With the rise of micro-investment apps, angel investing has become more accessible than ever, even with just $50. These apps allow anyone to invest in startups and private companies in small increments, democratizing access to investments that were previously exclusive to wealthy accredited investors. By automating and streamlining the investment process, micro-investment platforms lower the barriers to angel investing for the everyday investor. This enables broader participation and diversification in private market deals. In this article, we will explore how these angel investing apps work, their benefits and risks, and provide a comparison of some top players in this emerging fintech sector. Understanding how ordinary investors can now become angels with just $50 and a mobile app is key to evaluating this novel method of Angel investing.
How micro-angel investing apps work – fractional shares in startups
The basic premise of micro-angel apps is providing fractional access to invest in private growth companies and startups. Instead of needing the typical $10k-$100k minimums required to invest, these platforms allow investing even just $50-$100 per deal via fractional shares. For example, if a startup is raising at a $5 million valuation and offers 2% of the company for angel investors, a $50 investment would get you a tiny sliver of equity. While any one of such investments carries high risk, the idea is to create a diversified portfolio with small amounts in many startups. The angel app handles all the legal paperwork and investment processing in the background. This makes the deals accessible to non-accredited investors while saving tons of time and hassle. Many apps also provide educational materials, investment analysis, and portfolio management tools to support novice investors. Overall, the micro-investing model aims to open up deal flow previously reserved for only the wealthiest investors.
Benefits of micro angel investing – low fees and diversification
For new angels, the extremely low minimums allow affordable diversification across multiple private deals. Where else can you invest in 15+ startups for less than $1000? Lowering the financial barrier this way reduces risk through diversification. The streamlined process also saves tons of time versus investing manually. And the investments may yield higher returns than public markets if you pick the right deals. Startup valuations are lower in early rounds, allowing for larger investment gains if they grow successfully. Apps also reduce fees by automating paperwork, deal flow, and portfolio management. For example, AngelList charges a flat 2.5% annual fee based on assets under management, vs typical 5%+ of investment profits charged by angel groups. Overall, micro-angel apps grant easy diversified access to exclusive startup deals that should boost returns for savvy investors.
Risks of micro angel investing – high failure rate of startups
However, the risks of startup investing remain just as high with these apps. The failure rate for startups is over 90%, so most micro-angel investments will still result in 100% loss. Diversification helps reduce risk but does not eliminate it. And you forego control rights and voting shares common to direct startup investing. Startup valuations may also not be accurately priced on these platforms initially. Given the hands-off approach, investors must still evaluate each deal diligently rather than rely on the app alone. With such high inherent risk, micro-angel investing is not suitable for those who cannot afford losing their entire investment amount. As angel deals are highly illiquid, the investment timeframe is 5-10+ years to realize any potential returns as well.
Top micro angel investing apps – AngelList, Republic, MicroVentures, and more
Some top platforms enabling micro angel investments are AngelList, Republic, MicroVentures, and Wefunder. AngelList is the largest platform for both startups and angel investors, with the most deal flow and investors. Republic has a large inventory of curated startups across stages and industries. MicroVentures provides access to invest in later stage companies alongside VC firms. Wefunder focuses exclusively on Reg CF crowdfunding startups and SAFE notes. Each app has different pros and cons to evaluate for fit with investment goals and preferences. But they all open up startup investing at a mere $50-$100 entry point, allowing easy diversification for new angels that was never before possible in private markets.
Micro-investing apps like AngelList and Republic have revolutionized access to angel investing using fractional shares with low minimums. Now anyone can build a diversified portfolio of high risk, high return startup investments for less than $1000, democratizing private deal flow previously exclusive to only accredited investors. Though investing successfully still requires diligent evaluation per deal, such platforms reduce the immense friction and financial barriers of direct startup investing for novice angels.