According to a recently released white paper by Offerboard – a leading online marketplace for private placements – as a result of the implementation of Title II of the JOBS Act, the number of Reg D investors increased 50% over historical averages during the past year.
As a growing number of retail investors allocate their hard-earned money to private, less transparent businesses, they need to be cognizant of certain warning signs and made aware of lesser-known due diligence tools – many of which can be accessed online for free. The mission of Crowd Investors Corner is to not only draw attention to potential red flags but to help a new breed of retail investor known as “investumer” uncover valuable research resources.
Investment amount is yet another instance in life where size does indeed matter. When you see a startup issuing a press release boasting about securing a new high profile investor but neglecting to state the investment amount, it could be another red flag. A prominent angel or venture capitalist throwing a few thousand into a startup is not news.
Likewise, it should also raise concerns when a company tells you that it has closed a subsequent financing at a surprisingly high valuation but fails to affirm the sum. A $200,000 round at a $500 million dollar valuation is much less noteworthy than a $2,000,000 round at a $50 million dollar valuation.
It’s important to inquire further and confirm quantities. Investumers deserve to know how much “skin is actually in the game”.
This article was originally published in Crowdfund Insider
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