The post Best Crowdfunding Platforms for Investors by Eric McConnell appeared first on Benzinga. Visit Benzinga to get more great content like this.
Crowdfunding allows multiple investors to pool their funds and participate in investment opportunities that would have been out of their reach just a few years ago. It also gives startups and entrepreneurs an option beyond the narrow confines of venture capital or large banks to reach their fundraising goals. Many successful startups have used crowdfunding platforms to raise operating capital before making tidy profits for investors. Perhaps that’s why it’s one of the most dynamic investment sectors today. Keep reading to discover the best crowdfunding platforms for investors and see how you can turn a profit in this high-growth sector.
Best Crowdfunding Platforms
- Best for Accredited Investors: CrowdStreet
- Best for a Diverse Range of Offerings: EquityMultiple
- Best for Small Account Real Estate Investing: Streitwise
- Best for Low Cost Real Estate Investing: Diveryfund
- Best for Investment Diversification:StartEngine
- Best for Newer Accredited Investors: RealtyMogul
- Best for Investing in Small Businesses: Mainvest
- Best for Ease of Use: GoFundMe
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8 Best Equity Crowdfunding Platforms
Companies or entrepreneurs raising funds through an equity crowdfunding campaign must do so via an approved crowdfunding website or licensed securities dealer. Most equity crowdfunding offerings are available on authorized websites. A list of some of the best equity crowdfunding platforms and which investors they are best for is below.
1. Best for Accredited Investors: CrowdStreet
Crowdstreet is an online real estate investment platform that lets investors choose from a wide range of real estate investment offerings to crowdfund. Crowdstreet investors are free to buy into managed funds, individual buildings or even build a bespoke investment portfolio that includes both kinds of deals.
CrowdStreet’s platform has a diverse range of property types, ranging from multifamily to office, industrial, self-storage and others.
Best For
- Accredited investors
- Long-term investors
- Investors looking to diversify from stocks
- User-friendly interface
- Diverse investment offerings
- Great investor resources
- Proven performance history
- Many offerings eligible for inclusion in self-directed IRA
- Accredited investors only
- Most offerings require a $25,000 minimum investment
Crowdstreet is an equity crowdfunding platform that focuses on real estate offerings. It is best for accredited investors looking at offerings ranging from managed funds to stand-alone real estate investments (commercial center, apartment complex). Experienced investors can use Crowdstreet to tailor-make their own custom real estate portfolio.
Pros
- User-friendly platform
- Diverse offerings in diverse markets
- Solid history of delivering investor returns
Cons
- Only open to accredited investors
- A $25,000 investment minimum is high for some investors
- Many offerings have long hold periods with limited liquidation options
2. Best for a Diverse Range of Offerings: EquityMultiple
EquityMultiple is a groundbreaking alternative investment platform that leverages high technology to make real estate investing easy to understand and accessible to all investors. The site specializes in offering both short- and long-term growth opportunities that allow hands-on investors to create and diversify their own investment portfolios.
Best For
- Accredited investors
- Hands-on investors
- Investors looking for quick returns
- Investors looking for low buy-in offerings
- Many investments with low buy-ins less than $10,000
- Numerous offerings with pay-outs in less than 12 months
- High-functioning website
- Incredible client support
- Only available to accredited investors
EquityMultiple is an alternative investment platform that utilizes technology to simplify real estate investing for investors. It offers a range of investment options, including short-term and long-term growth, and allows investors to select specific real estate opportunities without the need to purchase properties directly.
Pros
- Fast returns (many offerings pay in less than 12 months)
- Excellent client support
- Smooth running, pro-investor platform
Cons
- Only open to accredited investors
- The $5,000 investment minimum is higher than other platforms
- Fewer offerings than competing platforms
3. Best for Small Account Real Estate Investing: Streitwise
Streitwise is a unique online real estate investing platform that was designed to give investors, both big and small, an equal opportunity to invest in real estate. At its core, Streitwise is a real estate investment trust, but it’s one of the few online real estate investing platforms that is available to non-accredited investors.
Best For
- Investors looking to diversify
- Investors with less than $200k in annual income
- Passive traders
- Consistent quarterly dividends
- Low, transparent fees
- Low investment minimum
- Convenient and easy to use
- Limited offerings
Streitwise is a real estate crowdfunding platform that’s best for investors looking to build a smaller real estate portfolio. This private real estate investment trust (REIT) is open to a wide range of would-be real estate investors.
Pros
- Offerings for accredited and non-accredited investors
- Open to investors outside of the U.S.
