Beyond crowdfunding: be an angel investor with this startup stock exchange

After the rise in popularity of crowdfunding startup products, it was inevitable that the concept would morph into something a bit different. Into this. Bigcolors lets regular people invest in startups and even trade shares in them as if they’re listed companies like Apple or Google.

Hong Kong-based Bigcolors, which launched last week to users in its home city, describes itself as a startup stock exchange. Co-founder James Giancotti tells us that startups can raise a maximum of US$100 000 for an idea, and for that entrepreneurs will give up 20 per cent of the company. Or you can try raise US$25k for a five percent cut, or US$50k in exchange for 10 percent. For potential investors, the notion should be familiar to anyone who’s seen reality TV shows about entrepreneurial ideas such as Singapore’s Angel’s Gate or Dragon’s Den in the UK.

Giancotti explains the process of getting onto Bigcolors:

Anyone can list their startup on Bigcolors. However if a startup wishes to get funding they need to firstly go through our due diligence process. This involves interviews with the founders, a background ‘know your customer’ check (KYC), understanding the idea, business model and the potential of success of the idea. This process takes about two weeks. If the startup is approved for funding and has successfully completed the due diligence process, it can list for funding on Bigcolors.

There are a few others entering this space at the same time, such as Belgium’s Startup Stock Exchange, but Bigcolors looks to be doing the best job of making it understandable with a clean and minimal user interface.

Prepping launch in Singapore and across Asia
After focusing on an initial launch in Hong Kong, Giancotti says the site will take an aggressive, Uber-like approach in rolling out to new markets every eight to 12 weeks. Next up is Singapore later this month followed by Taiwan, Japan, South Korea in January, and the rest of Asia after Chinese New Year.

Bigcolors expects to see three successful startup fundraising campaigns by the end of the year, which have so far raised just over $30,000. Giancotti notes that the average investment is $5,000 per investor per startup right now. A total of 68 startups have applied to list and raise funds, but the approval process is holding some up – or rooting some out.

Being an angel is still risky
There are risks involved of course. If the startup you’ve backed fails to reach its funding target, there is no charge for startups or investors. But it’s a different story if a startup fails thereafter. Giancotti says:

If the startup fails once they have been successfully funded on Bigcolors, it could be because of many reasons including team, product fit or competition, and typically many months/years after initially funded. As part of our due-diligence process, we are very strict in the companies that can list and only companies that have a high chance of success are listed.

Bigcolors aims to help the startups succeed by providing a platform for investors and advisors to help in the success of the startup.

If you become a stock holder in one of the startups listed on Bigcolors, you can cash out at any time by selling the stock via the platform – the same as with any private sale of equity.

Know the scene
Bigcolors is open to startups from around the world. Now seems to be a good time to chase new money in Asia, especially as more traditional personal investment opportunities, like property or the regular stock market, get more complex and uncertain. That’s why there have been huge booms in investing in things like art, fine wine, classic cars. Now, early-stage startups are an option as well.

Just as with fine wines, you’d better have a good nose for the tech scene before ploughing money into a startup on the Bigcolors platform. For example, one of the listed startups on the site, KissHugs, sounds like a super cool dating app. It’s a Facebook app that’s a mix of Tinder and the app formerly known as Bang With Friends. Indeed, that’ll probably be the TechCrunch headline when (if?) the blog writes about KissHugs. Trouble is, it’s far from original. Is that really a safe bet, even in the bubblicious world of Silicon Valley? Place your bets.

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This article by Steven Millward originally appeared on Tech in Asia, a Burn Media publishing partner.