EquityBee is a great platform that connects companies with people interested in investing in pre-IPO startups.
With equity bee, you can buy equity shares of private companies, which are all pre-vetted by the company’s management & equity bee team. The best part of the Equitybee investment plan is that anyone can join it with a minimum investment of $10,000.
A startup that will offer employees free personal development has focused initially on employee options through crowdfunded projects. EquityBee provides an intermediary and connects employees and investors through its platform.
Investors can choose the startup they’re interested in through employee stocks. This move will give the employee unlocking of equity shares a better chance of access to investment opportunities than they could have otherwise found out.
The platform can provide employees with sufficient money for exercising stock options before their due dates. It helps employees connect with investors who can give them the capital for these purposes.
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Founded |
2018 |
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Investment Type |
Venture, Startups |
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Sectors |
Fintech, Cyber, AI, MedTech, and BidData |
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Minimum Investment |
$10K |
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Audience |
Open to all Investors |
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Investor Fees |
5% + VAT (Upfront free) and 5% + VAT on profit |
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Due Diligence Process |
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Securities Offered |
SOFA (Simple Funding Option Agreement) |
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Investor Resources |
Company documents, blogs, One to one interaction with employees |
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Pros |
● No upfront cost for employees ● Growing startups with high growth potential ● Helps in exercising Emplyoes options ● Investment Diversification ● A user-friendly platform and gives excellent customer support |
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Cons |
● 5% upfront cost and 5% profit along with VAT on it for investors ● Minimum $10k investment is required ● High risk associated and offers low liquidity |
Types of Investments Equitybee offers
Equitybee offers its investors to invest in startups via employee stock options. In this process employee receives funding for their options and investors get a chance to invest in startups that are not available publicly.
The whole process is executed with the Simple Option Fund Agreement (SOFA). In this agreement, both parties agree to share the part of profits, dividend in agreed ratio for the investment made.
What do you get when investing with Equitybee?
Equitybee acts as an intermediary between angel investors and employees of growing investors.
As an Employee
Equitybee offers employees of growing startups to make a side income with the help of angel investors without bearing any additional risk.
If you are working in a growing startup that offers stock options to their employees then you can form an agreement with an angel investor via Equitybee for funding purposes. If any profit or dividend is realized on investment both (Investor and Employee) will divide in pre-defined ratio.
As an Investor
If you are an investor and want to invest in a non-listed startup you can invest through SOFA and if the startup grows or the company went for a public listing you will get the difference of profits made on investments.
As an investor when you invest in startups through Equitybee you did not get exclusive control over the affairs of the company but have a significant effect on the decisions made by employees.
How does the company make money?
The major source of revenue for the company is upfront cost (5% + VAT) from investors and a portion of (5% + VAT) on the increased value of investments.
Potential Returns and Cashflow
The expected returns on the investments are based on the performance of the company. If the company performs well and went for IPO you will get a maximum of the difference between the listed price and the purchased one.
It is an emerging option for venture capitalists to get access to the startup world. They can participate indirectly in the capital of startups.
It should be kept in mind while investing that it may take a few years for the company goes public. If the company does not go for IPO you will not be able to withdraw your investments easily. If the company is acquired by someone else in a non-financial transaction the SOFA will continue until and unless an IPO or acquisition in terms of cash is made.
It makes it difficult to consider this investment as liquid because it does not give the instant option to sell your part of the investment.
The Breadth of offerings on Equitybee
The Deal flow of the company
Equitybee offers employees of reputable startups to have a share in the capital of their startup via Employee stock option plans by providing the necessary capital required.
Equitybee tied up with the venture capitalist who wants to invest in companies that are not listed publicly.
When both the parties (employee, investor) convince on the terms of contract as decided by them it will result in the formation of indirect relation through Simple Funding Option Agreement (SFOA).
When the associated company goes for IPO or cash acquisition the investor and employee will distribute the profits among them according to the terms of the agreement.
Companies offered – Sector, Company, and Number
Equitybee offers various types of companies like SIGA OT Solutions (Cybersecurity), Fornova (Hospitality), and AlgoSec (Network Security).
Equitybee also offers the option to invest in –
- Fintech
- Home Improvement
- Nano-tech
- Automative
Generally, it depends on the type of company associated with Equitybee. You can also check out the all types of industries that Equitybee offers to invest in on their website.
Equitybee offers major fields like Fintech, Cyber, AI, Medtech, and Big data as mentioned by the company support team.
If you want to add a specific industry you can log in to your account, head over to your dashboard, and click Update watchlist.
Select industries you want Equitybee to notify you when any company is of listed in that industry.
Regulatory Framework
All the companies listed on the Equitybee platform have been gone through fundamental research and all background checks of the company and related management personnel.
It should be noted that you should comply with the terms and conditions of Equitybee as they clearly describe the termination of an account in violation and you will no longer be able to access your account.
Equitybee does not provide any third-party research or risk factors associated with investments before or while investment was made.
It should also be noted that Equitbee a previously registered broker is currently not licensed to act as a broker.
You can also visit the official website of Equitybee for detailed terms and conditions.
Conclusion
Equitybee mainly focuses on investment in startups which is termed as a high-risk investment option. In general, a startup may end up closing its operations or grow and reach to become a business giant.
Equitybee can be a go-to option for a person who wants to invest in startups. The minimum investment amount stands at $10K which is considerably high and there is no guarantee of returns.
It reflects whether the investment will skyrocket or it became vain. It should not be preferred by a beginner. A beginner may start from the stock market and after having a decent experience diversify their investment portfolio.
Still, if you want to start your investment journey with Equitybee you should go with an industry that you understand as it will be easy to find a good company from that respective industry.
We can consider it as a “High-risk high Reward” game with lower liquidity. Do your analysis before investing with Equitybee as it may end up freezing your hard earn money.