Keith Ippel is the founder & Co-CEO of Spring, a leading early-stage impact investing ecosystem that’s raised $51M+ in early-stage capital.
Imagine if you were able to invest in your favorite “overnight success” before it hits the mainstream. That’s the allure of angel investing, a type of early-stage investing that provides funding for startups in exchange for equity ownership.
To date, angel investing has traditionally been limited to wealthy individuals and institutions known as accredited investors. This has created a barrier for everyday investors, also known as “retail” or “non-accredited” investors, to access the potentially lucrative and high-impact world of angel investing. However, efforts to democratize access to angel investing are changing the face of capital to create impact and return opportunities for all. If you’re a retail investor interested in angel investing, these insights can help you set yourself up for success.
Challenges Facing Retail Investors
While democratizing access to angel investing has numerous benefits, there are also challenges and risks to consider. Early-stage investments are inherently risky and can be highly volatile. Investors need to be educated and informed to understand these risks, be prepared for potential losses, and make thoughtful, informed choices to avoid becoming a target for fraud.
Currently, angel investing is primarily accessible only to accredited investors—individuals with an annual income over $200,000 or a net worth of at least $1 million in the U.S., with higher limits in Canada. This has created a system where retail investors are effectively excluded from participating in early-stage investments. As a result, they often miss out on opportunities to potentially generate meaningful financial returns and support innovation that can make a better world. Due to this assumption that retail investors can’t participate in angel investing, you may initially face a lack of critical investing education and access to deal flow.
Available Pathways
There are several ways you can begin your angel investment journey and intentionally and meaningfully open the doors to start generating ROI Squared—return on investment and return on impact.
• Equity Crowdfunding
Technology is revolutionizing the investing landscape, and angel investing is no exception. New tools and platforms are emerging, enabling you to access early-stage investment opportunities once only available to accredited investors.
Equity crowdfunding platforms—different from traditional crowdfunding platforms like Kickstarter and Indiegogo—are great places to begin. They offer educational resources, conduct due diligence on companies and offer opportunities to make investments at a lower price point. You can diversify your investments between multiple companies to see how they develop over time versus making a larger investment in one company.
• Educational Programs
Beyond crowdfunding platforms, there are an increasing number of educational programs available to teach you what you need to know about investing to become empowered and sophisticated. These programs typically cover the fundamentals, including developing your investment thesis, company selection, portfolio construction, due diligence, deal flow, impact measurement and more.
Consider programs that are supported by established angel networks and other investor groups with a reputable track record. Programming is available for all levels of experience to meet you where you’re at in your investment journey.
• Support Regulatory Changes
There are also opportunities to voice your support for regulatory changes intended to democratize access to angel investing at the government level. For example, changes to equity crowdfunding regulations in the United States and Canada in recent years have opened new avenues for non-accredited investors to participate in early-stage funding. Similarly, Canadian provinces like Manitoba and Saskatchewan have opened up the criteria for investors, making it easier for individuals to qualify and gain access to a broader range of investment opportunities as “self-certified” investors.
I recommend getting educated on the regulations for non-accredited investing in your province or state. Speak up on your needs, and stay informed on regulatory changes.
Conclusion
Becoming a part of the democratization of angel investing could transform the early-stage investing landscape. I believe that engaging in equitable access helps shape a more inclusive financial system that allows anyone to participate in the growth of innovative companies they believe in.
Don’t forget, though: You need to stay informed and educated about the risks and opportunities that come with it. As you grow in your equity investing experience, you can also be part of empowering a new generation of investors to shape the future of the startup ecosystem, the types of innovation being funded, and a future that combines positive social and environmental impact and financial returns into a blended ROI that can make a difference.
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