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PENSCO Blog

PENSCO Blog

Fresh alternative asset insights and the latest news on real estate and private equity investing.

Equity Crowdfunding Doesn’t Care Who You Know

Man on his computer at the park

  |  By Christopher Orr, SDIP

In an earlier blog post, I discussed the rise of equity crowdfunding and how at PENSCO we’ve also taken note of the growing interest among our clients. Indeed, more PENSCO clients are using crowdfunding platforms to access private equity opportunities than ever before possible. But does this trend have implications for the broader US accredited investor base? 

Until recently, accessing investment opportunities in startups was all about where you lived. Of course, for those living San Francisco, New York, Boston or any other “innovation hub”, this wasn’t an issue – all you had to do was tap into your local network to uncover a startup opportunity. But for the less geographically connected, access to startup investing was scarce. 

The introduction of equity crowdfunding platform websites in 2012 changed all of this. After the JOBS Act cleared the way for platforms to publicly solicit new investors, all accredited investors suddenly had equal access to private equity opportunities. The result has been a “democratization” of private equity investing, in which a more diverse geography of accredited investors are able to access startup deals on crowdfunding platform websites.   

As referenced in a blog post from our partners at the Angel Capital Association, it’s been surmised that geographically-focused investors who insist on meeting with founders of startups may soon be evolving to incorporate these deal-sourcing technology advancements. In fact, adhering to such an approach may result in missing some of the most attractive opportunities, as other investors could more nimbly identify these deals on platform websites.  

So it doesn’t matter if your live in the pristine wilderness of the continental United States or a densely populated city-- equity crowdfunding platforms are entirely location agnostic. 

I’ve personally fielded numerous calls from investors expressing interest in equity crowdfunding, and the area codes that appear on my caller ID aren’t the usual suspects. It’s encouraging to see that accredited investors in the most remote corners of the country are at last getting the same private equity access as their urban counterparts. PENSCO will definitely be keeping a watch on this interesting trend. 

This Blog does not provide investment, tax, or legal advice nor does it evaluate, recommend or endorse any advisory firm or investment vehicle. Investments are not FDIC insured and are subject to risk, including the loss of principal.