Crowdfunding is not just about startups raising money. Even excluding rewards-based campaigns like those offered by Kickstarter and Indiegogo, so-called equity crowdfunding, the type that represents an investment for ownership in a company or project, can span the gamut of asset classes. And frankly, that’s a good thing, because startup investing simply isn’t a good idea for all aspiring angel investors. But there are other avenues to target high returns.
In the past we’ve covered real estate crowdfunding platforms, but this is just the tip of the iceberg. Today, SaaS-based crowdfunding technology provider Invested.in is announcing the launch of a new invite-only platform focused on institutional-grade alternative investment opportunities, like hedge funds, venture funds, funds of funds, and securitized debt products.
Named Invested.in Alpha, the platform is the result of Invested.in’s as-yet unreported acquisition of Santa Barbara-based MyNewFinancialAdvisor, an online marketplace connecting financial advisors and prospective high net-worth clients. The companies declined to specify the terms of the transaction, but Invested.in CEO Alon Goren did reveal the it was an all stock transaction. The companies share a common investor in Siemer Ventures.
Invested.in Alpha’s hopes is to appeal to accredited investors by offering investment opportunities that they otherwise wouldn’t be able to access or that would typically require far larger investment commitments.
We aren’t going to be advertising a single startup looking to raise $1 million. We’ll be targeting larger, less risky deals, with slightly less opportunity for reward. For example, we may offer the chance to invest in the next fund being raised by a well known VC firm or hedge fund manager or a securitized portfolio of loans from a peer-to-peer lending site.
The company is already talking to several firms interested in carving out $10 million to $50 million allocations from a total $200 million-plus fundraise, Goren added. The goal is to offer between 10 to 20 such investment opportunities at any given time time.
“We’re focused on working alternative asset managers in the top 10 percent of the industry,” Goren says.
The key, however, is that investors won’t have to write $500,000 to $1 million minimum checks to participate in these opportunities, as they typically would, had the deal arrived through their financial advisor. By the virtue of crowdfunding, the minimum investment size is more likely to be $10,000 to $50,000. The site also promises charge fees far less expensive than traditional alternative investment placement fees (which can be 5 to 10 percent).
Goren is confident that Invested.in Alpha has solved the two biggest problems facing most aspiring crowdfunding platforms. The first is access to accredited investors. Over the last two years, MyNewFinancialAdvisor founder Framk Troise, who has joined InvestedIn Alpha as SVP and GM, has built a network of more than 70,000 verified accredited investors who have opted in to receiving alternative investment opportunities. While these members will have to re-opt-in to Invested.in Alpha, the company has a huge head start by virtue of these existing relationships.
Secondly, by virtue of its access to the above network of accredited investors, My NewFinancialAdvisor has established relationships with many large financial institutions and asset managers in search of qualified investors. What was missing previously was a technology platform to facilitate connecting these two constituencies at scale – enter Invested.in – and the regulatory framework to make it legal – thank you, JOBS Act and new general solicitation provisions.
“General solicitation provides hedge funds with tremendous opportunities to reach a larger pool of potential accredited investors,” Troise says in a company statement. “Our platform creates an easy, secure, and seamless way for the country’s best alternative investment firms to find the best accredited investors.”
It all sounds great, but Invested.in Alpha will have a ton to prove. Investors will want to see that the deals offered on the platform are truly exclusive and institutional grade opportunities. Those raising money will want to know that Invested.in Alpha’s members are both active and interested in alternative investment opportunities. If both of those conditions are met, then this could be an enormous success.
“The platform is pretty much ready today,” Goren says. “We just want to get out ahead of it in terms of signing up investors, fund managers, and financial advisors. Most importantly, we want to line up initial roster of rock star deals to really come out of the gates with a bang. We’ll be launching soon.”
Invested.in raised $875,000 in Seed funding from Siemer Ventures, Canyon Creek Capital, Karlin Ventures, and several angel investors. MyNewFinancialAdvisor raised at $1.5 million Series A round in earlier this month from Siemer Ventures.
Invested.in Alpha won’t compete directly with AngelList, Second Market, or other startup-focused crowdfunding platforms. But it will be competing, in the absolute sense, for investor mindshare, and the finite pool of alternative investment dollars available. The good news is that until recently, this has been an incredibly small and inefficient market, meaning that all of these platforms can grow considerably before any one portal begins cannibalizing the others.
Invested.in’s goal, from its earliest days, has been to power the premiere crowdfunding platform in each vertical, according to Goren. The company previously announced a partnership with Adam Draper’s Boost VC to launch Boost Funder, an early-stage startup-focused crowdfunding platform. The partnership didn’t last long, as Draper elected to change course and instead launch a startup accelerator. Invested.in Alpha is the second attempt at this strategy, but if things go according to plan, it won’t be the last.
We went into this saying to ourselves, we believe in being the engine that powers everything. Which is why we started with our SaaS model. But there are multiple industries and verticals that are way bigger than anything CF is currently touching but which aren’t getting much attention. It’s starting to play out in areas like real estate. Funds and institutional wealth management products is another area that we expect to follow a similar course. Hopefully there we’ll be able to enter others as well.
We’re in the early stages of the crowdfunding revolution. There has never been a better time to be an accredited investor in search of investment opportunities or an entrepreneur or asset manager in search of capital. But with all this choice, comes the challenge of separating the contenders from the pretenders.
Invested.in Alpha has done well to differentiate itself as one of the only platforms focused institutional grade investment products. The next step is to actually facilitate investment dollars changing hands and to generate returns for its members.
[Image via DDTactics]
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