance, on the FundersClub platform, while VCs have invested over US$750 million in startups, that have raised funds previously from their website, the total funds invested directly through the firm’s platform by both retail and institutional investors’ stands at over US$42 million after 3 years of operation. There is, therefore, more room for the adoption of online investing by VCs and angels who are still syndicating most of their deals offline.
In particular, by investing through online crowdfunding platforms, VCs can co-invest with hedge funds and accredited investors, both within the US and across the globe. This would, in turn, cause a spike in their funding volume, as well as increase the deal size to amounts greater than what they’ve experienced so far under the regular offline syndicated deals.
We could very well start seeing more deals averaging US$100 million. This may even cross into the billion dollar unicorn zone as VCs break into online investing.
As an early stage equity expert, I work with funds, fund of funds, venture capital funds, seed funds, hedge funds, sovereign wealth funds, institutional investors and family offices globally. As a result, I can provide professional consultancy to VCs, angels and other investor groups looking to co-invest online (through crowdfunding platforms) with other VC firms, angels, family offices, pension funds and accredited investors.
VC investment activities over the years have been mostly restricted to specific industries that offer significant returns. However, industries such as real estate, which used to be closed to VC investment have, lately, piqued their interest with substantial amounts raised in funding rounds by innovative real estate tech startups.
Crowdfunding has been one of the most successful niche in the real estate tech space, accounting for over 42% of funds raised (equivalent to $134 million raised) in the first half of 2015. This is according to a report by RE:tech, a firm that tracks the impact of technology on the real estate industry.
Startups such as WealthForge, FundAmerica, CrowdEngine, Tilt have been at the forefront of providing innovative technology solutions that power online private company investments. They have provided compliant technology for real estate crowdfunding platforms in accordance with the SEC regulations.
I have spent the past 4 years researching for the best tech platforms compliant with SEC and FINRA regulations to allow money to be invested online, and have found those platforms that guarantee investments are secured, and offer the best returns in the industry. Those looking either to invest in innovative fintech platforms in various industries, or that are looking to incorporate technology into their investment processes, will find useful expert advice needed to gain proper footing in the dynamic fintech investing space.
The most lucrative investment opportunities in today’s evolving venture capital industry landscape will go to firms that are able to develop innovative strategies, especially those able to leverage technology to access a wider market, as well as increase their funding volume. Equity crowdfunding is only the beginning of a revolution in the automation of online investment set to explode across various investor groups and industries.
You can’t afford to be left behind as an investor in today’s dynamic landscape. Get connected to experts in the field who will give you an advantage in the development of the current online fundraising technology.