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SeedInvest Review 2021: Best Startup Investing Platform?

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SeedInvest
  • Minimum Investment
  • Accessibility
  • Transparency
  • Investment Fees
  • Offering Selection
4.2

Summary

SeedInvest is a startup crowdfunding platform that allows investors to access thoroughly-vetted startups with as little as $500. Through the platform you can invest in highly innovative companies in virtually any industry.

As one of the largest startup investing platforms, SeedInvest’s differentiating factor is the vetting process they use when evaluating startups. Most platforms will accept any company that meets basic financial qualifications.

However, SeedInvest accepts fewer than 2% of startups for listing on the platform.

Pros

  • Successful long track record
  • Thorough vetting process
  • Low minimum investment

Cons

  • Higher fees for startups
  • Some investments limited to accredited investors

With everyday folks looking for additional ways to build wealth and invest creatively, startups are on the radars of more investors. Investments in early-stage companies can be some of the most profitable out there. However, this does not come without risk.

The failure rate for startups is 90%. As a result, if you invest in 100 different startups, odds are that 90 of those investments will go to $0. But even just one winner could make all the difference.

Early investors in Facebook and Uber went on to make hundreds of millions (or even billions) of dollars. In many cases, this was the result of an investment of only a few thousand dollars.

In the past, these kinds of investments we available exclusively to the ultra-wealthy. You needed to have money and connections to even know about these deals. However, over the last 10 years, this has changed substantially with the rise of startup investing platforms.

SeedInvest is one of the largest platforms that allows everyday investors to allocate some of their portfolios to startups. In this SeedInvest review, we’ll take a closer look at how the platform works and determine whether it is an effective place to invest in startup companies.

SeedInvest Review: Platform Highlights

  • SeedInvest is one of the most prominent startup investing platforms in the marketplace
  • To date, 500,000+ total investors have invested over $300 million on the platform
  • Non-accredited investors are able to participate in most of the deals on SeedInvest
  • SeedInvest applies a very strict due diligence process and accepts fewer than 2% of startups that apply for listing
  • Users can start investing in startups with as little as a $500 minimum investment

SeedInvest Logo

What is SeedInvest?

In essence, SeedInvest is a platform that connects startups with investors. If a startup is looking to raise money, they can apply to be listed on the SeedInvest platform for investment. Additionally, the SeedInvest venture team is constantly on the hunt for promising startups to list.

This strong due diligence process is one of the more compelling reasons to use SeedInvest. SeedInvest’s venture team sources its deals in a number of different ways.

First, they receive referrals from venture capitalists and other prominent people in the startup investing community. This is thanks to their significant reputation in the industry.

Next, their team keeps a pulse on up-and-coming companies and establishes relationships with those that show significant promise. This is another route that is not available to the majority of everyday investors. We don’t have the level of connection necessary to be in the know about these deals.

Last, there is a significant stream of organic traffic to SeedInvest. When companies are looking to raise money, SeedInvest is often one of the first places they look. However, oftentimes companies are not accepted as a result of SeedInvest’s strict criteria. It’s not uncommon for SeedInvest to see companies that they rejected pop up on other startup investing platforms that potentially have lower standards.

How Does SeedInvest Work?

As an investor, you are able to browse all of the available deals on the SeedInvest platform. Each deal provides substantial information about the startup’s finances and vision to allow investors to make an informed decision. Despite SeedInvest’s strict review process, it’s important that investors do their own due diligence before investing.

After settling on a company to invest in, it’s a seamless process to enter the amount you want to invest along with some basic information. Then, you’ll be required to confirm that your income or net worth is high enough to justify your investment. Unless you are an accredited investor, you’ll need to keep your investments below 10% of the lower of your income or net worth. For example, if your income is $50,000 and your net worth is $500,000, you will need to keep your investments to $5,000 or below.

You will be able to fund your investment with a bank transfer, credit/debit card, or a wire transfer. From there, your investment will be held in an escrow account until the company meets certain requirements. At that point, your funds will be released to the company and you will be an investor.

