Neil Patel here – we have a lot to cover today.
There’s a reason that people typically picture angel investors as Silicon Valley billionaires in hoodies and jeans, handing out $100,000 checks like it’s no big deal.
It’s because this world used to be reserved for the super-rich and well-connected. You couldn’t even try to invest in startups unless you were an accredited investor – in other words, someone with a net worth over $1 million.
Today, the landscape of angel investing has transformed into something that’s a lot closer to the American dream. There’s no minimum salary requirement to get started anymore.
Now, anyone at all who wants to strike Silicon Valley gold can do just that as an angel investor.
It’s an exciting new world of opportunity out there. And it’s all thanks to Title III of the Jumpstart Our Business Startups Act (JOBS), which was signed into law in 2012.
I won’t get too nitty-gritty with the details – but here are the basics…
First, the JOBS Act allowed startups to publicly advertise when they are seeking investors. This is called “general solicitation,” and it was banned by the SEC for more than 80 years.
That meant you had to be an insider to be privy to angel investing opportunities in the first place. For the most part, this massive profit potential was restricted to those who had some connection to the high-powered early investing crowd.
Now, you can access an endless number of deals online, in just about any industry you can imagine, on equity crowdfunding platforms.
These platforms, like WeFunder, Republic, and StartEngine, are basically online marketplaces where a founder can post a detailed profile of their business, along with their pitch deck, financial information, answers to interview questions, deal terms, and tons more information – all in one place.
Investors can browse these listings, do some research on each startup, and even go through the deal process online.
If the startup reaches its funding goal, investors get their stake in the company (whether as equity, debt, or dividends – each deal is a little different).
If the startup fails to convince enough investors, everyone gets their money back.
Still, for a few years, only accredited investors were allowed to play the game. Everyone else was confined to the spectator stands.
But that all changed on May 16, 2016, when Title III came into effect. Title III is the provision that allows anyone to invest in startups, regardless of income or net worth.
There are still rules about how much you’re allowed to invest each year based on your income, because angel investing can be a bit tricky.
You need a good strategy, like mine, to turn a profit. The SEC doesn’t want anyone blowing their life savings on a bad investment strategy.
That’s why I developed the 1,000X Formula. It’s a simple formula I use to determine whether a startup has the potential to kick back 1,000X returns – or if it’s likely to flop instead.
Originally, I developed this formula for private deals… the kinds you won’t see on any crowdfunding website. But I came to realize something: this strategy can work just as well on equity crowdfunding deals as it has on private placements.
Right now, for example, I know of at least four startups on crowdfunding sites that pass the 1,000X Formula with flying colors.
They’re disrupting the way we do everything, from hiring babysitters to recovering from natural disasters. These are multibillion-dollar industries that are ripe for change, and I believe these startups have what it takes to claim a huge chunk of their respective markets.
You can still get in on these opportunities, if you don’t delay. Their rounds are filling up fast.
Until next time,
34 responses to “The Perfect Time to Make Your First Angel Investment is Right Now – Here’s Why”
October 08 2019