How Crowdfunding is Affecting Angel Group Investment
In September of this year, the SEC voted to overturn the ban on “general solicitation” that made it illegal for companies to publicly advertise that they are raising capital. An easing on some of the U.S. government’s long standing restrictions on fundraising has given life to a new type of financing called crowdfunding that allows Angel and other early stage investors to quickly assemble a group of investors over the internet.
While startups are still limited by the types of investors they can take money from (i.e. wealthy, verified investors), the lifting of the ban on general solicitation has allowed investors to publicly advertise that they are raising capital, be it on their blog, Twitter, Facebook, or crowdfunding site such as AngelList.
Every crowdfunding site works differently, but the model that the majority of equity crowdfunding platforms are taking looks like something like this: a person or collection of people can form a group that other accredited individual investors can join. Individuals select how much they are willing to contribute and the leaders of the group will determine which individuals to accept or not. From here, these groups can collectively select startups to invest in based on their crowdfunding campaign.
What does this mean for Angel investment groups?
As this funding vehicle develops, experts anticipate that many of the best crowdfunding rounds of investment will be “led” by angel groups or seed stage funds. First and foremost, the screening and due diligence needed to decide which startups warrant investment is best suited for the professionals. Meanwhile, Angel groups can benefit from gathering additional partners and co-investors, recruiting and engaging new local angers, seeing new deal flow, and giving first look to a broader network of accredited investors to help close out portfolio deals.
Want To Learn More?
Download our free Raising Capital from Angel Investors eBook.
- This guide will walk you through the process of obtaining seed capital for your startup. This book includes:
- An overview of the angel investor process and who they are
- The milestones angel investors look for when evaluating your business
- Strategies for finding the angels best fit for your startup
- How to nurture the relationship, prepare for the meeting and deliver the pitch
- Rounding out the details and preparing for the future