Equity crowdfunding: investing in startups

Since 2016, the SEC has allowed non-accredited investors to invest in early-stage companies through equity crowdfunding platforms. Republic, Wefunder, StartEngine, and others let you buy shares in startups for $100–$1,000. It sounds democratizing, and it is. But the economics of startup investing are brutal even for professionals, and amateurs face structural disadvantages that make it more speculative than most alternatives.

The math problem

Professional VCs expect 60–80% of their portfolio companies to fail, 15–20% to return their money, and 5–10% to produce the massive returns that make the whole fund profitable. They invest in dozens or hundreds of companies, with deep due diligence, board seats, and follow-on capital. Retail crowdfunding investors do none of that — they pick 1–5 companies based on a pitch page, have no governance rights, and can't follow on in later rounds.

When it can make sense

• You've already maxed all retirement accounts, have a fully funded emergency fund, and are investing in index funds.
• You're allocating less than 5% of your investable assets to speculative bets.
• You're investing in a company whose industry, team, or product you genuinely understand from professional experience.
• You're comfortable writing the money off the moment you invest it.

The accredited investor question

Accredited investors ($200k+ income or $1M+ net worth excluding primary residence) get access to more deals, larger investment amounts, and platform-level due diligence. Non-accredited investors are limited to $2,500–$124,000 per year in Regulation Crowdfunding investments, depending on income and net worth. The limits exist for a reason — they prevent catastrophic concentration in an asset class with a very high failure rate.