A new chapter for regular retail traders has come, bringing with it the ability to maneuver the financial markets in the same way as accredited investors.
The past decade has seen explosive growth in venture capital investment with records showing a whopping $118 billion worth of investment in contracting venture capital firms targeting early-stage companies in 2018 alone.
Compared to the S&P 500 and even the Russel 2000, the Venture Capital Index has posted an astronomical return on investment despite a low success rate of less than 20%.
Venture capital institutions have capitalized on the model of fundraising capital for startups, investing in high-growth companies that need to scale while providing active management along the way in the hope of making an IPO exit 5 to 10 years later. The high ROI performance that venture capital firms across the board have managed to achieve has obviously attracted capital from professional investors across the globe.
However, most retail individual investors are left out of venture capital investment as there are stringent minimum requirements put in place that only allow the participation of accredited investors.
Barriers of entry
Undoubtedly, one of the best ways to invest in a startup is to become an accredited investor.
An accredited investor is someone who meets certain standards set by the Securities and Exchange Commission (SEC). These set standards demonstrate that the investor has a high level of income or financial assets, as well as sufficient knowledge about investments.
Therefore, a legal barrier is set to only allow those with a net worth of over $1 million excluding primary residence, or with incomes of over $200,000 for at least two years out of five to legally invest in startups and other ventures.
Theoretically, while these set standards are designed to protect investors with low income, they also lock out a majority from the financial markets. Anyone can meet these qualifications if they’re willing to put in the time and effort required. However, most people don’t have enough money saved up for this type of investment, and even those who do often lack the knowledge to make the right choice, or the time required to make the connection.
Despite the risks involved when investing in startups, venture capital investments can be very profitable for those who know what they’re doing and invest wisely.
A good example is the case of Snapchat. This social media tech company raised $485 million dollars on its first day of IPO, and today that money would be worth nearly $3 billion. It’s hard to find returns like that with a more stable investment vehicle such as stocks or equities.
The challenge for individual investors is not only finding those winners, and identifying them before the general market does but also getting a foot in the door to play in the big league of venture capital investment.
A new beginning for investors
One company is opening the doors to higher return investments around the globe. Hillstone is a soon-to-launch project that aims to change the game while using Blockchain technology and smart contracts. Through the use of these decentralized technologies, they are lowering the threshold for investment thereby allowing anyone to participate.
With a comprehensive service that allows individual investors to obtain information on venture capital opportunities, Hillstone is not only closing the gap in terms of capital but also knowledge. With Hillstone, legal and geographical constraints set in the world of investment are removed thus enabling legalized global market investment.
What’s more, Hillstone is also mitigating the risks involved in investing in early-stage startups with project selection criteria that are conducted by an expert team of investors.
Conclusion: A new frontier of investments
Indeed, emerging technologies such as blockchain and smart contracts are changing how people invest in startups by creating a solution that breaks the barriers of the difficult requirements of accredited investors.
Instead of relying on centralized regulators such as the SEC to approve brokers and investment vehicles, investors can now invest directly in startups using secure and safe smart contract technology-based platforms such as Hillstone.
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