MicroVentures was among the very first online venture-investing platforms. Founded in 2009, they started by offering traditional angel and venture investments to accredited investors, but in smaller dollar amounts and exclusively online. They now also offer Reg CF investments which are open to all investors, and generally have lower minimum investment amounts.
They have a strong track record and history, including having offered investments in Facebook, Twitter, and Yelp before each went public. They’ve done more than $100M in transactions, and the MicroVentures platform also powers FirstDemocracy VC, the new equity crowdfunding feature of IndieGoGo (all Reg CF offerings on MicroVentures are also offered via First Democracy VC).
Types of investments MicroVentures offers
Microventures offers investments in startups. Most are for early-stage startups, but some investments (most open only to accredited investors, and offered under Reg D) are for later-stage companies that have arguably outgrown the “startup” moniker (eg, Dropbox) but are still private companies. They have an admirable portfolio of funded companies, including Birchbox, Bonobos, Cloudera, Instacart, and Lyft.
Microventures also periodically offers some investment funds, which offer a good value for accredited investors to gain exposure to a diverse portfolio of venture-backed companies for a relatively low investment amount. (Hedgeable is also worth a look if you’re looking for a low-minimum way to invest in a venture fund).
What do you get when investing with MicroVentures?
The specific security an investor will receive depends on the investment, and varies quite a bit among the investments available on MicroVentures. For example, among the the 3 Reg CF offerings open at the time of this writing, one was for common stock, another for a revenue share, and a third for a promissory note to be paid back out of future revenue. Other investment types offered include equity, debt, and convertible notes.
With Reg CF investments, investors always receive a security directly from the company (whether it’s a promissory note, common stock, or some other variation). With Reg D investments (the ones open only to accredited investors), the investment may be through a special-purpose vehicle such as an LLC.
Influenced no doubt by the affiliate with IndieGoGo, many of the Reg CF investments offered via First Democracy VC, their Title III funding portal, also include various rewards at different investment levels (for example, one active investment for a film offers red-carpet access to a premier to those investing $2,500, whereas $100,000 will get you an Executive Producer credit on the film).
How does MicroVentures make money?
MicroVentures takes a 5% from investors from each successful raise (plus 5% from the issuing company), and charges 10% in carried interest.
Potential returns and cashflow
Investments on MicroVentures are high-risk investments in startups. While some debt and revenue share investments may offer some ongoing cash flow, most of the investments have no explicit expectation of payments, dividends, or other cash flow. Except under very limited circumstances, Reg CF investments must be held for at least 12 months, with minimal expectation of any secondary market for the investment after that. 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.
Breadth of offerings on MicroVentures
MicroVentures offers something for almost anyone. (Indeed, the array of choices can be dizzying to a newcomer to the site). Their featured offerings are their Reg CF investments (offered through First Democracy VC, their partnership with IndieGoGo), which are open to anyone. They also offer various investments via Reg D, which are only open to accredited investors, including secondary offerings in companies like Dropbox and Docusign.
MicroVentures also occasionally offers investment funds (I personally invested in one targeting a number of late-stage startups expecting a liquidity event on a 1-3 year time horizon).
Regulatory framework and due diligence expectations
MicroVentures is an SEC registered Title III Funding Portal, which means they are subject to a range of rules and obligations around investor education and due diligence. All companies offering Reg CF investments on MicroVentures will have been through background checks of key officers and owners, and there are links provided to the relevant SEC filings made by the offering company. Prospective investors also have access to online forums to talk with other investors, and an online channel for asking questions of the company raising funds (and viewing answers of prior questions from others – see screenshots below).
MicroVentures is also a registered broker-dealer. Broker-dealers are subject to specific due-diligence requirements to ensure an investment is “suitable” for their registered customers, or they can face fines and civil action. (That does not of course provide any guarantees about investment return or performance!)
Overall they place a major emphasis on their curation role in evaluating and selecting companies to offer as investments. When you first register with MicroVentures, they will schedule an initial phone call to discuss your situation and objectives.