For too long now, the average serious investor has been excluded from the big tent. Up till now, the traditional noncredentialed investor was not permitted to enter the realm of private equity investing. But, thanks to the advent of crowdfunding, that paradigm is experiencing a transition. Private equity is a type of investment that exists outside the traditional public stock market. Crowdfunding is a vehicle that permits accredited private and institutional investors the opportunity to secure a stake in a private company in their portfolios. While this form of investment does incur more risk, the potential payoff in higher returns is greater than what one might expect in public equity investments.
Essentially, private equity encompasses three entities:
The investors who supply the capital.
The private equity firm manages and invests that money via a private equity fund.
- The companies in which a private equity firm invests.
Traditional Private Equity vs. Private Equity Crowdfunding
Let’s just assume that you invest $1 million in a private equity firm. As any savvy investor is aware, traditional private equity funds enjoy a significantly higher minimum investment than public equity investment options. With private equity funds, private equity companies would employ instruments such as buyouts or venture capital. However, with most of these kinds of investment vehicles, you need to guarantee that your net worth exceeds a million dollars.
Private Equity Crowdfunding Offers an Alternative
If you are among those of us who find that kind of capital investment too risky, and you’re not an accredited investor, you do have an alternative: a crowdfunded private equity firm. Private equity crowdfunding is the practice of generating funding through the sale of securities such as shares, private debt, and convertible notes. Entrepreneurs are finding crowdfunding to be a new and increasingly popular way to invest in early-stage companies or small businesses that are seeking funding options. In private equity crowdfunding, the investor secures equity interest or partial ownership in the business.
Crowdfunded Private Equity Exchanges
Crowdfunded Private Equity Exchange funds (ETF) are for those who desire to participate in private equity investing, but aren’t accredited or cannot attain the minimum investment required by private equity funds. The best source for finding a reputable ETF broker is through the internet. With an ETF, you share the risk by pooling investors. Once you open an account and add money to it, you can use the broker’s online platform to begin your private equity investing alternative. The best equity investment firms provide online tools to better manage your crowd-funded ETF investment. Once you familiarize yourself with a firm’s digital platform, you’re just a few clicks away from investing in the fund.
Private equity funds interact with three key entities:
- The investors who provide the capital.
- The private equity firm manages and invests that money through a private equity fund.
- The private companies the equity firm invests in.
Crowdfunded private equities level the playing field for investors by not requiring deep pockets to get in the game. Typically, the investor can employ a much smaller amount of capital. Often, the amount varies by company and ranges anywhere from $100 to $1000. Crowdfunding private equity firms offer an innovative approach to private equity investing that investors are flocking to. investment opportunity page estimates that ” …the global crowdfunding market was valued at $12.27 billion in 2019 and is expected to reach $25.8 billion by 2026.”
For more information on this exciting opportunity to invest in the private equities market through crowdfunding, visit PSG’s investment opportunity page and learn more about this exciting new approach to investment banking.