By Jerilyn Klein Bier/ FA-mag.com
Private equity has been a challenge for retail investors because these investments typically have been available only to accredited investors and for very steep minimums. Reg A+ and Reg CF are opening the door for a broader investor audience and this fintech company (which operates under these regulations created by the JOBS Act) aims to help investors better navigate this fast-growing arena.
“We’re like Kayak for investing,” said Ryan Ràfols, founder and CEO of Austin-based Newchip, an online marketplace that he explained aggregates deals from multiple crowdfunding platforms including Wefunder and SeedInvest. According to Ràfols, the Reg A+ and Reg CF industry will raise more than $1 billion in capital this year.
“We try to be the ‘Shark Tank’ for everyday Americans,” he said, referring to the reality TV show for entrepreneurs, because Newchip helps ordinary people invest affordably alongside the uber-wealthy and the venture capitalists leading these deals. Its minimum investment is $100. On average, its individual investors invest $400 to $800, he said.
Newchip has onboarded more than 100,000 individual investors since its app went live in 2017, it raised several million dollars this year, and it has helped fund more than 1,500 small businesses and early stage companies, said Ràfols. Angel investors and venture capitalists comprise about 7 percent of its investor population, he said.
Although he’s seen some early stage companies achieve returns of 20 percent to 30 percent, he cautioned there’s high risk associated with such high-return vehicles. “If someone doesn’t already invest in pubic stocks or have a portfolio,” he said, “they should probably stay away from these investments.”
Newchip tries to advise and educate people about the value of investing in at least 20 early-stage companies (no matter their total investment amount) to get broad exposure. “It’s not about picking the right one,” emphasized Ràfols. “Some of the companies will fail and some will do very well.”
Newchip and the crowdfunding platforms it partners with vet deals and perform due diligence by looking at companies’ financials, projections and statements of fact, he said.
Newchip’s demographic is largely 25- to 35-year-olds. “We’re on the precipice of wealth transfer between the generations,” said Ràfols, and millennials are typically early adopters of technology. They’ve been investing in “lots of things that you can hold and experience and enjoy,” he said, which is what many startups focus on. Popular investments include consumer-type apps, local craft breweries and interesting restaurant concepts, he said. Newchip has also attracted some older investors, he noted.
Startups aren’t new territory for Ràfols, a 28-year-old army veteran and electrical engineer who launched a textbook resale business as a teenager and developed a campus safety app while attending college after his army service. Military-provided classes on taxes, budgeting and investing (which he laments young people aren’t generally taught in high schools and colleges in the U.S) fueled his interest in the finance industry, he said.
His dream is to help people become financially educated and to help companies, he said, and “bringing that together is what formed the vision of Newchip.”