Diversifying your assets often means escaping the stock market. This diversification can look like a lot of things, including real estate investing, vending machine ownership, and — yes — even startup investing.
While you don’t have to have a full-blown venture capital (VC) firm to invest in a startup, there are risks associated with it. About 80 percent of startups survive the first year, and only half survive the first five years, according to the Bureau of Labor Statistics. If your portfolio is adequately diversified and you can take on this risk, you may be interested in one of the best startup investment platforms around.
Investors can start small with MicroVentures, NextSeed, and Republic.
For a $100 minimum investment, you can invest at MicroVentures, NextSeed, or Republic. The three have a low minimum buy-in in common, but they do have key differences.
MicroVentures provides equity crowdfunding opportunities for private market companies. If you’re an accredited investor, you can put more into your favorite opportunities. Also, you can access secondary markets for late-stage startups that are en route to the public markets. Available investments include 23andMe, Bloom Energy, BitPay, Redfin, and even MicroVentures itself.
Meanwhile, NextSeed focuses on providing investment opportunities for small-to-medium sized local businesses. Debt investments can offer regular cash payments (similar to dividend investing, but with a different kind of risk). The cool thing about NextSeed is it gives you the opportunity to invest locally, meaning you can get a stake in companies you see and visit in person.
Equity investment platform Republic bought out NextSeed in 2020. Republic also has a $100 minimum but focuses on startups, real estate, video games, and crypto. Toast, North Carolina beach investment opportunities, Upshift, and more can be found on the Republic platform.
AngelList Venture and Propel(x) are good for accredited investors.
If you’re an accredited investor, you have more off-market investment opportunities. AngelList and Propel(x) are two of them.
You may have heard of AngelList for its talent search platform, but it also has a venture arm, which allows everyday investors to access potentially lucrative opportunities. Invest in rolling funds, managed funds, and deal-by-deal syndicates.
Propel(x) lets accredited investors buy into tech startups. In an attempt to reduce risk associated with off-market tech startup investments, the platform sources co-investment opportunities from its network of financial institutions and VC firms.
Pro tip: There are a few ways to become an accredited investor. According to the U.S. Securities and Exchange Commission:
- You can have an earned income of more than $200,000 (or $300,000 together with a spouse or spousal equivalent) in either of the past two years and expect to do so again
- You can have a net worth of at least $1 million, either individually or with a spouse or spousal equivalent
- You can hold in good standing a financial professional license (either Series 7, 65, or 82)
At the end of the day, investing in startups is a riskier business than you might realize. However, reserving a portion of your portfolio for a startup investment could be beneficial — if you select the right companies, that is. VC operates on the premise that three or four out of every 10 investments will fail, but the ones that succeed will hopefully see big enough returns to make up for it. Keep that in mind as you enter the startup investment space.