Hi y’all, it's Casey! 👋 I'm back with more info on all things investing.
Back in June the team from Wefunder joined VEST for a session on equity crowdfunding but in case you missed it, I'm here to give you the low-down on what that means and why it’s important.
You can think of equity crowdfunding as Kickstarter for investing. On Kickstarter, when you see an idea or company you love you can contribute money (as much or little as you want) and in return you might get early access to a product or some other perk. Some people have raised tons of money through crowdfunding platforms like this, but at the end of the day the money you put in is just a donation.
Equity crowdfunding is not a donation. It’s an investment that gives you ownership in a company and its future profits. Just like investing in the stock market, if the company is successful, you’ll see a return on your capital. If it’s not, you lose your money. But unlike the stock market, these companies are private, meaning they are much earlier in their development process and not required to report publicly on things like finances or growth.
On the one hand, this makes the investment much riskier (literally 90% of startups fail). On the other hand, it gives you access to equity at a cheaper price and you have the opportunity to win big if the startup does well.
If all of this is talk about equity and returns is conjuring up images of squinting at spreadsheets or the Wall Street Journal, at this point you might start tuning me out and decide that investing just isn’t your thing. If it makes you feel any better, I definitely didn’t think it was my thing either at first!
But if you want my opinion, the most important thing about investing in early stage startups isn’t the possibility of a future payday (which will most likely be years from now, if at all). It’s the ability to support founders through one of the hardest things they will ever do, building something from scratch, and helping bring about a future I'm excited about.
Because you can invest as little as $100 at a time on Wefunder, I usually don’t spend too much time crunching the numbers or digging into the market research, although you can if you want to. Instead, I assess my investment using the “something special” test.
If you have a partner or a best friend, you know that “something special” feeling and how it resonates with you. It’s that feeling you get when someone or something innately makes sense to you and you can’t get enough of it. That’s the feeling I'm looking for when I decide whether or not to invest in startups.
For those of you who are less woo-woo and more practical, think about it like planning a vacation. The money you “invest” in your vacation should feel worth it not only because of your excitement for the trip itself, but for some result you hope to gain from the experience, whether that’s to try something new, to rest and relax, or to spend time with loved ones. Similarly, you should only invest in startups that excite you for what they are doing but also for what the world will gain as a result.
Maybe as you’re reading this you’re starting to feel that “something special” feeling about angel investing. If you’re heart feels warm and tingly, make sure you RSVP for our next VEST Angels session on the app! We’ll connect with one another and meet amazing female founders that you can invest in or support in another way if you choose.
Still wanting to learn more? I highly recommend perusing Wefunder’s FAQ page for a deep dive on all things equity crowdfunding (how it’s legal, how the process works, etc.).
Until next time,
Casey Williams, VEST Angels and D.C. Chapter Lead