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EquityNet Review 2021: Best Startup Investing Platform?

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EquityNet
  • Minimum Investment
  • Accessibility
  • Transparency
  • Investment Fees
  • Offering Selection
4.1

Summary

EquityNet is the longest-standing startup investing platform in the US. The platform allows investors to browse dozens of active offerings and easily compare them to one anther.

Accredited investors are able to apply for an account on the platform and begin investing with as little as $5,000 if their accounts are approved. EquityNet only approves approximately 1/3 of investors for accounts on the platform.

Pros

  • No fees for investors
  • Standardized platform

Cons

  • Outdated interface
  • Partially funded campaigns are allowed
  • Accredited investors only

When trying to decide what stock to invest in, it’s pretty easy to compare companies side-by-side and get an idea for which one you think is the better investment.

With standardized metrics like a P/E Ratio, market capitalization, and pricing charts, it’s easy to identify the differences between companies and make an informed decision.

The same cannot usually be said for startups.

Given that private companies don’t have the same reporting requirements as public companies, potential investors rarely have enough information to make a fair comparison.

However, the EquityNet startup investing platform aims to solve that problem. In this EquityNet review we’ll provide a closer look at this startup investing platform to help you determine whether it can be an effective tool for investing in startups.

EquityNet Review: Platform Highlights

  • EquityNet provides a standardized platform for screening and investing in startups
  • The platform has a successful 17+ year track record of raising $600+ million
  • Investors must apply for access to the platform (only 1/3 are accepted)
  • Minimum investments start at $5,000 and may vary for each deal
  • All investors must be accredited in order to utilize the EquityNet platform

EquityNet Logo

What is EquityNet?

Founded in 2005, EquityNet is the first startup crowdfunding platform in the United States. Over the last 17+ years, over 1,000 companies have raised over $600 million through the EquityNet platform.

During that period, 25,000+ investors have had access to many companies that have gone on to deliver significant gains. These startups come from a variety of different industries, giving EquityNet investors the ability to diversify across different sectors or hone in on their interest areas.

At any given time, there are dozens of active deals on the platform for investors to browse. Each of these deals includes standardized information, allowing investors to quickly compare startups to one another.

This is one of the areas where EquityNet truly shines. In the past, it would have been extremely difficult to get the same matrics from dozens of different startups in order to compare things like revenue growth, gross margin, and MRR.

However, EquityNet brings investors all of that information and more in a way that makes it easy to compare companies side by side.

How Does EquityNet Work?

In order to start investing in companies through EquityNet, investors need to create an account on the platform. This requires some basic information about your background and goals as an investor. At this point, EquityNet will need to manually approve your account before you can start investing.

According to their website, EquityNet only approves about 1/3 account requests. In many cases, account requests are denied when investors do not meet the accredited investor qualifications. EquityNet requires all investors to certify their accreditation status when creating an account.

In order to qualify as an accredited investor, you have a couple of different options. The two most common of which are the income requirement or the net worth requirement.

In order to meet the income requirement, an investor must show an income of $200,000 or more for the last two years. If the investor is married, the investor and their spouse must have a combined income of $300,000 or more.

The net worth requirement states that an investor’s net worth must be greater than $1 million to qualify as an accredited investor. This amount must exclude the value of your primary residence.

Once your account has been approved, you’re able to browse listed startups and start investing with as little as $5,000.

One factor that does make EquityNet different from many other startup investing platforms is what happens when a company does not meet their funding goals. With most platforms, if a company does not meet their goal then your funds are returned and no investment is made.

However, with EquityNet, even if the company does not meet their goal the investment still goes through at the reduced amount.

EquityNet Returns

As the name would suggest, EquityNet investors are making an equity investment into the listed companies. This means that you as the investor own a small portion of the company.

When investing in startup equity, there are a number of important factors investors should be mindful of. The first of which is the substantial level of risk you are taking on.

The failure rate for startups is 90% meaning that 9/10 of the startup equity investments you make will likely go to $0. This is very different from stock market investments where even if your investment goes south, you’re not likely to experience a total loss.

When investing in startups, the odds are very good that your investment will go to $0.

However, nobody would take on this level of risk if there wasn’t the potential for substantial returns. With an EquityNet startup investment, you’re likely only going to see a return in one of two scenarios: acquisition or IPO. Both of these are known as liquidity events and provide shareholders with the ability to sell their position, hopefully for a substantial gain.

If you are an early investor in a company that experiences a liquidity event, you have the potential to generate some very generous returns. For example, if you invested $7,500 into the investing platform Robinhood during their earliest round of funding, that investment would be worth $2.19 million today.

That’s an ROI of over 29,000%!

For this reason, most startup investors will pursue a strategy of investing in many different companies. This allows them to spread their risk and, hopefully, hit it big with at least one of their investments.

EquityNet Active Offerings

EquityNet Fees

One unique feature of EquityNet is that there are no fees whatsoever. Investors do not pay any fees on their investments and startups do not pay any fees to raise money on the platform.

However, EquityNet is not a charity and they need to make a profit. Instead of charging fees or commissions, EquityNet has an optional subscription that startups can pay for. This grants them access to premium features and access to EquityNet’s team of startup fundraising specialists. Revenue from these subscriptions covers the cost of operating and maintaining the platform for investors and entrepreneurs.

Legally, EquityNet is set up differently than most other startup investing platforms. Instead of operating as a crowdfunding portal or broker-dealer, EquityNet is solely a subscription service. This allows them to avoid many of the regulatory hurdles that investment platforms face and is one of the primary reasons why they are not able to collect revenue outside of their subscriptions.

As a result, investors can rest assured that there are no additional hidden fees or costs from the platform.

EquityNet Pros

  • Access to dozens of different startups to invest in at any given time
  • Standardized view for comparing startups side by side
  • No fees for investors or startups to use the platform

EquityNet Cons

  • Only accredited investors can invest on the platform
  • Older interface compared to many newer startup investing platforms
  • Investments will still go through if the campaign does not reach the full funding amount

EquityNet Review: Final Thoughts

Accredited investors have no shortage of startup investing platforms to choose from. EquityNet presents another option for this group to begin investing in startups across a variety of different sectors and sizes.

However, the platform is significantly different from many of the other options out there.

On one hand, the no fee structure can be advantageous for investors concerned about paying management fees or carry to an investment platform. The standardization of each startup also helps investors compare between companies quickly.

On the other hand, a less than 1/3 chance of EquityNet approving your account may be a turn off for some investors. On top of that, with so many companies listed on the platform at any given time, a substantial percentage of them will not reach their funding goals.

That said, applying for an account is totally free free. So if EquityNet seems interesting, it may be worthwhile to sign up and check it out.

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