Have you ever wanted to invest in early and late-stage companies but couldn’t because your bank or financial institution didn’t have that feature? Then, you’ll like our MicroVentures Review. With MicroVentures, it is possible.
It is an American FINRA-registered broker-dealer crowdfunding platform that connects accredited and non-accredited investors with early-stage companies seeking to raise capital. It allows domestic (US) and international investors to participate, subject to certain restrictions and requirements.
Your funds are safe since it is well-regulated and subject to SEC regulations. While it may seem simple and rewarding, investing in early-stage companies is risky. Here is everything you need to know about MicroVentures.
Table of Contents
MicroVentures Review of Its History
Let’s start our MicroVentures review with its history. Bill Clark founded MicroVentures in 2009 in Austin, Texas. Big financial institutions in the US offered less credit to small businesses following the 2008 financial crisis, and he saw an opportunity.
Bill’s background in credit risk management at companies like GMAC, PayPal, and Dell Financial Services gave him the best background to bridge the gap between investors and startups safely. In 2010, MicroVentures completed FINRA’s application and became a registered broker-dealer. It allowed it to legally sell shares of companies without a third-party mediator.
Bill Clark added market leaders to his company, which quickly grew. By January 2013, the monthly deal volume rose to over $1M.
To this day, MicroVentures has over 200,000 investors, transacted for over $550M, thanks to over 1200 investment opportunities. The platform’s past investment opportunities include Airbnb, Uber, Lyft, OpenAI, and other big names in various industries.
Investment Process
The investment process for investors and startups to join the platform is straightforward but requires a few steps. Here is a MicroVentures review breakdown.
Investors
MicroVentures accepts both accredited and sophisticated non-accredited investors. The platform conducts initial phone calls with every investor to determine their accreditation status or suitability. MicroVentures holds over 10,000 accredited investors and a significant number of international investors. Both groups must meet specific requirements set by the SEC.
Non-accredited investors may be eligible to invest under Regulation Crowdfunding, with limitations on the investment amount based on their income or net worth. On the other hand, international investors can participate in some investment opportunities, but availability may be limited and subject to additional regulatory requirements. They may need to provide further documentation.
Startups
First, startups submit an application detailing their business, market potential, financials, and growth plans. Next, MicroVentures conducts thorough due diligence, including legal and financial analysis and criminal background checks on the founders. Then, the platform negotiates with the startup’s owners to achieve a fair valuation. The startup may not be listed if a fair valuation cannot be reached. Once approved, the startup is listed on the platform. Investors can review the due diligence results and make informed investment decisions.
Note: MicroVentures accepts less than 0.5% of applicants for listing.
MicroVentures Review of Its Services
MicroVentures offers a range of services to both investors and startups. The minimum investment for investors varies based on the investment. Here is a MichVentures review of those.
- For Regulation Crowdfunding offerings, the minimum is generally $100.
- Regulation D offerings start at $3,000.
- Investments in secondary, late-stage companies usually begin at $10,000.
Company Listing and Due Diligence
MicroVentures funds startups from various industries, such as technology, consumer products, healthcare, media, and telecommunications. The platform conducts thorough due diligence on prospective companies, evaluating numerous factors (risk, profitability potential, and other key criteria).
It posts the due diligence results for investors to review, ensuring transparency and informed decision-making. As a result, transparency is good in this MicroVentures review.
Investment Opportunities
If we’re doing a MicroVentures review, we must discuss investment opportunities. The platform provides investment opportunities in early-stage companies and select secondary market equities.
It supports startups in internet technology, online social services, software, mobile technology, media and entertainment, gaming, and green technology. The average startup listed on MicroVentures raises between $150,000 and $250,000. Some outliers raise over $1M.
Investors must hold their investment for a minimum of 1 year. They can try to sell it afterward, but it may be harder than it looks. There is no guarantee that a market will exist to sell the investment because the private market is illiquid. Investors must be prepared to hold their investments longer. A typical investor can expect to hold their investment for seven years or longer.
Secondary Market Equities
What are secondary market equities? MicroVentures offers a secondary market where accredited or institutional can buy (minimum $50,000) and sell equity shares of privately held companies originally funded through MicroVentures’ primary crowdfunding platform.
