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Technology Stocks : Equity Crowdfunding

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From: Thehammer6/16/2020 10:47:33 AM
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Glenn Petersen

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Kevin O' Leary AKA "Mr. Wonderful" has invested in and became a paid spokesperson for StartEngine. Several good videos here.

I have been investing in various private companies for several years and those investments include StartEngine which helps connect investors with start ups.

When I worked in financial services, I was precluded from investing in initially hot IPOs and that was later extended to any IPO. These investments are certainly very risky but also a potentially an opportunity to get into the next "big thing" earlier than an IPO.

After 3 years. I am even more positive on the concept. Initially, considering my financial services background, my major concerns centered on unsophisticated investors investing their rent money in some really bad companies. Some of that has happened but not to the extent that some folks have gotten burned with digital currencies.

The "Jobs Act" gave entrepreneurs increased access to capital markets. After 3 years, I am convinced that more and more start ups will seek this avenue to grow their company. It probably isn't for the "mom and pop" corner grocery store and I typically look for investments that have the potential to scale the business geometrically.

It seems that many startups receive some level of funding from "friends and families" and perhaps some early adopting clients who feel in love with the concept. Equity Crowdfunding opens up whole new venue for a capital raise beyond bank loans, VC's or angel investors. With these large investors you typically give up considerable control as well as board seats. I see two big advantages with Equity Crowdfunding from the company perspective. The first is that you can expand your client base mainly to individuals who utilize your product and are aligned with your vision. Secondly, you maintain a much greater degree of control.

From an investor perspective, these investments are not liquid and some (there are 3 categories of crowdfunding) only allow the investment to be sold after 1 year (assuming there is a market). StartEngine has applied to become a dealer and start a secondary market, but I assume that will only apply to some of the companies that used their platform.

For the time being, these are long term investments and many will probably go to zero. That is why I take a portfolio approach and don't commit a whole lot of money. I have invested multiple times in a few of them that have appeared to be doing well and come back for additional funding.
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