Crowdfund investing is a new type of investing wherein an individual invests for equity in an early-stage startup which is not a public company. Before crowdfunding became more prevalent, you would usually need to become a member of a prominent angel group or a limited partner of a venture fund in order to gain exposure to early-stage startups. Now, you may directly invest in a private firm whenever that firm attempts to raise funds through a crowdfunding platform.
Crowdfund investing is one of the ways to invest in startups. Most of the advantages and disadvantages of startup investing apply to crowdfund investing too. Refer to our 'Startup Investing' knowledge resource for more information.
It is suggested that you invest through crowdfunding only with your 'play money'. It is a ‘discretionary fund’ of a size that you are comfortable. The amount in this discretionary fund can go towards investing in risky opportunities in which they believe and understand. One advantage of crowdfund investing is that you may invest in a crowdfunding round, even when the amount of play money you have is not substantial. That said, not all people can afford to have play money, and in such a scenario, it is not prudent to do crowdfund investing.