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How Crowdfunding is Affecting Angel Group Investment

Crowdfunding and Group Angel Investment from The Startup Garage

How Crowdfunding is Affecting Angel Group Investment

In September of this year, the SEC voted to overturn the ban on “general solicitation” that made it illegal for companies to publicly advertise that they are raising capital. An easing on some of the U.S. government’s long standing restrictions on fundraising has given life to a new type of financing called crowdfunding that allows Angel and other early stage investors to quickly assemble a group of investors over the internet.

While startups are still limited by the types of investors they can take money from (i.e. wealthy, verified investors), the lifting of the ban on general solicitation has allowed investors to publicly advertise that they are raising capital, be it on their blog, Twitter, Facebook, or crowdfunding site such as AngelList.

Every crowdfunding site works differently, but the model that the majority of equity crowdfunding platforms are taking looks like something like this: a person or collection of people can form a group that other accredited individual investors can join. Individuals select how much they are willing to contribute and the leaders of the group will determine which individuals to accept or not. From here, these groups can collectively select startups to invest in based on their crowdfunding campaign.

What does this mean for Angel investment groups?

As this funding vehicle develops, experts anticipate that many of the best crowdfunding rounds of investment will be “led” by angel groups or seed stage funds. First and foremost, the screening and due diligence needed to decide which startups warrant investment is best suited for the professionals. Meanwhile, Angel groups can benefit from gathering additional partners and co-investors, recruiting and engaging new local angers, seeing new deal flow, and giving first look to a broader network of accredited investors to help close out portfolio deals.

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