5 reasons why you should invest in equity crowdfunding offers
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Equity crowdfunding has democratised access to private markets, allowing everyday individuals to back early-stage businesses, whilst simultaneously providing start-ups an alternative and accessible method of raising growth capital.
OnMarket is Australia’s largest equity raising platform and we have raised more funds, for more small to medium sized businesses, from more investors, than any other platform in Australia. This article explores some of the benefits of investing in an equity crowdfunding offer.
Reason #1: Invest in early-stage companies
Prior to 2017, investments in early-stage companies were limited to an exclusive group of high-net-worth individuals, angel investors, venture capital funds and family offices.
However, since the start of the Australian equity crowdfunding regime in late-2017, retail investors are now able to invest and receive part-ownership (equity) in a variety of early-stage companies. Through the OnMarket platform, everyday Australians can handpick, invest and gain a stake in businesses they feel passionate about and can invest up to $10,000 per company in any 12-month period. (P.S: The $10,000 limit does not apply to sophisticated investors).
Reason #2: Invest as little as you want
Unlike brokers and fund managers which typically require a significant minimum investment amount, equity crowdfunding allows you to invest as little as $50. This allows you to access a broad variety of investment opportunities and spread your risk across a diversified portfolio of investments. It also means that you don’t have to take on as much risk as you would if you were required to invest a hefty amount... for as little as skipping your Sunday brunch, or purchasing a new pair of jeans, you can be a shareholder in an Australian startup.
Reason #3: Get involved in the next big thing and share in success
Equity crowdfunding allows you to choose and invest in businesses that you’re passionate about and become part of the business’ future growth. As a licensed intermediary platform, OnMarket works with a variety of different start-ups, enabling investors to partake in a broad range of investment opportunities from businesses in Fintech, EdTech, HealthTech, into trending consumer markets and craft brewing. This allows you to find and back a business that you’re truly interested in, that align with your morals and values... as well as follow and benefit from the business’s journey after the capital raise.
Reason #4: Diversify your portfolio and reduce volatility
By providing access to early-stage companies, equity crowdfunding allows investors to spread their investment risk across another asset class, thus enhancing portfolio diversification. Private markets are often much less volatile than public markets because they are less exposed to intraday “noise” and irrational fluctuations in investor sentiment. 'Noise' can be classified as tweets from celebrities (*cough cough Elon Musk*) or a scene in a TV show (*cough cough Peloton from Sex in the City*). This means that in addition to providing diversification benefits, equity crowdfunding can also reduce your overall portfolio volatility. That said, private companies carry their own unique risks, so be sure to read to offer document before investing.
Reason #5: Potential for eye-watering returns
Private markets, particularly early-stage companies, have been found to generate greater returns for investors than public markets such as ASX. While this may come at the expense of liquidity and transparency, many of the best investments in Australian capital markets have come from early-stage companies turned unicorns, with the likes of Canva, CultureAmp and Mr Yum providing eye-watering returns to their early investors.
Every company on OnMarket's platform is screened by our investment team who follow a rigorous due diligence process to provide you with high-quality companies. For more information on the opportunities currently available, please visit our offer page.
*Always consider the general CSF risk warning and company offer document before investing in an equity crowdfunding offer.
*OnMarket is not a financial advisor, the above contents is general to equity crowdfunding.