MicroVentures Review

Pros

• Equity crowdfunding for non-accredited investors
• Broker-dealer registered by the FINRA
• Secured funding for big-name companies

Cons

• Exclusive
• Considerable costs involved

MicroVentures Overview

MicroVentures is an equity crowdfunding platform that offers accredited investors and non-accredited investors alike the chance to invest in early-stage companies.

MicroVentures specializes in Regulation Crowdfunding, a term that refers to equity crowdfunding that allows everyone to invest, not just accredited investors. Companies on MicroVentures can also launch Regulation D Rule 506 raises, though these are limited to accredited investors. Furthermore, MicroVentures is one of the few equity crowdfunding sites to be a broker-dealer registered by the Financial Industry Regulatory Authority (FINRA).

According to MicroVentures, “The sweet spot for our platform is companies or startups that need at least $150,000 to $1,000,000 in capital.” The company also says that its investors typically look for not just entrepreneurs/companies with good ideas but ideas with demonstrated market traction and a team with experience in the industry in question. Clearly, this isn’t crowdfunding for the little guy. Home-based creators of digital content and mom-and-pop shops will find rewards crowdfunding platforms more appropriate for their purposes.

Read on to see if MicroVentures’s brand of Regulation Crowdfunding matches the needs of your business.

Services Offered

MicroVentures describes its services thusly:

We raise capital for startups and small businesses through Regulation D, Regulation A, and Regulation Crowdfunding. Once you apply, we can discuss which option might be right for you.

Browsing the companies raising money on MicroVentures, you’ll find the following company types:

• Internet technology
• Media and entertainment
• Software
• Green technology
• Mobile
• Social
• Gaming

MicroVentures offers anybody the chance to become an investor — you can invest as little as $100 in a startup.

Project Qualifications

According to MicroVentures:

MicroVentures looks for businesses that have a unique idea or a new spin on an old technology. We review the team, traction, market size and other factors to determine if the company will be a good fit for our platform. Additionally, we believe in accountability to the business (or concept), which is one reason we seek to identify firms whose founders already have invested their own capital in their business.

The typical amount of time MicroVentures will spend assessing your application before giving it the go-ahead (or not) is six weeks.

Be warned, however, that MicroVentures is a selective platform. When you start the application process, MicroVentures informs you that, “We review every company that is submitted, but we are only able to respond to the ones we think will be successful on our platform. This is less than 5% of the companies that submit…”

Additionally, MicroVentures states on its website that over $220 million has been invested into companies on the platform. In comparison to the big players in rewards crowdfunding, that’s not terribly impressive! Compare that to the over $5.4 billion that has been invested with companies on Kickstarter — a company that also closely vets its campaigns — as of November 2020, and you see just how exclusive MicroVentures’s platform is relative to the “typical” crowdfunding site.

Terms & Fees

According to MicroVentures, these are the terms and fees for fundraising campaigns on the platform:

Upfront costs include:

• $1,000 for the required legal review
• $1,500 for Form C, generated by iDisclose, an automated system
• $3,000-$5,000 for the outside financial review, which is required to raise more than $107,000
• If you’re located or sell 50% or more of your securities in a state that requires notice filings, you may be required to pay an associated fee. A few states are $1,000+, but most fall between $100 and $500.

Optional additional costs:

• Outside Marketing: Costs will vary
• Video Production (Optional, But Highly Recommended): Costs will vary

Closing costs:

• 5% commission
• 2% equity
• Escrow Fee: $1,000 or 35 basis points of the total amount raised, whichever is greater

And now, a warning: Equity crowdfunding is a much more legally fraught field than rewards crowdfunding, as investing is heavily regulated. Consult an attorney if any legal questions arise in the course of preparing your campaign.

Application Process

MicroVentures’s application page for startups contains quite a lot of fields for the prospective campaigner to fill out. You’ll be asked to name a notable investor, describe your revenue and partnerships, discuss the terms of your financing round, and more. Remember, MicroVentures estimates that less than 5% of applying startups will ultimately be allowed to fundraise on the platform.

If your campaign meets its funding goal, you should get your funds within two weeks.

Sales & Advertising Transparency

When I last reviewed MicroVentures in July 2019, I didn’t find much in the way of information regarding the costs of running a campaign. Since then, the company has further detailed the costs involved, which I listed in the Terms & Fees section above.

Customer Service & Technical Support

MicroVentures provides a phone number and a contact form on its webpage. Of course, if your campaign is accepted by the company, representatives will contact you.

User Reviews

Most of the existing reviews of MicroVentures evaluate the company from an investor’s perspective, not the startup. As such, they are of limited value to the businesses actually interested in what MicroVentures has to offer. One thing the reviews seem to agree on, however, is the fact that MicroVentures’s heavy curation of the companies on its platform makes it a solid means of finding investment opportunities.

Final Verdict

As one of the industry’s pioneers, MicroVentures has a reputation as a powerhouse in the equity crowdfunding field. It offered investments in Facebook and Twitter before they went public. It is a trusted entity, and it has seen over $220 million in investments sent to a very select group of companies. Clearly, for the right kind of startup, MicroVentures offers an attractive package of services.

It’s open to debate, however, as to what degree this conception of equity crowdfunding truly fulfills the original promise of crowdfunding: open up funding to a broader cross-section of startups and businesses than had been adequately served by financial markets in the past.

An outfit truly at the beginning of its creation story would be better served by rewards crowdfunders (such as Kickstarter and Indiegogo) when initially raising capital. A track record of successful rewards crowdfunding will prove helpful if your enterprise should eventually seek to use MicroVentures’s equity crowdfunding platform.

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