BY WAYNE MULLIGAN, ON WEDNESDAY, JUNE 11, 2014,
“Holy crap,” we thought when we first heard about the JOBS Act.
“Retail investors are going to get killed.”
For the first time in more than 80 years, this historic piece of legislation was about to let ordinary citizens invest in start-ups.
Have you ever noticed that people tend to invest in the worst investments at the worst possible time? Twice in the same decade, for example, retail investors got crushed because they put money into investments that “couldn’t lose.”
First they poured money into Internet stocks at the height of the tech bubble. Then they levered up on real estate during a Fed-fueled joy ride.
You probably know how both of those stories ended. (Hint: not well.)
But with Shark Tank one of the most popular TV shows, and with all the recent headlines about Tumblr or WhatsApp getting acquired for billions, the prospect of owning “the next big thing” might be too seductive for many folks to pass up.
Will people take the time to learn about early-stage investing?
Or will they jump right in and make a mess of it?
If history is any indication, this could get messy.
Protection & (Hopefully) Profits
With these thoughts in mind, we launched Crowdability.com.
In the summer of 2013, we started aggregating deals from a dozen or so of the highest-quality platforms. We thought it would make peoples’ lives easier if they didn’t have to go from site to site. And we hoped that, if we only showed them high-quality deals, they’d be less likely to lose money.
We put all the deals in a nice email and started sending it out weekly.
Before long, a few thousand people signed up.
But after getting feedback from our initial subscribers, we realized that showcasing the deals wasn’t enough. They wanted to know more about how the deal terms worked. And they needed help filtering the good deals from the bad.
So we began writing articles a couple times a week – educational essays, stories from the trenches based on our experiences as entrepreneurs and investors, deeper dives into specific opportunities…
And as our subscriber base grew more sizable and more engaged, so did our vision for the company…
Stop By Anytime (Preferably Before You Make A Bad Decision)
We aim to be the place an investor visits before making an investment decision.
Morningstar has done a great job building a place like this for mutual fund investors. Our goal is to build the most trusted place for equity crowdfund investors.
By providing high-quality education on early-stage investing, and detailed research, we aim to help people avoid making bad investments… and hopefully, help them make some money along the way.
There’ll be plenty of opportunities for both scenarios: if U.S. investors shift just 1% of their investable assets into equity crowdfunding, that’s a $300 billion market.
That’s 10x the size of the current venture capital market.
But this whole trend – and a lot of dollars – could disappear overnight if investors aren’t prepared. If they casually sink capital into what they believe is “The Next Facebook” or “The Next Google,” many people will lose their shirts.
Investors need to learn about asset allocation strategies… how to build a diversified portfolio… how to perform due diligence… how to detect and avoid fraud.
To that end, our immediate focus is to build high-quality services and products to help. These services include:
1. Early-stage Investing Education Program. After interviewing dozens of top-tier professional venture and angel investors, we’re now codifying the Best Practices for finding, filtering and funding the best early-stage opportunities.
2. Start-up Risk Indicator. Start-ups are risky. Investors should focus on the ones with the highest potential and lowest risk. But to do that, they need an easy way to understand the relative risk of each opportunity. To that end, we’re building a tool that evaluates the objective risk of all start-ups on equity crowdfunding platforms.
3. Research Services. It’s critical to do due diligence and properly evaluate a start-up before investing – but it’s also extremely time consuming. With that in mind, we’re hiring a research staff to help prepare reports and analyses on the most promising equity crowdfunding opportunities.
This Could Get Expensive
We’ve got a full plate of goals.
To accomplish them all, we’ll need to build a great team, invest in technology and content, and attract millions of people before they jump into start-up investing headfirst and lose their shirt.
This could get expensive.
Thankfully, some of our friends share our vision and passion – and they’ve decided to support us not just with words, but with $1 million in capital.
Today, we’re happy to announce that Crowdability has closed its first round of funding. Steadfast Venture Capital led the round.
Howard Lindzon and Tom Peterson of Social Leverage / StockTwits fame also participated. And a number of prominent Angels are involved, too – from Rikki Tahta (Co-Founder of Covestor, a Union Square Ventures-backed investment management platform) to Savneet Singh (Co-founder of Gold Bullion International, a gold bullion provider to the wealth management industry).
This vote of confidence from such an accomplished investor group is an honor. But what makes us even more excited is the shared vision we have.
Our investor, Howard Lindzon, had this to say: “We were early investors in Angel List, and we’ve always believed that as equity crowdfunding became mainstream, a trusted source of research and education would need to emerge.”
He continued, “Crowdability has the team, the integrity, the expertise and now the capital to fill this role. They’ve already made great strides. Now the Social Leverage team and I are excited to roll up our sleeves and speed up their access to startups and the investment community.”
We plan to use this capital to build our Education Programs, our Data & Research Services, and to help spread the word.
Thanks to our investors, and to our subscribers new and old, for being part of the journey…
We’re looking forward to sharing it with you!