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Is Crowdfunding Diluting What Angel Investors See?

“Crowdfunding isn’t about collecting money. It’s about making something happen with a crowd of people who believe in something.” – Jozefien Daelemans Investopedia describes crowdfunding as “the use of small amount of capital from a large number of individuals to finance a new business venture.”…

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Is Crowdfunding Diluting What Angel Investors See?

10:00 08 June in Blog

“Crowdfunding isn’t about collecting money. It’s about making something happen with a crowd of people who believe in something.” – Jozefien Daelemans

Investopedia describes crowdfunding as “the use of small amount of capital from a large number of individuals to finance a new business venture.” Crowdfunding seems ideal for entrepreneurs as it limits the need to present a business plan, research, and profitability; but, can create tricky legal situations for both the entrepreneur and investors as there are strict rules and regulations for who can invest and how.

ADVANTAGES

PLATFORMS

Crowdfunding has become a huge phenomenon of the 21st century with many companies launching platforms that individuals from all over the world can elect to participate in. Having a wide variety of potential investors creates a plethora of marketing for entrepreneurs and increases their chances of reaching goals.

PRESENTATIONS

Entrepreneurs working towards acquiring funding for their venture must complete a thorough business plan, pitch deck, and have significant research with expected profitability. Crowdfunding provides a more care-free approach to funding for entrepreneurs in which they must simply create an engaging profile and unique video explaining their product.

FUNDING FAST

Angel Investors, Bank Officers, and Funds all require term sheets and negotiations securing their investment into any entrepreneurial venture. Crowdfunding simply tasks entrepreneurs with choosing a funding goal, once the funding goal has been met the money is dispersed to the entrepreneur.

TEST MARKET

Often getting in front of an entrepreneur’s target market can prove difficult, crowdfunding provides an easily accessible platform to share your ideas and gauge interest in their product.

DISADVANTAGES

FAILING PROJECTS

According to Forbes, 90% of start-ups fail. Failed projects can ruin reputations between the entrepreneur and the market and can create legal issues if the deal is not fulfilled. Additionally, funding is only provided to entrepreneurs if their campaign reaches its funding goal.

MENTORSHIP AND ADVISORY NETWORKS

Entrepreneurs pursuing crowdfunding lose out on many enriching opportunities and mentorship possibilities that they would receive by working with a Bank Officer or Angel Investor. Angel Investors invest funding, time, and energy into companies they invest in and spend considerable time mentoring the entrepreneur to success.

RULE AND REGULATIONS

Many people don’t realize that they cannot invest into any and every venture asking for funding. There are 4 key rules in Title 17, Chapter II, Part 227, Regulation Crowdfunding, General Rules and Regulations, “[(1)] require all transactions under Regulation Crowdfunding to take place online through an SEC-registered intermediary, either a broker-dealer or a funding portal, [(2)] permit a company to raise a maximum aggregate amount of $1,070,000 through crowdfunding offerings in a 12-month period, [(3)] limit the amount individual investors can invest across all crowdfunding offerings in a 12-month period and [(4)] require disclosure of information in filings with the Commission and to investors and the intermediary facilitating the offering.”

GOOD FOR PRE-SEED CAPITAL, NOT GROWTH CAPITAL

Crowdfunding is limited to raising $1,070,000 as stated above, this creates difficulty for entrepreneurs who need significantly substantial amounts of funding to really grow their venture. Angel Investors are a great way for entrepreneurs to meet their funding needs once finishing their pre-seed round goals.

Overall, it seems that Crowdfunding can be a great way for entrepreneurs to launch their product or service initially; however, crowdfunding proves difficult when entrepreneurs need more funding down the road and have already met the maximum funding allowed by the SEC on crowdfunding platforms. Angel Investors prefer to invest in seed-capital and growth-capital companies that have some form of establishment already in place; therefore, crowdfunding may limit what Angel Investors see to some extent or may delay the process but it is likely that entrepreneurs who succeed will need Angel Investing at some point anyway.

Source: http://bluewaterangels.com/is-crowdfunding-diluting-what-angel-investors-see/

Private Equity

Boston startups expand region’s venture capital footprint

This year has shaken up venture capital, turning a hot early start to 2020 into a glacial period permeated with fear during the early days of COVID-19. That ice quickly melted as venture capitalists discovered that demand for software and other services that startups provide was accelerating, pushing many young tech companies back into growth […]

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This year has shaken up venture capital, turning a hot early start to 2020 into a glacial period permeated with fear during the early days of COVID-19. That ice quickly melted as venture capitalists discovered that demand for software and other services that startups provide was accelerating, pushing many young tech companies back into growth mode, and investors back into the check-writing arena.

Boston has been an exemplar of the trend, with early pandemic caution dissolving into rapid-fire dealmaking as summer rolled into fall.

We collated new data that underscores the trend, showing that Boston’s third quarter looks very solid compared to its peer groups, and leads greater New England’s share of American venture capital higher during the three-month period.

For our October look at Boston and its startup scene, let’s get into the data and then understand how a new cohort of founders is cropping up among the city’s educational network.

