•  Venture

EquityNet Review -- Funding network connecting entrepreneurs and accredited investors

EquityNet is technically not an online alternative investment platform, as they don’t provide any means to facilitate the actual investment. Their primary business seems to be selling services to entrepreneurs to help them develop a business and fundraising plan, then marketing those businesses to their database of prospective investors.

EquityNet

  • Founded: 2005
  • Investment Types: Venture
  • Sectors: Energy, Healthcare, Marketing, Retail, Transportation, Communications, Software, Media, Entertainment, and Consumer Packaged Goods
  • Minimum Investment: $5,000
  • Must be accredited
 Pros
  • Long history (founded in 2006)
  • Wide selection of listed companies
  • No fees for investors
 Cons
  • No ability to actually invest online
  • No screening of companies raising capital (beyond legal minimums)
  • Onerous onboarding process to access deal details

Overview

This EquityNet Review will help you learn more about EquityNet's investment offerings, including how the alternative investments on EquityNet are structured, and what your potential returns might be. You can read more about the criteria we use to review investment platforms here.

EquityNet is a bit of an outlier among the investment crowdfunding platforms we’ve covered. They’ve been around since 2005 (founded in Arkansas) and list investments under both Reg D and Reg A+, yet unlike most other investment crowdfunding platforms, don’t facilitate the actual investment, leaving that up to investors and entrepreneurs to work out off the platform.

While many investment crowdfunding platforms ask for a lot of information from prospective investors, The EquityNet onboarding process is particularly onerous (for example requiring investors to upload a headshot). Since EquityNet is primarily aimed at entrepreneurs (they charge companies a subscription fee), the onboarding left me feeling like I was filling out a detailed CRM profile for future targeting by companies looking to raise capital.

Types of investments EquityNet offers

EquityNet lists a variety of businesses, from startups to later-stage growth companies, across a wide range of industries, including life sciences, energy, communications, and even real estate companies managing multiple hotel properties.

Once you’ve signed up as an investor, you can search and browse the EquityNet database, filtering by a range of criteria, such as location, revenue, funding type, and industry. Company profiles include detailed information about the company, including prior- and current-year revenue (as well as projection for next year’s revenue), company age, number of employees, valuation, and prior funding rounds. There is also a section with news and links about the company raising.

What do you get when investing with EquityNet?

Investments are not made via EquityNet itself, instead investors must connect directly with the company raising money to coordinate the investment. Issuers as of this writing were offering Convertible Debt, Equity, Debt Financing, Grant, and Royalty funding types.

How does EquityNet make money?

EquityNet does not charge fees to investors, nor do they charge any transaction fees to offering companies; they do however charge companies looking for capital fees for various services (primarily a monthly subscription).

Potential returns and cashflow

Investments made via EquityNet are high-risk investments in startups. Most startup investments lose some or all of their value. While some investors achieve excellent returns from startup investing, that is a rare outcome and requires substantial diversification over time combined with very careful investment selection.

Regulatory framework and due diligence expectations

EquityNet seems to be functioning essentially as an issuer/investor matchmaking platform, and is not offering or facilitating investments directly. According to their FAQ, investments listed may be offered by the listing company using Reg D or Reg A+.

EquityNet does not curate or provide any due diligence (and their dearth of advice about due diligence: “ask a lot of questions” leaves quite a few questions of its own). EquityNet does offer investors a “business plan analysis”, though that analysis must be individually requested for each offering an investor is interested in. They have a sample business plan analysis available for review here (PDF).

Within the issuer profile page, for some issuers EquityNet displays a “Business Risk” score (expressed as a percentage probability of failure) and a “Projection Alerts” section:

Estimated number of the business plan projections that may be abnormal. Benchmarks are derived from EquityNet’s peer business database. Red flags are more severe than yellow flags.

While many investment platforms tout their due diligence process and selection criteria, EquityNet takes the opposite approach, emphasizing they are a “Network for Everyone”:

EquityNet accepts all legal and ethical companies. Our competitors accept less than 5% of all companies who apply.

Put a different way, many platforms market to investors, emphasizing the quality of their offerings; EquityNet markets to entrepreneurs, emphasizing the quality of their investors. EquityNet is not alone in taking a “let the marketplace decide” approach, but prospective investors should be aware of that before investing.

That said, EquityNet does review each new listed company within a day of publication, according to CEO Judd Hollas:

All newly published companies are reviewed the day they publish and if they appear at all suspicious, or are offering questionable products/services, we reserve the right to remove them. Since all deals are ranked by patented scoring algorithms, the higher quality companies boil to the top based on investors’ level of engagement and activities.

This review was first published on 02 December 2022.


Our Rating

Good

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