Up 45% in U.K. -- The U.S. Is Next

By Matthew Milner, on Wednesday, March 30, 2016

I’m proud to be an American...

But lately, I’ve become jealous of UK citizens.

I mean, first they came up with James Bond and Fish & Chips (I’m a big fan of both)...

Then, according to the World Health Organization, they started living longer than us.

But now they’re kicking our butts on something I take personally:

Their citizens are getting better investment opportunities.

Luckily, we’re about to get our chance to get even…

And as a U.S. citizen, you’re about to get a chance to make some money.

Equity Crowdfunding Already Legal

In the UK, equity crowdfunding (“ECF”) has been legal for more than four years.

That means all UK citizens—regardless of net worth or income—have been able to invest in private start-ups at their earliest stages.

The reason that’s so important is that investing in early-stage companies can be extremely lucrative. In fact, research conducted by the Kauffman Foundation—a non-profit think tank—found that investors who invest in private, early-stage companies earn an average of 27% per year.

That’s nearly four times higher than the returns from the public stock market.

Perhaps that explains why demand in the UK has been so robust:

So far, 2,000 private companies have raised a cumulative $270 million from “Mom & Pop” investors.

Critically, these deals have been of the highest quality: there have been zero cases of fraud, and failure rates have been exceptionally low. (In fact, as you’ll see in a minute, ECF start-ups have been more successful than their non-ECF peers.)

But recently, the UK gave me yet another reason to be jealous…

Well, That Was Fast

Last month, a market research company called Beauhurst released a report about the state of start-up investing in the UK.

In the report, Beauhurst revealed an unexpected statistic:

Equity crowdfunding has become the #1 method of raising capital for start-ups.

That means ECF has become a more powerful funding source than wealthy Angel investors or even the professional investors known as Venture Capitalists.

Here’s what this rise looks like in a chart—where the vertical axis is the number of seed-stage deals, and the horizontal axis is time:

As you can see by the steep blue line, the rise of ECF has been swift and unrelenting:

After catching up with traditional funding sources in just four years, ECF in the UK finally claimed the #1 spot around 2014—and it’s blasted off from there, increasing 45% between 2014 and 2015.

Now Coming to the U.S.

And in just seven weeks, ECF is coming to the U.S.

That’s when Title III of the JOBS Act goes into effect »

This is what we’ve been preparing you for. You’ll finally have the chance to invest in start-ups at their earliest stages, just like our friends in the UK.

It’s expected that ECF will take off even faster in the U.S. than it did in the UK. That’s because Americans have spent four years studying how things progressed on the other side of the pond—and four years chomping at the bit to get involved.

Actually, it was a similar scenario in the UK, back when ECF first became legal…

Investments Going Up, Down Under

You see, the UK wasn’t the first country to legalize ECF.

That honor went to Australia, back in 2007. Since then, more than $130 million has been raised for 176 Australian start-ups.

Just like us, British citizens were “jealous” of overseas investors who could leverage ECF—but all they could do was watch from afar until the concept arrived in their own country.

And as it turns out, the companies they were watching performed extraordinarily well…

For example, generally speaking, about 50% of all new businesses fail within their first year. But according to a study performed by Dr. Richard Swart, the head of UC Berkeley’s crowdfunding research initiative, the Australian companies had a survival rate of 83%.

That’s 66% higher than expected.

There are several potential reasons for this:

For starters, most ECF opportunities have already been screened by a team of professional investors.

Furthermore, if the founder of the company can raise money from investors, he or she has demonstrated some important traits of a successful entrepreneur—from tenacity to salesmanship.

And finally, if dozens or even hundreds of investors are willing to support a company’s vision, that’s a good indication that the start-up has broad enough appeal to become a mass market success.

Pass the Baton

As you learned today, after ECF became legal in Australia, start-ups took advantage of it to raise $130 million.

Then, UK start-ups took advantage of ECF to raise more than double that amount, in half the time.

Now the baton is about to be passed to the U.S.

So keep your eye on your inbox every Monday at 11am Eastern…

That’s when we publish new ECF deals we’ve scoured from around the web.

In just seven weeks, those deals will start to include investment opportunities that are open to ALL citizens of the U.S.

That’s when you’ll get your shot at investing in some of the most promising early-stage companies in the country.

Best Regards,
Matthew Milner
Matthew Milner


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