You know when you are a small time retail investor, there are a number of investment vehicles you can participate in. Eg. Singapore Bonds, Shares, Unit Trusts, P2P loans…
Crowd funding for startups equity is also one of them.
However, for me, I do not find crowd funding for startups equity appealing simply because investing in startups is totally different from investing in a mature listed companies. For the latter, the are readily available news and historical data which you can use to research. These companies normally have a ‘Investor Relations’ section that update investors on the current progress of the companies. Also there are audited financial earnings reports. There would normally be other analysts reports by brokerage firms as well. And typically the market capitalisation of the company is relatively bigger with well established operations and clientele.
For startups, you have to judge the founders, their execution (from production, distribution to marketing), their ideas, etc. In gist, more hand-on, getMore often than not, there is no revenue / profits to speak of, so you really need to observe the person in action and their interactions with potential customers (and they do address the needs of the customers).
So I find it hard for me as a guy with a full time job (and small war-chest), to do the required ‘due diligence’. After reading the websites such as NUS Enterprises, Angel Investment Network Singapore, a few Startup blogs, stories from Techinasia… I came back clueless.
In addition, being a non-accredited investor also mean that you can’t join BANSEA (membership is strictly via invitation and recommendation). Similarly for most Singapore Venture Capital firms (Monk’s Hill Ventures, Golden Gates Ventures, etc) – these are open to high net worth individuals.
It is literally almost impossible giving money away investing in startups and doing the required research.
On top of this, the asking min. investment sums can be quite daunting for small time investors. $50k to $100k lump sums (for valuations of $2 million and up) are considered typical early stage angel investments. (If we exclude crowd funding)
There are investor days organised by NUS Enterprises. NUS Enterprise organises quarterly networking sessions for Investors to meet Start-Ups and vice versa. However, again (correct me if I am wrong), it is not open to all investors (by invite only). The timing is also early weekday late afternoon 3pm. Well, unless I take leave, I don’t think I can just drop by to listen to those pitches.
Then, you have the over zealous ‘hustlers’ who expect you to just invest $50k to $100k when they have no actual platforms or products. They don’t answer your questions nor address your question, and give sweeping statements that they personally believe it will work. No targets, no milestones, no budgeting….
Well I don’t really expect these startups to be generating any tangible profit, but at least they should see from my point of view and explain why I am giving you $50k other than the fact that the founder has spent 3 yrs slogging away at something which has not gotten any users yet (and has a family to feed). Help me understand your product and its viability first. As investors, there is really no rush to give money away invest.
No, I don’t use invest because:
- There are countless examples of Venture Capital Firms who would not hesitate to invest a the slightly hint of an idea with valuation of $2 million or more. (I don’t believe in that, and even if there is, doesn’t mean I would be one to do so – I don’t invest in just ideas. Even for billionaire Peter Thiel, he generally invest in people who have distinguished themselves by pioneering completely new concepts – read here).
- There are numerous examples of people getting ridiculously rich by investing in startups which became ‘unicorns’. Think Google, Facebook, Twitter… (Ok, that is just lame. People can also buy 4D and strike it rich.)
- The word ‘Tech and Startup’ is a cool and lethal combination. (You know even the hawker starting a new stall is technically a startup).
- Someone else has invested base on X millions valuation. (Again, what others are doing is not my concern).
- There is great potential and the founders firmly believe in it (I guess it is what the users or customers think or want, not what the founders believe in. Yes having the drive is good, but it is also to listen to the market and be humble).
- A partnership has been formed with another company (which I have not heard of)… (1+1 does not equal to 3).
- Long lengthy power-point slides showing the potential huge market size / demand but I still find it hard to comprehend what the product / service is about. How does it meet the needs of companies or consumers. Just show me the actual user traction or platform.
I can see why majority of people would rather loan SMEs money than invest in them in exchange for equity.
Then again, if you are Kanye West, it is a totally new level altogether.
Here’s What Facebook CEO Mark Zuckerberg Thinks Of Kanye West Asking Him For Money On Twitter (read here)
Kanye West begs Mark Zuckerberg for $1 billion on Twitter (read here)
Nah Honey, am not the sugar daddy here… No deal.
Shall leave you with this song.