When crowdfunding sites like Kickstarter became popular, they were hailed as the democratization of capital – now, finally, anyone could raise money without the blessing of a VC.
But crowdfunding isn’t all unicorns and rainbows. Managing a crowdfunding campaign can be a full-time job in and of itself, and delayed products can lead to unhappy masses of customers.
Startups seeking a middle ground might turn to angel investors, but there’s a new option in town: iSelect Fund. Investment committee chairman Jeff Joseph, a TechStars mentor and angel investor, describes it as a cross between crowdfunding and venture capital. Startups are able to submit applications and then be listed on the platform, where accredited investors are looking for investment opportunities. Soon, you may see investments of $5,000 and up coming in.
Here are some ways that St. Louis’s iSelect Fund finds a happy medium between crowdfunding and venture capital:
Selectiveness. VCs are incredibly selective, which makes for lots of rejections. On the other hand, crowdfunding sites approve most of the projects submitted – which also means you have to compete amidst tons of noise in the market. In the middle, iSelectFund has a 10-person investment committee that vets startups and performs due diligence. Startups also get evaluated by CrowdCheck.
Timing. Your startup won’t be accepted to iSelect Fund in a few days or a week, as with crowdfunding, but it also won’t take half a year, either. The vetting process takes about two to three months.
Workload. Instead of repeating a pitch over and over, startups on iSelect have a profile that interested investors review. Some of the due diligence findings are also available to investors who want to dig further. While the VC fundraising process can be a huge distraction from doing business, iSelect shouldn’t take too much of your time.
Complexity. With crowdfunding, you may have hundreds or thousands of backers who feel you owe them your attention and email responses. iSelect simplifies the process by considering all the investments made in your company as coming from them, a single entity. That keeps your term sheet simple, and should reduce headaches, too.
iSelect is still very new, with only 10 companies on the platform and five investments so far. But Joseph hopes that activity will increase as investors see the benefits – basically, the ability to build their own private equity portfolio. The minimum investment is only $50,000, which is fairly accessible for accredited investors, and they can select (get it?) which companies to invest in, for as little as $5,000 each. If you’re having trouble finding angel investment, iSelect might be an option to investigate.