Over the past few years, Crowdfunding has become increasingly popular with both businesses and investors. Crowdfunding has a multi-billion market cap that has allowed investors to access the entertainment market while alleviating some of the risks that are inherently present in all investments.
Before the introduction of Crowdfunding, only Accredited Investors, that is, those with a high net worth were able to take part in early-stage off-market, private ventures. The rule of thumb is that in order to be Accredited, one must have $1 million USD or more in net assets NOT including your primary residence (you can’t include your home in the calculation!), AND, you had to earn more than $250,000 USD in annual income AFTER taxes.
The logic was that in order to be Accredited, one must have the intelligence, access, and enough money to lose, in order to participate in the highest earning investments in the world. This was, and is, prima facie (latin, on its face) non-inclusive, elitist, and segregationist.
To put it in perspective, in 2020 only ~10% of all American households were deemed Accredited, controlling roughly $73.3 trillion in wealth in 2020 or 76.3% of all private wealth in America measured by the 2019 SCF!
Today, investing in someone just starting out is possible for both accredited and non-accredited investors. Regulatory agencies around the world such as the Security and Exchange Commission (SEC) started creating programs like the JOBS Act, enabling the vast majority of the world to participate in non-regulated, private crowdfunding investments.
With many traditional forms of investments, there are minimum requirements, with individuals needing to contribute large sums of cash. This can often go up to six figures quite easily. When it comes to investing in Crowdfunding, you can participate with smaller amounts of money and still reap the benefits of your investment.
After COVID-19 arrived, broadly speaking, smart investors began steering away from activist investing to focus on inclusive investing.
Governments and regulators, citing the need for blossoming businesses to have quicker, better access to growth equity, acknowledge there is a highly accelerated need for an accessible, inclusive investment ecosystem. And finally, the SEC is formally exploring Creating a More Inclusive Capital Formation Model - further building on the JOBS Act described above.
Those looking to invest have probably been made aware of the golden rule of investing – diversification. A diverse portfolio means that you can manage risks that are associated with individual stocks.
When it comes to your portfolio strategy, you shouldn't invest all your money in one project or talent. Rather spread your available funds amongst a few talents and watch your investments grow.
If you’re just starting out with investing, you might be wondering, "what is crowdfunding?" Investment jargon probably has your head spinning with terms like cap tables, customer acquisition, or expense ratio.
Dipping your toes into Crowdfunding will allow you to slowly become familiar with more of these terms as you will be participating in early-stage entrepreneurship. You might also find that educating yourself on the topic will shed light on your own goals of starting a business one day.
Investing in talent means that you will be enabling an individual to realize their potential. This brings with it a much greater satisfaction than investing in large-cap companies. You can choose to invest in talent that you believe it. Creatives often have a very difficult time obtaining investor capital, but with your input, you will be doing your part in stimulating both the local and national economy.
Another advantage of Crowdfunding, when compared to other types of investments, is that you don’t have to worry about the geographical distance between you and the talent playing a role in your investment.
If you want to invest in ten different talents around the world – you can. On the other hand, if you feel very strongly about one type of market in the entertainment industry, you can focus on that too.
The great thing about investing your money internationally is that you don’t rely on the import and export trends and strengths of your countries market. This means there is an increase in returns potential for your crowdfunding investments.
The sooner you start investing, the sooner you will be able to gain financial freedom. There are plenty of people around the world that are stuck doing a job. They cannot stand simply because they're tied down financially. Investing in Crowdfunding will bring you one step closer to financial freedom.
Think about it. Wealthy people are not reliant on their next paycheck. They have the freedom to pick and choose how to invest their money further. Once you have some built-up wealth, you will be able to make confident financial decisions that don’t come from a place of fear.
Crowdfunding is very transparent in that it allows for a direct connection between you as an investor and the talent. Rather than betting blindly on an investment, you have access to information about the talent in question, their goals, and how they’re progressing.
Another highlight of Crowdfunding is that the process is completely digitized. Everything is done online, meaning you won't have to go through all the paperwork during the registration process of traditional investments.
Because you are investing in talent right at the beginning of their journey, Crowdfunding is often a lucrative venture for investors. Depending on how much you choose to invest, you can see satisfying returns.
One of the best examples of investing in startups is Peter Thiel, who back in 2004 made an angel investment in Facebook, making billions of dollars in profits.
With the click of a mouse, you're able to invest in Crowdfunding. This seamless transaction avoids the need for you to visit or communicate with a broker because you have complete control over your portfolio. The best crowdfunding sites allow you to eradicate the possibility of miscommunication, and you're able to monitor your investments at any time, day or night.
Investing in Crowdfunding comes with a plethora of advantages. These advantages allow you to be in control of your assets and not have to rely on third parties. Real time trading will enable you to keep an eye on your investments at all times and avoid the tiresome paperwork that comes with traditional investing.
You can start with as little or as much as you like and never have to worry about the fact that you might not be an accredited investor.
The first piece of advice many people receive when it comes to investing is never to throw all your eggs in one basket. Investing in talent means that you can spread your investment in various markets but also invest in something you genuinely believe in.
Transparency is a huge factor, as is the ability to avoid geographical boundaries. On the other hand, you can do your bit for your community and watch your assets grow while making someone's dreams come true.
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