How Can Small Investors Access Private Deals With Big Potential?

OurCrowd allows investors to stake a claim in promising startups for as little as $10,000

"Stripe, a payments startup, is one of the most successful companies to emerge from Silicon Valley in a generation. Last year, it hit a valuation of $65 billion. But in the 15 years since it was founded, there has not been a way for most individuals to invest in it," Erin Griffith reported in The New York Times in April.

"It is a problem that has vexed retail investors for years, as startups like Stripe, SpaceX and OpenAI soar to enormous valuations in the private market," Griffith says. "By the time the companies go public a decade or more after they started, their growth has often slowed and their valuations are high."

Even if you can access such deals, the minimum investment is "often very high," James Seyffart, a research analyst at Bloomberg Intelligence, tells Griffith.

One rare access point for such private deals is OurCrowd, a global investment platform that has introduced its worldwide community of over 235,000 accredited investors to opportunities in more than 460 portfolio companies, attracting over $2.3 billion in commitments to date.

The minimum investment in a single startup deal through OurCrowd can be as little as $10,000.

The definition of "accredited investor" varies, depending on your jurisdiction. In the U.S., the SEC sets the bar at someone with an annual income of at least $200,000, or a net worth of $1 million or more. That's because investing in startups is a high-return, high-risk business and investors must be wealthy and sophisticated enough to realize what they are getting into.

Startup companies seeking private investment generally prefer to attract VCs, institutions, pension funds and high net worth individuals who can commit at least six-figure sums. This keeps the company's cap table clean, allowing its executives to concentrate on building their business instead of fielding phone calls from dozens of retail investors.

The result: thousands of would-be investors are locked out of opportunities where startups can sometimes grow by 50x or 100x.

Extending Access

The OurCrowd model blows open this exclusive club, extending access to these potential blockbuster deals to thousands of investors for whom a $100,000 investment in a single company is too high, but $10,000 is attractive.

"OurCrowd is enabling hundreds of thousands of investors around the world to access the exciting venture capital asset class," says Jon Medved, OurCrowd's founder and CEO. "It turns out that if you want to make real money today, you have to invest in startup companies before they go public. In the good old days, you could have invested in something like Amazon or Microsoft, held it from an IPO and made thousands of times your money. But today that’s not possible because the private companies are going public much later."

"The smart money, the smart investor, wants to find a way to get into these exciting dynamic growth stories while they’re still private," Medved says.

While SpaceX did not appear on the OurCrowd platform, members have invested in Axiom Space, selected by NASA to build the successor to the International Space Station and NASA's new generation of space suits; Stoke Space, which is developing reusable rockets for daily launch missions; ICON, which is creating 3D-printed housing for use on the Moon; and Ursa Major, America's only independent provider of aerospace propulsion engines for the commercial space, hypersonic and defense launch markets.

Likewise, OpenAI is not available via OurCrowd, but other promising AI companies have recently attracted millions of dollars of investment and, for investors wishing to further diversify, OurCrowd also offers a dedicated AI Fund.

"It's traditionally very hard for accredited investors and even family offices to invest in individual startup investment opportunities," says Lisa Graston, OurCrowd's associate director for Investor Relations. "You can invest via a VC fund, but then you're relinquishing control and you're dependent on the fund managers."

"Historically, the VC asset class has outperformed the public markets and it's an asset class that's really difficult to access. We are really democratizing the space," Graston adds.

To give investors added comfort, OurCrowd vets every opportunity offered on its platform and selects only a small number, invests its own money in every deal, and co-investors often include many of the world's leading VCs and institutions. By participating through OurCrowd, smaller investors can secure access to some of the best classes of shares, anti-dilution protection and other privileges usually reserved for major shareholders.

"It can be difficult to get a clear picture of the current valuation of a private company when you are investing through secondary marketplaces. When you invest with OurCrowd you are joining a funding round alongside other very experienced dealmakers, reducing the risk of investing at an outsized price compared to the current company value," Graston says.

OurCrowd is not a passive investor. It takes an active role in helping the companies added to its portfolio to succeed, often taking a seat on the board and introducing them to potential partners, customers and future investors.

Recently, OurCrowd extended its offering beyond VC funds to additional private market alternatives, including venture debt, private credit and private equity funds where the entry ticket can start at half a million dollars or more. OurCrowd makes funds from top-tier managers available to investors at much lower minimums, enabling many more people to participate in these opportunities.

"The innovation wave, which is changing all of our lives – whether telemedicine or e-commerce or climate change – is going to be led by entrepreneurs who are backed by smart money and smart investors," Medved says. "OurCrowd is where those entrepreneurs meet the smart money on a global basis, where they can work together to benefit everyone."

For more information about investing in startups with OurCrowd, click HERE.

Featured photo courtesy of OurCrowd.

This post contains sponsored content. This content is for informational purposes only and not intended to be investing advice.

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