SeedInvest Review: Invest In Startups

Private equity investments have historically been restricted to accredited investors, which ruled out most of us. Also, you had to somehow know about these deals, which meant a high-quality network of connections.

But SeedInvest is an investing platform that's bringing private equity to the masses. It allows non-accredited investors to get in on the early stage of startup fundraising with investments as low as $200.

SeedInvest also provides all the information an investor needs to know about each company, which greatly reduces the amount of time needed for research. In this article, we’ll go over what the platform offers in detail and break down its pros and cons.

SeedInvest is a private equity crowdfunding platform. It was founded in 2012 by Ryan Feit and James Han. SeedInvest is located in New York City.

“SeedInvest is a leading equity crowdfunding platform that provides individual investors with access to pre-vetted startup investment opportunities. SeedInvest has funded over 150 startups and boasts a rapidly growing network of over 190,000 investors.

SeedInvest has had over 15,000 startups apply to raise capital since inception and has only accepted 1% of those companies to feature on the platform,” Feit told StartupNetwork.co.

SeedInvest offers regular investors the opportunity to participate in the private equity market. Private equity is made up of companies in the early stages of raising capital and not yet listed on public exchanges. In fact, some will never be listed publicly. Many of these companies are startups.

Private equity funds have traditionally only been available to accredited investors who were in the know. Accredited investors have a net worth of $1 million, excluding their residence, or an income for the last two years of at least $200,000. But many of the investments available on SeedInvest are open to both accredited and non-accredited investors.

SeedInvest also offers lower investment minimums than many similar platforms. Each company is free to set its own minimum. These can be as low as $500, but SeedInvest says that most range from $1,000 to $10,000. However, users who sign up for Auto Invest can invest as little as $200 per investment even if the companies have set higher minimums.

Auto Invest allows investors to diversify their investments across several companies. The minimum to invest is $200 per company and $1,000 to get started.

You’ll have control over how your money is invested — pick the companies you want to invest in. You can stop, start, and pause auto invest contributions. The maximum number of startups you can invest in through Auto Invest is 25.

You can visit the SeedInvest website to open an account. The account opening process with SeedInvest is longer than with other types of investment accounts as it's heavily regulated. 

You’ll need to upload additional documents to verify your identity and citizenship status. Accounts can be set up as an individual, corporation, or trust. The application approval process can take 1-2 days, as manual reviewing is required.

Investing in startups can be extremely risky. There is no guarantee that your original investment will ever be returned, nor are the companies you invest in required to make such guarantees. And funds invested on the SeedInvest platform are not FDIC or SIPC insured. You are usually investing in a convertible note offered by the company. 

Private equity investments also tend to be very illiquid. There is no public marketplace (like a stock exchange) for selling your shares. SeedInvest says all that investors should expect to hold their investments for 5+ years.

You may not receive any income during the holding period (most investments don't pay out any income) or even at the end of the investment period. In fact, you can end up losing all of your investment. Even if the company is successful, you could see your position diluted by future funding rounds.

SeedInvest does, however, perform rigorous due diligence on each potential startup to help reduce these risks. Only 1% of companies are accepted into the SeedInvest program.

For those that have an appetite for risk and want to dip their toes into private equity investing, SeedInvest provides that opportunity. And, unlike many other private equity platforms, it's open to both accredited and non-accredited investors.

However, if you have a low risk tolerance or don't want to lock up your investment for 5 or more years, you may want to stick with publicly-traded stocks and funds. Check out our favorite stock brokers for building a diversified portfolio.