A strong Q3, a strong 2020

Boston’s third quarter was strong, effectively matching the capital raised in New York City during the three-month period. As we head into the fourth quarter, it appears that the silver medal in American startup ecosystems is up for grabs based on what happens in Q4.

Boston could start 2021 as the number-two place to raise venture capital in the country. Or New York City could pip it at the finish line. Let’s check the numbers.

According to PitchBook data shared with TechCrunch, the metro Boston area raised $4.34 billion in venture capital during the third quarter. New York City and its metro area managed $4.45 billion during the same time period, an effective tie. Los Angeles and its own metro area managed just $3.90 billion.

In 2020 the numbers tilt in Boston’s favor, with the city and surrounding area collecting $12.83 billion in venture capital. New York City came in second through Q3, with $12.30 billion in venture capital. Los Angeles was a distant third at $8.66 billion for the year through Q3.

Source: https://techcrunch.com/2020/10/23/boston-startups-expand-regions-venture-capital-footprint/

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Private Equity

Alternative Investments/Real Estate: Housing Market Demand Is “Insane”

Speaking to CNBC on Power Lunch, Glenn Kelman, CEO of real estate brokerage Redfin (NASDAQ: RDFN), said he expected the current boom conditions in the housing market to last well into next year. He attributed the high demand to affluent professionals looking for remote homes as well as low interest rates. Also, he thinks some sellers will put their properties on the market only after the presidential election.

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Alternative Investments/Real Estate: Housing Market Demand Is “Insane”

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Redfin CEO Glenn Kelman says the boom could last into next year.

Speaking to CNBC on Power Lunch, Glenn Kelman, CEO of real estate brokerage Redfin (NASDAQ: RDFN), said he expected the current boom conditions in the housing market to last well into next year. He attributed the high demand to affluent professionals looking for remote homes as well as low interest rates. Also, he thinks some sellers will put their properties on the market only after the presidential election. (CNBC)

Kelman: Too good to last forever

“This level of demand is absolutely insane. I would expect it to last into 2021, at least,” Kelman said.

Recent data from the National Association of Realtors shows up the strength in the housing market.

Existing home sales shot up 9.4% in September beating expectations. Even though the median purchase price of a home rose approximately 15% year over year, there is just a 2.7-month supply of for-sale homes, showing tight market inventory conditions.

The 30-year fixed-rate mortgage averaged 2.80% for the week ending Oct. 22, down from 2.81% in the previous week and 3.75% a year ago, according to the Freddie Mac Primary Mortgage Market Survey. Therefore, mortgage rates crept even lower in the latest week.

However, “there’s no way it can last forever,” Kelman warned of the bullish conditions.

Canada: Off the charts

Meanwhile, at the northern neighbor, home sales activity in September is described as “off-the-charts.”

Housing data released by the Canadian Real Estate Association (CREA) last week showed a nationwide year-over-year increase in sales of 45.6%.

This was a new all-time monthly record for the third month in a row.

“This is starting to sound like a broken record (about records being broken), but Canadian home sales and prices set records once again in September … as they did in July and August,” said Shaun Cathcart, senior economist at CREA, in a statement.

Real Estate ETFs in the U.S.

The year-to-date performance of some real estate ETFs is shown below:

iShares U.S. Home Construction ETF (ITB)              +24.61%

SPDR S&P Homebuilders ETF (XHB)                          +20.83%

Vanguard Real Estate Index Fund ETF                      -13.91%

It may be noted that despite the boom conditions in housing, real estate ETFs and stocks have declined in recent days.

According to Barron’s, this may be due to yields on the 10-year and 30-year Treasuries moving higher in recent weeks.

Other reasons could be fears of inflation ticking up in the future amidst an improving economic situation.

Nevertheless, the view is that interest rates are likely to remain low for longer. So demand may remain strong.

“Part of what is fueling this boom is that the economy has just split into two and rich people are able to access capital almost for free, so, of course, they’re going to use that money to buy homes,” said Redfin’s Kelman.

Related Story:   Mortgage Rates Set Another Record Low; Real Estate ETFs Could Benefit

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Source: https://dailyalts.com/alternative-investments-real-estate-housing-market-demand-is-insane/

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Private Equity

Asda’s new owner EG Group seeks new leadership ahead of IPO – report

EG Group is owned by the billionaire Issa brothers and the private equity firm TDR Capital, who teamed up for a £6.8 billion takeover of Asda last month

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UK grocer Asda Group’s new owner EG Group is looking for a new chairman and independent directors as it prepares for a £10bn initial public offering, The Timesreports.

EG Group is owned by the billionaire Issa brothers and the private equity firm TDR Capital, who teamed up for a £6.8 billion takeover of Asda last month.

The move comes after Deloitte resigned last week as the company’s auditor because of concerns over the group’s governance and lack of internal controls, according to the publication.

A decision on candidates will be taken before the end of this year, although roles haven’t been finalised yet as the company is in the process of deciding whether to float in the UK or the US, The Times reports.

Write to Barcelona editors at barcelonaeditors@dowjones.com

From Dow Jones Newswires

Source: https://www.penews.com/articles/asdas-new-owner-eg-group-seeks-new-leadership-ahead-of-ipo-reports-20201023

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