The world of investing has long been a venture reserved for a very small sect of individuals. But several SEC rulings over the past few years have largely democratized the space, opening the door for everything from crowdfunding to the likes of Columbus-Canada joint venture InvestX.
“We aggregate small checks and then we write one larger check,” says InvestX Founder & Chief Entrepreneur Marcus New. The company pools smaller funds from accredited investors to make one larger investment in later-stage and nearing-IPO companies.
“None of these later-stage companies want small checks,” he says. The crowdfunded investments aim to reach upwards of $500,000 to $1 million. For example, InvestX is currently pooling money for a $604,000 investment in Lyft and $350,000 for Spotify.
“We see it as later-stage venture rounds,” New says. InvestX aims for at least Series C (meaning the company has already raised additional rounds of institutional capital) to help investors reach liquidity faster (an event like a sale, merger or going public that means investors get returns).
“Private equity has the best 10-year return of all the different asset classes,” New says. And it’s a class that retail investors previously have not had access to until recently.
InvestX looks for companies that will have a liquidity event in the next three to five years, although New notes some could be faster or take longer. Just how much an investor will see in returns also depends on a number of factors, but New says the average for 10 years is 17 percent.
InvestX partners with private equity and venture capital firms to find companies in which to invest. In some instances, InvestX’s funds will be lumped in with a private equity partner to make the minimum size. For smaller investments, they will approach directly.
While still reserved for accredited investors, Title III of the SEC’s Jobs Act could further open the door. Currently investors must make over $200,000 or have a net worth of $1 million, but if the SEC enacts the ruling, those making under $50,000 could invest up to five percent of their income, and those over $100,000, up to 10 percent.
New has watched as investment markets have slowly opened up. He was instrumental in building Canadian financial site Stockhouse, which provides information on public markets. As public markets democratized in the late 90s, opening them up to retail investors, New asked why not for private markets?
“A couple of years ago I had the idea of how could we take that to the private markets,” he says. He wanted to remove the barriers that were keeping individual investors from this asset class.
He approached colleague and friend Pam Springer, one of the founders of Manta, with the idea. Springer came on as the first board member, giving InvestX its Columbus connection. Pete Morse, former head of product at Manta, also joined the team.
InvestX plans to grow its presence in Columbus, hoping to hire another three to four employees once they raise a second round of capital. New likes the fact Columbus might not be the first city that pops to mind when thinking investments. Great talent and a lower cost of living are making the city attractive to InvestX.
For more information, visit investx.com.