Crowdsourcing, Fintech and Private Assets

How would you like access to private investment opportunities in institutional-grade assets — without the inconvenience and cost of having to go through a financial representative?

Well, thanks to the JOBS Act, this is now a viable option. Here’s what you need to know.


How the JOBS Act Made Crowdsourcing for Investments Possible

Aimed at reopening U.S. capital markets to emerging growth companies, the Jumpstart Our Business Startups (JOBS) Act was signed into law by President Obama on April 5, 2012. The act has three main objectives: first, to make it less complex for companies to go public; second, to enable companies to stay private for longer; and third, to make it easier for entrepreneurs and startups to raise all-important capital to initially fund their operations.

And it’s that last reason that’s so important for private investors, because the JOBS Act introduced certain changes that facilitated the raising of capital by businesses.

To begin with, the prohibition of “general solicitation” was eliminated. As a result, companies can now publicly market their investment opportunities to individuals. For example, they can advertise an opportunity on social media and general interest sites, as well as via other media.

In addition, companies are now permitted to offer equity by means of crowdfunding, or as we prefer to call it, crowdsourcing. This means that they can source capital by offering equity to a relatively large number of accredited investors — people with an annual income of $200,000 ($300,000 for joint income) who expect an equivalent or higher salary in the future.

In crowdsourcing, offering equity usually occurs through an online fintech platform. Fintech in this context refers to a type of customer relationship management (CRM) tool that advertises the available opportunities, allows investors to make a pledge and guides them automatically through an accreditation process. Via the platform, investors can manage their accounts and see the status of their investments — all online. Examples of successful equity crowdfunding platforms include SeedInvest and WeFunder.


Crowdsourcing for Real Estate 

What’s so important to understand is that in real estate, the capital formation from crowdsourcing is growing dramatically. Why? Accredited investors may invest up to 10 percent of their annual income; plus, they have access to many more opportunities — including institutional-grade assets — than ever before. In addition, they don’t have to deal with the middleman markup of the public markets. Finally, the minimum investment size is also relatively smaller due to lower administration and marketing costs — making liquidity less of an issue — yet the economics of the underlying deal remain the same.

For example, if you’re an accredited investor with an income of $250,000, you could invest a total of $25,000 per year in various opportunities. And those opportunities, when carefully chosen, could generate thousands of dollars in passive income for you.



It should be clear that the JOBS Act has changed the landscape of private investment forever. So whether you’re a seasoned investor or just taking your first steps in the exciting world of investing, it’s well worth the time to investigate the private investment opportunities that are available


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