Startups & equity crowdfunding
High riskWhat it is
Buying a small stake in a young, private company — either as an angel investor writing a larger check, or through a regulated equity-crowdfunding platform that lets many people back a company with small amounts each. Money is locked away for years with no way to sell early.
How to buy it
Regulated equity-crowdfunding platforms now operate under securities-regulator supervision in Brazil, Mexico, Colombia and Chile, letting ordinary investors participate with relatively small tickets. For a full treatment of the routes, from crowdfunding tickets to angel checks, invertirstartups.com covers that world in depth.
Pros
- Access to potentially large returns if a company succeeds
- Crowdfunding tickets can be small, unlike traditional angel checks
- Genuinely diversifiable if spread across many small bets over time
Cons
- Most startups fail — a total loss on any single position is a realistic outcome
- No liquidity: money is locked for years with no public market to sell into
- Hard to evaluate without real diligence — this is not a place to follow tips
What it actually costs
The platform charges a fee, usually to both sides of the deal. The larger costs are structural: there is no market to sell into for years, later funding rounds dilute your stake unless you can keep investing, and most individual investments in this asset class return nothing at all. The realistic time horizon is seven to ten years, and the realistic base case for any single company is a total loss.
Who it suits, and who it does not
Only money you can lock away for the better part of a decade and lose without consequence, and only after the rest of the ladder is in place. It suits someone who plans to make many small investments rather than one large one, because the arithmetic of this asset class depends on a few winners paying for many failures.
A worked example
A common pattern among experienced early-stage investors is spreading a fixed, affordable budget across many small positions rather than one large bet — because the return profile is lottery-shaped: a few big winners are expected to make up for many total losses, and nobody can reliably pick the winner in advance.
Common mistakes with this instrument
- Reading a headline valuation as a statement of value — it is the price of the last negotiated round, not an appraisal and not something you can sell at.
- Making one or two investments and treating the result as a verdict on the asset class rather than as the coin-flip it statistically is.
- Using a platform that is not in the regulator's register of authorised crowdfunding operators.
How to reach it, country by country
Equity crowdfunding is a licensed activity in most of the region: institutions authorised under Mexico's Ley Fintech, platforms operating under the CVM's rules in Brazil, entities authorised by the Superintendencia Financiera in Colombia, the Ley Fintec register in Chile, collective-financing platforms registered with the CNV in Argentina, and financiamiento participativo financiero companies authorised by the SMV in Peru. If you want to go deeper on how startup investing actually works, invertirstartups.com covers that subject in detail.