Many of the richest people in modern history got their start from investing in or building startups. Most famously, many of the “sharks” have rags-to-riches stories about starting a small business that made them millions. Mark Cuban’s parents were immigrants before he sold his company, broadcast.com, for billions. Daymond John was raised by his mom, a flight attendant, before starting FUBU and becoming who you see today. Kevin O’Leary was primarily raised by his mother after his parents divorced due to his father's alcoholism. Barbara Corcoran grew up with 10 brothers and sisters and working-class parents but still managed to come out on top despite a number of setbacks.
Even those who started from more affluent backgrounds hit new levels of wealth from startups. Elon Musk’s father was an African real estate developer who made much of his wealth in emerald mines. However, the controversial billionaire skyrocketed to his current status after making millions in PayPal Holdings Inc. PYPL and a startup called Zip2. Musk co-founded the online bank X.com, which merged with Confinity to form PayPal, an ever-prominent payment processing company. eBay later bought PayPal in 2002 for $1.5 billion.
However, until recently, the only way anyone would be able to make money in the world of startups was to be rich enough to be an accredited investor and invest in startups or build a startup yourself. For every success story, there are 10 that tried and failed. Many people simply might not be in a position to take on that risk directly.
However, that doesn’t mean there aren’t millions of people out there who would gladly invest in startups hoping to diversify their portfolios and grow their wealth. Fortunately, platforms like SeedInvest and StartEngine (the world’s leading startup investing platform who recently acquired SeedInvest) are now making it easy for anyone to invest in startups.
According to recent statistics released by SeedInvest, they are apparently doing incredibly well, too.
Over 25 Exits On SeedInvest
SeedInvest is one of the earliest equity crowdfunding platforms to open startup investing to the public, and it recently published a list of all the companies that have raised on its platform. The list consists of 165 startups that have raised cash and 29 that have either been acquired, IPO’d or are gearing up for an IPO in the seven or so short years the platform has been in operation.
This doesn’t mean that money was lost on the other 137 startups; rather, they just haven’t IPO’d or been bought out yet. Roughly 18% of the companies raising on the platform are producing an exit, which is an extremely good ratio.
When investing in startups, the rule is that about 10% of the companies in your portfolio will make up for the other 90% or so that fail. If you invest in 20 startups, on average, only two or three will ever make it to an exit, and the rest will fail. However, those two or three startups typically give a high enough return to make up for the rest of your portfolio.
For example, if a seed-stage startup IPOs as a unicorn, you’re typically looking at gains around the 10,000% mark. If you invested the same amount in every startup, that one 10,000% startup would pay for the rest of your portfolio and provide a nice return on your investment. With SeedInvest nearly doubling that return percentage, it’s likely investors are doing incredibly well.
Notable Equity Crowdfunding Exits on SeedInvest
The majority of the companies were smaller companies that got acquired before the majority of people likely ever heard of them. However, you might have heard of a few of these companies.
The most notable exit is Heliogen Inc. HLGN which IPO’d after receiving an investment from Bill Gates. Knightscope Inc. KSCP is another that IPO’d in early 2021 after raising from the crowd on SeedInvest.
While you might not have heard of the companies that were acquired, you are probably aware of the companies that acquired them. Scoot was a micro-mobility scooter startup acquired by Bird Global Inc. BRDS, a prominent micro-mobility startup in several major U.S. cities. Gatsby is an options trading platform that raised on SeedInvest and then was acquired by eToro, a massive social investing platform.
A few massive names just haven’t IPO’d yet. For example, if you are in the crypto world, you have almost certainly heard of BitPay and Wyre. These startups raised some of their earliest rounds on SeedInvest, and Wyre recently had a deal fall through, valuing the company at $1.5 billion. GroundFloor is one of the world’s leading real estate investment platforms and has also raised cash on numerous occasions.
How Can You Invest in Startups?
You can technically add one more to that list of 28 because SeedInvest also raised from retail investors and was recently acquired by StartEngine, the world's largest equity crowdfunding platform. If investing in startups interests you, not only can you invest on StartEngine’s platform, but you can also invest in StartEngine itself. Investing in startups is as simple as making an account, finding great startups on their site, and investing money.
Photo by Danny Howe on Unsplash
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