Never Miss Out Again with Equity Crowd Funding

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Posted by The Savvy Retiree on April 19, 2017 in Money Saving Strategies, Personal Finances

Adam Sharp writing on equity crown funding…

For as long as I can remember, I’ve been an entrepreneur.

When I was around six, I had a lemonade stand that could pull in $8 net on a good day.

In third and fourth grade, I sold candy to the other kids at 200% markups. (Supply and demand was a lesson learned early.) On a field trip day, I could pocket $15 or so.

In sixth grade, my friend Mark and I opened a baseball card shop inside his mom’s gift store. We’d bug one of our parents to drive us 45 minutes to BJ’s so we could buy bulk packs and turn them around for profit.

That business worked out for a while, but my card-collecting endeavors would eventually end in tears.

Over the years, I “invested” much of the profit from my enterprises into baseball cards. Which turned out to be quite the lesson in overvalued assets, scarcity, and bubbles. But I digress…

By the time I graduated from college in 2002, the internet was hitting its stride.

In 2005, I started a small side business operating content websites. My most successful project was on the subject of hair loss. It was a simple content site, but at its peak it pulled in $500 per day from advertising.

I learned a lot about how search engines work from projects like this, and eventually I began a consulting business focusing on SEO (search engine optimization).

This is how I met my friend Erik, whom I would partner with on a number of other projects.

In 2006, my friend Erik ran one of the largest online chess sites. I helped him optimize it for search engine traffic. It was a very fruitful partnership.

Erik was quite an entrepreneur. When he told me he bought Chess.com in a bankruptcy sale, I was floored. He had scooped up one of the world’s premier domain names for a steal. What a coup!

And when he told me he was fundraising to build this new business, I immediately told him to count me in.

The minimum investment was sizable, especially for me at the time. But I had seen Erik do business, and I knew he was destined to succeed with this new venture.

So I got the money together and waited for my chance to invest.

Not long after, I got a message from Erik: “My lawyer wants to know if you’re an accredited investor.”

I wasn’t. I didn’t pass the income test to be one and I lost the chance to invest in the deal. The other investors and lawyers weren’t comfortable having a non-accredited investor on board. Non-accredited investors are considered a liability who could sue if they lose money. And even today in most private deals, the majority of investors aren’t allowed to participate.

Needless to say, the website is now one of the most popular websites in the U.S. And that investment I missed out on would be worth somewhere around $500,000 to $750,000 today.

Investment is changing though…and opportunities are opening up for the small guy. You can now buy shares in private companies through equity crowd funding…even if you’re not accredited by the crowdfunding platform.

Editors Note: Andy Sharp is co-founder of Early Investing.

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Image: ©iStock.com/Umkehrer 

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