Thanks to SeedInvest, everyday Americans can now invest in startups
By Daniel Huizinga | September 7, 2016, 6:20 EDT
For many years, only the top 2 percent of Americans could invest in startup companies due to excessive regulations. Ryan Feit made it his goal to change that. And now he has built SeedInvest, a company that opens access to more than 240 million would-be investors.
“One of the biggest challenges to changing laws is that you have to deal with incumbents who don’t like change,” Feit told Opportunity Lives. The process of changing the law that restricted access to the startup market wasn’t easy. Feit and his co-founder, James Han, had to fight lobbyists and politicians to convince them that the general public should be able to invest in the startups that they use and love.
Although Congress passed the JOBS Act in 2012, SeedInvest couldn’t offer startup investment opportunities to Americans until the Securities and Exchange Commission wrote new rules. That was supposed to be done within nine months after the law was passed. Instead, it took several years.
“We’ve learned a lot about how long things can take, especially when it comes to changing securities regulation,” Feit said.
As Forbes has reported, of the original crowdfunding startups that hoped to profit from the new law, “only Wefunder and SeedInvest have so far stuck with the enterprise enough to get government approval to sell stock to the crowd — most of the entrepreneurs lost interest or ran out of capital in the interim.”
With a customer base of 130,000, SeedInvest has become a popular destination for people looking to diversify their investments or put their money in promising startup ventures. More than 70 companies already have raised capital through SeedInvest.
The company has a rigorous screening process. Only about 1 percent of the approximately 7,000 applications were accepted to list on the site, Feit said. SeedInvest seeks to only list companies with full-time founders, a minimum viable prototype (a version of the product that is mostly complete and working) and significant proof of demand.
Some companies have been highly successful in using SeedInvest. Virtuix, a leader in “immersive virtual reality,” recently raised over $7.5 million from 1,800 people on SeedInvest. KnightScope, a company that builds robotic security guards, raised $1 million in a Series A funding round, and is now testing the waters by allowing people to “express interest” in investing more. This process is non-binding but allows startups to gauge how much money they could raise through SeedInvest in the future. For KnightScope, people have expressed $18 million.
Like many well-known startups such as Airbnb and Uber, SeedInvest is a marketplace. Feit acknowledged that building the initial set of investors and startup founders (the “two sides” of the marketplace) was one of the biggest challenges of building the company. But through tireless effort to build trust with both groups, SeedInvest was able to foster a thriving market.
“Once you get your first deal or two done, it makes things a lot easier,” Feit said.
In recent months, SeedInvest has leveraged the power of the startup’s networks to continue to build awareness about the new investment opportunities for customers.
For other entrepreneurs, Feit has some valuable advice. “Bounce your idea off anybody who will listen to you,” he said. Too often, entrepreneurs are worried about someone stealing their idea. In reality, it’s more important to get good feedback and feel out possible interest. Along the way, you might even meet new customers or prospective team members.
That’s what Feit did — and now hundreds of millions of Americans are able to invest in the startups they know and love.
Daniel Huizinga is a columnist for Opportunity Lives covering business and politics. Follow him on Twitter @HuizingaDaniel.
This article first appeared on Opportunity Lives.