If you’ve read our stuff before, you know Regulation Crowdfunding provides a new-to-you business investment opportunity. An avenue to invest local that has been suppressed since before the Great Depression is now yours for the taking! Breathe in all the freedom that can be packed into a phrase beginning with “regulation”.
But it’s important to take a moment to consider Jeff Goldblum’s warning (also the most justified “I told you so” in any movie franchise ever). So should you join in the fun? Let’s talk about a few reasons why you may want to invest in your local business scene.
Diversify. The word no investing article would be complete without. Shifting a portion of your dollars from a traditional financial institution to the local economy will allow you to diversify your investment portfolio beyond the algorithms and global orientation of wall street.
Learn. A personal favorite of mine, researching local securities offerings on our funding portal will provide a great opportunity to expand your knowledge. Some notable areas of discovery include:
1. Business start-up and growth plans
2. Finance and investing fundamentals
3. Risks business owners and investors face
The actual offering page is just the beginning. Local investors also get direct access to Q&A with the owners. Local regulation crowdfunding offerings give you the chance to explore ideas and initiatives that are being created to directly help your community.
Earn. This is not a donation. As an investor, you are taking a risk alongside the business owner to support value creation. If successful, you get rewarded through a return on your investment.
While there are investment limits for those that aren’t accredited investors, there is still a risk that you lose your investment.
If anyone guarantees you returns or promises you’ll get rich quick, run away fast. Jeff can coach you on how fast.
Build Community. Tech and social media are great connection tools, but true community can’t be built exclusively on web sites. Investing locally connects you with small businesses, owners and other investors that care about your hometown. For the same reasons you may want to eat local or shop local, you now have the chance to invest local.
This is more than a good feeling. When businesses, customers, investors, and neighbors overlap, each is incentivized to benefit the other.
Maybe these reasons sound good but investing under the jobs act through Reg CF (or in general) may be completely new to you. Next week we’ll talk about how this works through Vicinity, but here are a few tips for first-time local investors:
· Understand the risks. Never invest more than you can afford to lose.
· Research. Take a look at all the information provided, even the boring stuff like financial statements, and take advantage of the opportunity to ask the owners questions.
· Only invest in what you understand. If you are unclear on the business model, how they are using their funds, how their annual reporting will work or what their mission is, you probably want to pass. Pick business investment opportunities you are comfortable with or even excited to get behind.
· Compare the options. A real estate revenue sharing deal may pay out very differently than a tech startup doing an equity crowdfunding raise even if the target offering amount is similar.
Just because you might be new to investing in small businesses, dosn’t mean you need to feel overwhelmed. Many of the same business and investment principles you operate under now will apply to this new world of crowdfunding. There may just be a new set of terminology you need to get comfortable with.
Start slow and take it in bite sized chunks. That’s the beauty of investing with Vicinity in the first place, you don’t need to (and often legally can’t) sink your life saving into on deal just to get in the capital raising game. Plus, when it comes to learning and understanding this new space, that’s exactly what we’re here for.
Besides helping to bring local investments to the neighborhood, our team at Vicinity is here to raise awareness and educate about local economics and investing fundamentals. If you have a question, email [email protected], we’d love to hear from you. You can also sign up here for the upcoming launch of the investment portal.