The first step in the seven-step crowdfunding investment plan is to calculate the maximum amount of money that you are allowed to invest each year in Title III offerings.
Spread out your crowdfunding investments, ideally 10 to 15 deals, over three to five years. Develop an equity crowdfunding budget for the coming 12 months. Be patient and select offerings that are most likely to result in strong ROI.
The first rule of investing is: diversify. The benefits of diversification—spreading the risk—apply not only to your overall investment portfolio (on a macro level), but to each asset class (on a micro level) as well.
When you start looking for offerings to invest in, look first in the industries where you have knowledge or experience; or look for consumer products and services that you are familiar with. Later you can consider offerings in certain other industries for diversity. Make sure you understand the basics of private securities: stock, LLC shares, and convertible debt.
Based on your preferences for industries, kinds of securities, and minimum investment, pick from a list or directory of funding portals and broker-dealer platforms that list suitable offerings. Review the intermediaries’ selection criteria and track records before registering.
After you identify an offering that you feel optimistic about, review the terms of the deal that really matter—including price, equity percent, valuation, use of proceeds, liquidation preferences, conversion rights, etc.—and be sure they make sense. Then conduct due diligence, perhaps collaborating with or relying on other smart investors or a professional adviser.
Remind yourself once more that angel investing is risky, and private securities can be illiquid for several years. Then, if you’re sure, click on “Invest Now,” and send money to an escrow account. If the issuer meets its funding goal, the deal closes and (congratulations) you’re an owner; if not, you’ll get a refund from escrow.
Monitor your equity crowdfunding investments and, every 12 months, perhaps adjust your allocation and budget for the coming year. Over the years, stay alert to opportunities for an exit (acquisition or IPO), later-round investing, redemption, liquidation, or sale of shares on secondary markets.