Sellers might want to exit their position before a major liquidity event like an IPO or acquisition occurs for the company. Let’s continue with this MicroVentures review.
MicroVentures Review of Fees
How does MicroVentures make money from all this? It charges fees to both investors and startups. Here is a MicroVentures review breakdown for both parties.
Investors
- Placement fee – A one-time 5% placement fee is taken upfront after the initial raise closes.
- Offering costs – A one-time 1.5% fee is charged upfront when the offering is finalized. It covers the costs of setting up, regulating, and reporting for the offering.
- Management fee – A 0.50% annual management fee is charged until there is an exit.
- Carried interest – A one-time 10% fee is charged during a liquidity event. After the investor gets their initial capital back, any remaining money is split 90% to the investor and 10% to MicroVentures.
As you can see, investors’ fees can quickly accumulate. You can forget your typical 0-2% ETF or mutual fund annual management fee.
Startup fees
Investors aren’t the only ones paying fees to MicroVentures. Startups must do the same. They have to pay fees throughout the process. Those include:
- Due diligence fees (variable)
- Listing fees (a few thousand dollars)
- Success fees (a percentage of the funds raised – 5 to 10%)
- Other fees (additional transaction-specific fees may apply)
MicroVentures Review of Pros and Cons
With every investment and platform, there are pros and cons. Here is what you can expect when you join MicroVentures.
Pros
- MicroVentures has a strong track record. The platform has thousands of active accredited investors and has facilitated investments in companies like Facebook, Twitter, and Yelp before they went public.
- The platform places a major emphasis on due diligence, ensuring that only high-quality startups are listed.
- As a registered broker-dealer and Title III Funding Portal, MicroVentures adheres to strict regulatory requirements, providing security and trust for investors.
- MicroVentures offers a diverse range of investment opportunities across various sectors.
Cons
- The typical minimum investment amount is $3,000, which may be a barrier for some individual investors. Some late-stage companies require a $10,000 minimum investment.
- Private equity investors must hold on to their investments for at least one year. Typically, they can expect to stay invested for around seven years until they can find a buyer in this illiquid market.
- MicroVentures charges various fees to investors and startups, which can add up and impact overall returns.
- Investing in startups and early-stage companies carries risks, including the possibility of total capital loss. Investors must conduct thorough research and seek professional advice before making investment decisions.
Previous Examples
MicroVentures has facilitated funding for several late-stage companies in the past. It provided opportunities for investors to participate in the growth of established businesses before they hit the stock market. Here are some historical examples.
Facebook (NASDAQ: META)
In 2011, MicroVentures raised $500,000 to invest in Facebook before it went public.
Slack
Slack raised over $1B in funding with MicroVentures. In 2019, the company went public, but Salesforce acquired it in 2021. It is now a private company.
Instacart (NASDAQ: CART)
MicroVentures participated in one of Instacart’s funding rounds worth $500M.
Oculus VR
Before being acquired by Facebook in 2014, Oculus needed funding to develop its products and grow its market presence. MicroVentures participated in a round of funding that allowed Oculus to raise $90M.
You can find Microventures’ full portfolio here. There are plenty of interesting companies in various industries to choose from.
Final Thoughts: MicroVentures Review
To conclude this Microventures review, if you are an experienced or accredited investor looking to invest in early and late-stage, MicroVentures is for you. Remember that private investing is risky and costly (fees!), and you must hold on to your investment for many years.
Fortunately, MicroVentures’ platform has all the tools you need to succeed. They perform the due diligence for you (we suggest you still do some!), and they have the tools in place for you to understand what you are investing in. The platform offers plenty of investments from different sectors and industries.
If you want to learn more about profiting from the stock market, head to our free library of educational courses. We have something for everyone, including trading options for those with small accounts.
Frequently Asked Questions
MicroVentures was the first major equity crowdfunding site registered with the FINRA. It is heavily regulated and has a proven track record.
MicroVentures charges investors and startups various fees depending on the type of investment they choose.
Equity crowdfunding is very risky for many reasons. The company has a higher risk of failing; it may take years to realize a profit and is an illiquid market.
