Ryan Feit and James Han wanted their crowdfunding site to be more than a listing service for startups in search of cash. So when the former investors launched New York City-based SeedInvest in February, they handpicked the companies they wanted to include. The idea was to make it easier for startups to stand out from the crowd and give accredited investors the highest caliber of companies from which to choose.
So far more than 400 startups have applied to SeedInvest, and more than 600 accredited investors have signed on. "Right now about 1.5 percent of the companies that apply are given the green light to raise capital," Feit says. The site has already yielded nearly $1 million in equity or convertible-note investments. In addition to companies actively fundraising, SeedInvest features "prospects"--select up-and-comers showcased to gauge investor interest.
Once cleared to begin fundraising, startups must specify a target amount and deadline; to collect the funds, they must meet both. SeedInvest takes a 5 to 10 percent cut of funds raised through the site.
We talked to Feit about SeedInvest's curated approach.
What qualities do you look for in startups?
We definitely evaluate the team to see if their experience fits the market they're going after. We'll also look at whether it's a large enough market for investors. We'll look at the competitive landscape and figure out if they have something that differentiates them from other people. We'll look at funding traction as well. Although it's not a requirement, a lot of the deals that have done well on our site are deals where an angel group or a VC or maybe some other investors have already committed to the company.
What must companies submit to be considered?
We require them to submit an investor deck, which should have walked through a lot of the things that I mentioned we're looking for. Then we want to see a little historical [info] if they have that, and projections. From that we can typically tell whether they're ready or whether they need more work.
How long does it take to get funded?
Based on what we're seeing, it should take between a week and a few months. But it really depends on the company, how much they're trying to raise and their investor traction.
What are your repayment terms?
We don't have a standardized template. It's ultimately a negotiation between the entrepreneur and the investor, and typically the terms are not any different than they would be from raising capital offline.
What are some of the site's unique features?
We have something called Virtual Meetings. It allows an entrepreneur to pitch investors across the country from their couch. The second feature we've built is called Simple Invest. That allows investors to sign legal documents and send money to fund their investment in a few easy steps. As an entrepreneur, you never have to track down a check or a signature page again. And we're building a feature called Groups, which allows VCs, angel groups, incubators and other affinity groups to have their own portion of SeedInvest. As we bring on more investment groups, it will help entrepreneurs on our site access them.
Any advice for 'treps interested In SeedInvest?
It's really important to get as far as you can as an entrepreneur prior to raising capital. Spend some time and a little bit of money to make sure you have a product that is ready to launch. Speak with as many investors as you can before the SeedInvest process.
It helps your cause if you have some investors that are interested when you launch your deal on our site.