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Pros and Cons of Equity Crowdfundingby@jatinshah
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Pros and Cons of Equity Crowdfunding

by Jatin ShahOctober 25th, 2022
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Investing in startups used to be available only to accredited investors, while on the other hand, Equity Crowdfunding has opened doors for all normal investors. The good thing about investing in startups is that you can start an investment with as little as $50. If the startup is either got listed publicly or sold out for a good price then you will get a great return for each $ invested. The risk of investing in early-stage startups is full of risk; they may get fail and your return will be reduced.
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Investing in Startups is a really great thing that you can do with your investment portfolio. Investing in startups used to be available only to accredited investors, while on the other hand, Equity Crowdfunding has opened doors for all normal investors.

Equity Crowdfunding benefits both investors as well as companies. Obviously, there is a huge risk associated with Equity Crowdfunding. You can lose all of your money. I started investing in startups in 2017 through Equity Crowdfunding and most of my investments are 0 from my investments made in 2017 and 2018. Specifically for companies that are in the "Test the water" phase (when there is no actual product associated when a funding round occurs).

There are different types of investments in Crowd Funding. SAFE, Convertible Note, Preferred Stocks, and Loan. There is a lot to learn about these different types. There are lots of websites as of now offering different types of Crowd Funding.

The good thing about investing in startups through Equity Crowdfunding is that you can start an investment with as little as $50. If the startup is either got listed publicly or sold out for a good price then you will get a great return for each $ invested. But on the other side, most of them end up a failure. But it benefits both investors and the company. Startup companies may be looking at investors as their potential customers, not only investors from Venture Capitalists or Private Equity.

Pros:

  1. You can invest in an early-stage startup and you may get high returns.
  2. You can get updated with the latest technology and trends in the world.
  3. You can get great deals on products and services that startups are offering.
  4. It may become a diversified investment.

Cons:

  1. It may take years to get something as a return on your investment.
  2. Startup investments are full of risk; they may get fail and your return will be reduced or maybe to Zero.
  3. You may or may not get any updates from the company.
  4. When a company gets listed publicly, you may have to pay transfer fees which may be higher than your stock value (No one is mentioning this one).


Overall Investments in startups are risky and rewarding investments. It requires lots of research and patience with your investments. Check with all types of equity crowdfunding before making an investment. Investing with less money does not mean a good option (not investment advice) rather, do more research on the company and competitors.