- Scheduled to pay quarterly dividends
Cons
- 2% annual investment fee is higher than many competing platforms
- Redemption fees can be high if investors need to liquidate shares
- Fewer offerings than other platforms
4. Best for Low Cost Real Estate Invesitng: Diversyfund
-NOTICE- Benzinga has been alerted that Diversyfund has suspended its monthly dividend. This review will be updated once we investigate these changes to the platform’s dividend payments.
DiversyFund isn’t your average crowdfunding platform. You’ll find that the company puts a twist on the traditional everyday crowdfunding platform, beyond anything you can find online with a simple Google search. You only have to look under DiversyFund’s skin one layer to surmise that DiversyFund is a conscientious developer and sponsor and helps hedge risk through improved vetting.
DiversyFund offers a multifamily real estate investment trust, the DiversyFund Growth REIT, and its main goals are to increase cash flow and resale value. It’ll automatically give you access to multi-million dollar real estate assets.
Best For
- Those looking for an alternative investment beyond stocks and bonds
- Individuals who aren’t sure they want to be landlords in the traditional sense
- Investors who aren’t accredited
- Only need to pony up $500 to get started
- Open to investors all over the world
- No expensive broker fees
- You’ll only be able to access “blind pool” investments, which means that you can’t opt out of specific properties
- There’s only one real investment option, the DiversyFund Growth REIT
The Diversyfund crowdfunding website is best for investors who want to buy into a private REIT whose core assets consist of a large portfolio of multi-family residential properties in multiple geographic markets. One of Diversyfund’s goals is to make Class-A multi-family offerings available to everyday investors.
Pros
- Available to non-accredited investors
- Buy-ins as low as $500
- Experienced, proven management team
Cons
- Long hold period (five years)
- No secondary market to liquidate shares
- Multi-family-heavy portfolio lacks diversity in other real estate sectors
5. Best for Investment Diversification: StartEngine
StartEngine is an equity crowdfunding platform that connects the general public with startups. Equity crowdfunding came about in the wake of the 2012 Jumpstart Our Business Startups (JOBS) Act that gave companies more freedom in how they could raise funds. StartEngine has helped companies raise more than $350 million across 500 offerings via Regulation Crowdfunding and Regulation A+ to date — more than any other platform in this space.
Companies raise funds on StartEngine and later give their shareholders the opportunity to trade, all within the same interface. Investors can discover more than 100 different startups and build their portfolios. It’s open to nonaccredited investors and maintains low investment minimums — as little as $100. StartEngine also provides companies with an opportunity to start a Regulation Crowdfunding offering before moving on to a Regulation A+ raise. To date, more than $350 million has been invested on StartEngine, and the platform boasts more than 500,000 prospective investors.
Best For
- Investors looking to diversify
- Businesses needing investors
- Those who wish to invest outside the stock market
- Investors and businesses connect in real-time
- Can sign up at any time
- Detailed investor presentations
- Low minimums
- Opportunity for companies to raise funds through Regulation Crowdfunding
- Inherently risky and illiquid to invest in startups
- Limited information on companies beyond minimal background checks and anti-fraud checks
- Valuations set entirely by the company raising money — no room for negotiations
The StartEngine equity crowdfunding platform is best for investors who are looking to get involved with investing in pre-IPO startups. This platform is an excellent place to look for high-upside crowdfunded offerings in a variety of business sectors.
Pros
- Famous SharkTank investor Kevin “Mr. Wonderful” O’Leary is a prominent backer
- Incredible diversity of offerings in multiple sectors
- Upside potential of startup investments
Cons
- Startup investing is highly speculative and high risk
- Many offerings have long hold periods
- Limited or no secondary market on most offerings
6. Best for Newer Accreditied Investors: RealtyMogul
Get started
securely through RealtyMogul’s
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RealtyMogul’s crowdfunding platform is best for non-accredited or smaller investors who want to participate in institutional quality real estate offerings that have traditionally only been available to accredited investors with deep pockets. It is also an excellent option for real estate investors looking for passive income.
Pros
- Available to accredited and non-accredited investors
- Impressive diversity of offerings
- Low buy-ins in relation to institutional quality assets
Cons
- Investor fees can be on the high side (approaching or exceeding 2%) in some cases
- Many of the most appealing offerings have high buy-ins ($50,0000+) and are only available to accredited investors
- Newer platform lacks the track record of some competing sites
7. Best for Investing in Small Businesses: Mainvest
Mainvest allows people to invest in local small business with a minimum investment of only $100.