From here, SeedInvest recommends diversifying your startup portfolio across a minimum of 10-15 investments. This mitigates the risk of you losing 100% of your investment due to the high failure rate of startups. While you could manually look for this many startups to invest in, there is a simpler method SeedInvest provides investors looking for diversification.

SeedInvest Auto Invest

SeedInvest Auto Invest

One of the unique features that SeedInvest offers investors is their Auto Invest feature. With Auto Invest, you’re able to easily build out a portfolio of up to 25 different startup investments. This is done by investing a small amount across many of the companies listed on the platform.

In order to participate in SeedInvest’s Auto Invest feature, you’ll need a minimum of $1,000 to invest. There are no additional fees to take advantage of this feature. Once you sign up for Auto Invest, you’ll be able to configure your settings based on the types of startups you’re interested in investing in.

Then, when new startups are listed that meet your criteria, you’ll automatically invest a portion of your portfolio in that company. At any point you are free to opt-out of any investment, add more funds, or withdraw from the program entirely. So the platform can be as active or passive as you would like.

SeedInvest Returns

When investing in startups, the majority of your returns will likely come from a small selection of your investments. A recent study from Angel Resource Institute found that 10% of startups typically account for 85% of investor returns. This is another reason why it is so important to diversify your startup portfolio.

The reason for this distribution is that most startups fail. And of those that don’t fail, a tiny minority end up succeeding in a big way. So many investors’ objective is to cast a wide net and hope that at least one of their investments makes it big.

All of the investments on SeedInvest are equity investments, meaning that as an investor you own a portion of the company. Your payoff only comes as a result of a liquidity event in the future. The two most common of which are acquisitions and initial public offerings (IPOs).

In most cases, these events (if they happen at all) will not happen for 3-10 years. As a result, it’s important to take a long-term time horizon on any startup investment you make.

SeedInvest Deal

SeedInvest Fees

SeedInvest’s business model revolves around the collection of fees. Both investors and companies will pay fees in order to take advantage of the SeedInvest platform.

On the investor side, there is a 2% transaction fee for each investment that you make. This is capped at $300 per transaction. If a startup does not meet its funding goal, you will receive a full refund including any transaction fees.

For startups, there are two applicable fees that they will pay to raise money on the platform. These are a placement fee and an equity fee. The placement fee is paid in cash, whereas the equity fee is paid in equity. Both of these fees only apply to successfully funded projects.

The SeedInvest placement fee is a flat 7.5% of the total funding amount from the platform. The equity fee, on the other hand, is 5% of the total funding amount, paid out in equity. For example, if a company raises $1,000,000 on SeedInvest, the company will pay $7,500 in cash and $5,000 in equity.

While these fees on the startup side may seem high, the companies are paying for the massive network that SeedInvest offers. With a track record of 235+ successful offerings, these fees can often be well worth it for companies.

SeedInvest Pros

  • Long track record of successfully funding startups since 2012
  • Attracts more promising startups than many other platforms
  • SeedInvest accepts fewer than 2% of startups
  • Low minimum investment of $500
  • Auto Invest option allows for increased diversification

SeedInvest Cons

  • Higher fees than many other platforms
  • Some investments are only available to accredited investors

Seed Invest Deals

SeedInvest Review: Final Thoughts

As far as startup investing platforms, there are a wide array available depending on your investing style and objectives. For niche-specific sites, to sites that focus on small businesses, to more generic platforms.

However, one of the most important qualities to many investors is the track record of the platform. How long have they been around? What is their track record? Are they consistently finding high-quality companies?

When looking at SeedInvest, they check all of the boxes. With a nearly 10-year track record, over 200 successfully funded companies, and over 500,000 investors on the platform, it shouldn’t come as a surprise that SeedInvest is one of the top platforms out there.

This reputation is somewhat of a self-fulfilling prophecy. As SeedInvest builds a reputation as one of the top platforms, they are able to be more selective in the companies they accept and continue to build their reputation.

On the startup side, this reputation comes at a slightly higher cost with their placement fee and equity fee. However, on the investor side, the small transaction fee is reasonable and keeps the platform accessible to all.

If you’re looking to dip your toes into the waters of investing in startups, SeedInvest is certainly one of the top contenders.