Ever wonder what millionaire entrepreneurs, families and just generally rich people do with their spare cash?
Well, some of it goes towards investing in the next big ideas.
Investing in new startup businesses is a risky endeavour, but, it can pay off big time. Think those who got in before Airbnb or Facebook became huge.
The catch? You have to be willing to lose all your money if you want to play, which is why it’s advised that you don’t invest what you can’t afford to lose.
We chatted to Jonny Wilkinson from Australian crowdfunding company Equitise who started his business to let ordinary Australians invest like millionaires.
Here’s how you can do it.
What is “equity crowdfunding”?
“This financial term simply means that you buy part of a business through a platform like ours,” Jonny says.
“Previously only very wealthy people with access to these deals would have been able to invest in what could become the next big thing.
“We saw there were changes coming and we wanted to be part of the change, so we started Equitise to give ordinary people the opportunity to invest and support people or businesses they believed in.”
Who’s behind this?
“Chris Gilbert and myself are the co-founders of Equitise. We lead a team of 10 based out of the co-working space Tank Stream Labs in Sydney,” Jonny says.
“We work with new and innovative companies in all types of industries – from medicinal cannabis too car sharing apps, gin distilleries and a new breed of banks called neobanks.”
Am I going to get rich?
“Yes – you could, but you could also lose all the money you invest. The nature of startup investments is that it is a high-risk play. Investors can make money when the business is bought or is floating on the stock exchange.”
Should first time investors take part?
“It’s a great way for people to learn about investing and dip their toes in putting in only a small amount of money.
“We recommend investing in a range of stocks or property and consider this as a non-essential part of your portfolio. First time investors could use Equitise to put as little as $50on one of these deals and get a sense of how it would play out.
“Before you invest you should do your research, understand what you are investing in, and make sure you can afford to lose whatever money you put in. You’ll find most of your information on the offer page and in the offer document you can download from our website, however a lot of investors also like to do their own research. Equitise also gives potential investors plenty of opportunity to ask questions through webinars and events with the cofounders of these businesses.”
“To ‘exit’ – the technical term which means you get your money back – you might need to wait while the early stage business grows to a point it is either bought or can be floated. Some businesses will pay dividends to their investors before that point but not always. Take this into account too as it’s more of a longer term strategy for investing!”
How do millionaire venture capitalists invest in companies?
VC will usually invest in many opportunities. Jonny says the traditional VC model works like this:
- 1 investment might make all your money or more than 10 times your investment
- 2-3 investments might make a modest return
- 2-3 might break even
- The rest will go bankrupt
Give me an example?
“One opportunity we had recently is with The West Winds Gin, a Margaret River distillery. It raised $933,500 and you could own a piece of the company for $500 (or as much as $10,000).
“West Winds boss Paul White knew his customers were really passionate about the brand and were looking for a way to buy in. He met my co-founder Chris a while ago and they’ve been building towards this ever since.
“Bottling its first gin in 2010 and selling 5000 in its first year, West Winds will this year sell more than 100,000 in over 10 countries and it’s about to ramp up even more.”
What new money products do you use?
“I use online banking to monitor my income, savings and mortgage. I like to look at that all together. I also have investments in Australian companies listed here and a large number of investments through Equitise.
“I also pay with Apple pay!”