With the rise of angel investing platforms, investing small amounts like $50 into early stage startups is now possible for retail investors. Previously limited to accredited investors who meet minimum income and net worth requirements, the SEC recently expanded access so that anyone can try angel investing. This opens up huge opportunities, if you know how to analyse startups and invest smartly. I’ll explain a few tips on how to start angel investing for free with a $50 app, including how to find, research and invest in promising startups.
Look for equity crowdfunding platforms with free plans
The best way to start angel investing with little money is through equity crowdfunding platforms. They provide easy online access to invest in startups, whereas traditionally you’d need connections and invite. Republic, SeedInvest, StartEngine, NextSeed all offer free plans to browse opportunities without paying fees. Once set up, you can filter for startups raising $50k or less. Do research into the platform – SeedInvest is one of the biggest players, having facilitated over $200 million into 320+ companies. Read reviews and make sure there are solid startups on the platform before committing.
Evaluate startups carefully before investing
With equity crowdfunding, there is high risk investing in startups. Do thorough due diligence before placing your $50. Read the business plan and financials in detail. Do the founders have expertise in their domain? Study their traction and metrics. Talk to the founders if possible. Search media articles for any coverage of the startup. Cross-check claims and projections. Evaluate if the valuation and terms are reasonable. Look for red flags like no traction despite time in market. Research the market potential for their solution. Determine if the startup has a solid plan and ability to execute before investing.
Diversify across multiple startups
With such small investable amounts, diversification is key to manage risk. Rather than placing the full $50 into one startup, invest $10-20 each in five startups. Spread your risk across different sectors like SaaS, consumer products, biotech etc. This way, if one startup fails you still have four others with potential. Diversification protects the downside when angel investing small amounts. On some platforms, you may need to invest $50 minimum per startup, so save up $250 and diversify wisely.
Take advantage of investor updates to monitor startups
Equity crowdfunding platforms provide ongoing investor updates from startups post-funding. This helps you monitor their progress without extra work. Watch for milestone achievements, traction growth, new funding rounds etc. Follow startup updates to gauge if they are executing well post-investment. Be ready to write off underperformers, but let the winners run. Use investor updates to make informed follow-on investment decisions when the startup raises again.
Think long-term and reinvest proceeds
Angel investing requires 5-10 year time horizon for significant gains. Continue reinvesting your proceeds into new startups for compounded growth. As portfolio startups get acquired or go public, redeploy those proceeds into the next batch. With cash-free investing to start, this capital recycling fuels your portfolio expansion. Maintain a long-term mindset, and keep investing proceeds from exits back into new startups. Over time, portfolio returns can snowball thanks to recycling capital while minimizing new cash input.
Equity crowdfunding now enables anyone to start angel investing with little cash through platforms providing free access. But be selective in evaluating startups, diversify smartly and maintain a long-term mindset to allow portfolio returns to compound over time. With the right diligent approach, seeding promising ventures with $50 can now open the door to angel investing and potential outsized startup returns.