SeedInvest Fees Explained

SeedInvest Fees Explained 2021: How Does SeedInvest Make Money?

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Although SeedInvest only offers a few startups for investment at any given time, it remains one of the most popular startup investing platforms.

This is largely due to the strict screening process they have in place for startups. Currently, the platform accepts fewer than 2% of companies for listing on the platform making them one of the most highly-vetted platforms.

As a result, investors have confidence that the few startups that are listed have been closely examined.

However, one area where investors may not have as much confidence is in the SeedInvest business model. Many investors likely have no idea how SeedInvest makes money or what fees, if any, SeedInvest charges.

This article will provide a complete breakdown of all SeedInvest fees as well as all other costs that investors will face on the platform.

To learn more about SeedInvest, read our full SeedInvest review.

SeedInvest Logo

How Does SeedInvest Make Money?

Similar to most other startup investing platforms, the SeedInvest business model revolves around fees. Both investors and startups pay fees in order to use SeedInvest.

In most cases, the fee for investors will depend on the amount invested. For startups, the fee is determined based on the total amount of their fundraise.

There are no commissions or management fees for investing on SeedInvest.

SeedInvest Fees Explained

On the SeedInvest platform, fees are split between both investors and startups. In general, the majority of the fees will be paid by the startup.

Similar to Wefunder’s fee structure, investors cover the payment processing costs and startups cover the cost to operate the platform.

1. Transaction Fee

For investors, the 2% transaction fee is the most apparent cost. This is the only fee that they directly pay.

The transaction fee applies to the total investment amount and caps at $300 per transaction.

For example, if you invest $2,000 into a startup on SeedInvest, you will pay an additional $40 transaction fee. If you invest more than $15,000, you will pay $300 in transaction fees.

There are no hidden fees or additional costs for investors on SeedInvest.

SeedInvest Deal

2. Placement Fee

Startups raising on SeedInvest pay two different fees when raising on the platform. These include a placement fee and an equity fee.

There is a 7.5% placement fee on all funds raised through SeedInvest. This is a cash fee based on the startup’s total funding amount.

For example, if a startup raises $1,000,000 on the platform, the placement fee is $75,000.

3. Equity Fee

Additionally, startups pay a 5% equity fee as a part of their fundraise. The fee is known as an equity fee because it takes the form of equity in the business.

Companies multiply their total funding amount by 5% to calculate the total amount of equity that SeedInvest receives.

For example, if a company completes a $1,000,000 fundraise, the fee is $50,000 of equity in the business.

What If The Startup Doesn’t Reach Their Goal?

In the case of a startup not reaching their goal, investors receive back their entire investment along with the transaction fee.

For instance, say you invest $2,000 and pay a $40 transaction fee. If the fundraise is not successful, you receive the entire $2,040 back.

Startups also do not pay either fee if the investment does not go through. This is because the fees are only paid after a raise is completed.

SeedInvest Fees: Final Thoughts

As far as startup investing platforms go, SeedInvest is certainly one of the most popular. The thorough vetting process and curated selection make it an attractive place for many investors to look.

However, the fees for investing on the platform are somewhat higher than their competitors.

A 2% transaction fee is nothing new. Wefunder has the same fee for investors.

However, a 7% placement fee and a 5% equity fee are certainly higher than many of their competitors. StartEngine’s fee structure includes the same 7% service fee, but the equity fee is only 2%.

Of all of the major platforms, SeedInvest has some of the highest fees. However, many investors and startups feel that they are getting their money’s worth from the platform.

In the end, the decision to use the platform or not comes down to the individual.

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