Best For
The Mainvest investment platform is best for investors who want to generate passive income while also crowdfunding small to medium-sized local businesses all over the country. This platform makes money for investors by pooling their capital and lending to small businesses, then paying investor income based on the loan interest.
Pros
- Open to non-accredited investors
- Buy-ins as low as $100
- Open to individual retirement account (IRA) contributions
Cons
- High risk profile of the loans
- Many small businesses are subject to local economic pressures that can threaten investor returns if those pressures prevent the business from paying loans on time
- No mobile app
8. GoFundMe
The GoFundMe platform is best for people or investors who wish to support a small business or a cause financially. It is more a fundraising site than an investment platform. In many cases, the payoff for GoFundMe campaigns is not equity in a business but access to the product the business offers or some other inducement.
Pros
- Open to everyone
- Low minimum contributions
- Widely known
Cons
- Is a charitable platform, not an equity crowdfunding platform
- Not geared toward investor return
- Many campaigns are not business-oriented
What is Equity Crowdfunding?
Equity crowdfunding is the process of raising capital from a wide swath of investors by offering future equity shares in a startup or company in exchange for investor capital. If the startup hits certain targets as specified in the shareholder agreement, (a successful exit, initial public offering) the investor’s contribution becomes equity in the company.
Equity crowdfunding investments were made possible by a provision in the Jumpstart Our Businesses and Startups Act of 2016 that allowed startups to raise up to $5 million in through U.S. Securities and Exchange Commission (SEC)-regulated offerings. These offerings, known as Reg A, Reg A+ and Reg CF, are only available to investors through licensed securities brokers or an SEC-authorized crowdfunding website to act as a payment processor.
Companies and startups that wish to run crowdfunding campaigns must be vetted by the SEC before they can make an offering available to the public. Many of the best equity crowdfunding platforms also have secondary vetting requirements that startups must meet before they accept the offering on the platform.
Who Should Invest in Crowdfunding Platforms?
A wide profile of investors could consider investing in crowdfunding platforms. If you are looking for high-upside opportunities with minimal buy-ins, or you are looking to diversify your portfolio from low-to-mid-risk holdings, equity crowdfunding could be an option for you. It’s also another way to get early equity in dynamic startups that may be big names in a few years. Equity crowdfunding could be for almost everyone.
What Makes a Good Crowdfunding Platform?
When it comes to what makes a good equity crowdfunding platform, user-friendliness and transparency should be at the top of the list. Potential investors should be able to easily browse the platform, review investment offerings and access the information they need to make a decision about the offering. That includes being upfront about charges, such as a platform fee or payment processing fee that comes with an investment offering.
Another important aspect of a good crowdfunding platform is vetting. Does the platform do secondary vettings of potential offerings after they receive SEC approval? The best equity crowdfunding platforms only accept a small fraction of the offerings that are submitted for consideration. Ideally, a platform will be headed by experienced people who have proven themselves either running startups, investing in startups or both. The platform should have a responsive and robust client service operation.
What is the Best Equity Crowdfunding Platform for You?
The good news about choosing the best equity crowdfunding platform for you is that there are so many platforms in so many sectors to choose from. One way of assessing which is the best platform for you is by starting off with a few important questions:
- What are your investment goals?
- Are you an accredited investor?
- How much money do you have to invest?
- What sectors do you want to invest in?
- What is your risk tolerance (wealth building, passive income)?
When you can answer all these questions, it won’t be difficult to pare down the list of equity crowdfunding platforms and figure out which one is best for you. Then you can begin browsing offerings and looking for one or more that fit your investor profile. The good news is, that no matter which platform you choose, you will enter an investment sector that is dynamic, exciting and full of opportunity.
Frequently Asked Questions
Can you make money investing in crowdfunding?
Yes, you can make money investing in crowdfunding; lots of money. Equity crowdfunding allows investors to take advantage of real estate or startup offerings with tremendous potential upside for wealth building, passive income or both.
Is crowdfunding worth it?
A well-run crowdfunding campaign can certainly be worth it in terms of effort from the campaigner and potential pay-off for the crowdfunders and investors. However, a lot goes into a successful crowdfunding campaign, including planning and clear-eyed risk assessment.
How do crowdfunding platforms make money?
Crowdfunding platforms can make money in a variety of different ways. In most cases, they charge a platform fee or payment processing fee to investors, the companies making offerings on the platform or both. These fees can vary with different platforms and different offerings.
The post Best Crowdfunding Platforms for Investors by Eric McConnell appeared first on Benzinga. Visit Benzinga to get more great content like this.
