Speaker 1: Welcome back to the Net Worth podcast. This week we are diving into crowdfunding strategy, a practical guide for investors and how these alternative investments fit into your net worth blueprint. Check out the full edition on our website. Wearenoyack.com. So we are unpacking one of the biggest shifts really in modern investing. It’s how private markets have moved online, allowing investors like you, not just huge VCs, to back startups, real estate, consumer products, and with much, much smaller checks than ever before.
Speaker 2: It’s a huge moment for access.
Speaker 1: It really is.
Speaker 2: Yeah, but there’s a tension there. You have to understand why you now have access. You’re still investing in assets that are, by their nature, illiquid and pretty risky.
Speaker 1: So our core mission for this deep dive is to extract the essential process, the guardrails you need to test this strategy responsibly. We have to make sure it genuinely adds to, rather than detracts from your overall wealth.
Speaker 2: OK, let’s unpack that, starting with the basics. What exactly is crowdfunding in this context we’re talking about?
Speaker 1: Pooling smaller checks, right, maybe $100 up to a few thousand, all online through these regulated portals. In investing, that’s the key thing, right? Not donating.
Speaker 2: Not donating. You’re looking for a return. And that distinction is vital because these assets fundamentally change your portfolio’s liquidity profile.
Speaker 1: You’re not buying a stock you can sell tomorrow. As this edition of Your Wealth Blueprint lays out, they are highly illiquid and risky. You absolutely must plan on holding for years—5, 7, maybe even 10. And you have to expect well, high variance.
Speaker 2: You should expect some zeros.
Speaker 1: Expect some zeros. So a lot of these bets will fail completely.
Speaker 2: The vast majority, yes. That’s the model.
Speaker 1: OK, so if I’m holding for that long and risking a total loss, how does the money actually come back if one succeeds? What are the mechanisms?
Speaker 2: They’re very different from the public markets. This edition breaks them down into three main categories. The first, and the one with the highest potential upside, is equity. So you’re buying a small slice of a young company.
Speaker 1: Exactly. A small slice and usually you get no dividends and there’s no easy way to sell. The whole financial idea is that a few huge wins—like an acquisition or an IPO—will deliver a big enough multiple to cover all your other losses.
Speaker 2: So you’re trading time and high risk for that massive but very concentrated upside.
Speaker 1: That’s the game. Also seen: platforms offering debt. Now on the surface that sounds a bit safer. If I’m waiting years for a potential IPO on the equity side, why would I bother with the capped upside of say a debt or a revenue share deal?
Speaker 2: That’s a great question. That’s the second category: debt or revenue share. Here, you’re acting as the lender. You get interest or maybe a percentage of the company sales.
Speaker 1: So you get cash flow sooner.
Speaker 2: You can get cash flow sooner, which is the appeal, but your total upside is capped. If that company becomes a unicorn, you just get your principal and interest back.
Speaker 1: Yeah, the risk there isn’t so much a slow-burn failure, but a default—a missed payment—which is often a clearer, faster signal that something’s wrong.
Speaker 2: And the third type: it’s real estate, right?
Speaker 1: Real estate, yeah, which is often a blend of the two. You might get ongoing rent payments—that’s like the debt part—plus a lump sum when the property sells. But the fine print there is absolutely critical. The fees from the platform, the execution from the property sponsor, I mean, that all significantly impacts your net result.
Speaker 2: The devil is in the fees. Always.
Speaker 1: Always. OK, let’s talk about the why behind this. Why does this work now? The core idea seems to be turning early customer demand into capital.
Speaker 2: The best campaigns, they don’t just sell an idea. They show proof before the pitch. That proof is the engine.
Speaker 1: When we look at the big success stories, we’re not just looking at money raised. We’re seeing real validation of product-market fit.
Speaker 2: Exactly. I mean, think about the Oculus VR headset.
Speaker 1: Oh yeah, a classic example. They started with what, a $2.4 million Kickstarter raise?
Speaker 2: That wasn’t just pocket change. No, that was thousands of people putting real skin in the game. Showed massive demand for something that barely even existed yet.
Speaker 1: In that early proof led directly to its acquisition by Facebook for about 2 billion dollars.
Speaker 2: 2 billion. That’s scaling off customer conviction. And it’s not just for high-tech hardware.
Speaker 1: Not at all. Look at Exploding Kittens, the card game. They asked for $10,000 and raised almost 9 million from over 200,000 backers. That immediately signaled this was durable IP, not some novelty. The demand was proven before they even scaled up manufacturing.
Speaker 2: And then you have a company like BrewDog, the craft beer company. They took it even further. They pioneered equity crowdfunding, right?
Speaker 1: Equity for Punks.
Speaker 2: They did. They systematically raised over $100 million, turning their most passionate customers into capital partners. They didn’t need the banks.
Speaker 1: The key takeaway from all these examples—from Oculus to BrewDog—is that success demonstrates credible product-market fit. It reduces the guesswork for investors. That’s the real engine of returns for you, the individual investor.
Speaker 2: Your edge is disciplined pattern recognition. You have to look past the slick video and find the real traction metrics: the wait lists, the repeat presales. If that tangible proof is missing, that’s a huge red flag.
Speaker 1: OK, so if the engine is proven product-market fit, how do we go from a good story to actually evaluating the risk? This edition says the edge is process, not deal picking. You have to move from just intuition to a checklist. There are three major factors for diligence.
Speaker 2: First is price and stage. You have to ask: is the valuation fair for the progress they’ve made today? Earlier is cheaper but riskier, of course. But the price you pay at entry sets the entire bar for your return.
Speaker 1: If a company has no revenue but is valued like it’s already a success, your margin for error is just gone and the risk of that zero goes way up.
Speaker 2: OK? What’s the second factor?
Speaker 1: This one feels like the most crucial.
Speaker 2: It is. It’s the people. Execution always beats a great idea. You have to favor founders with relevant experience, a record of actually shipping things, and a history of honest updates even when things are going badly.
Speaker 1: A great idea is worthless if the team can’t navigate a crisis.
Speaker 2: Absolutely. And the third factor is the financial structure—the terms and fees, the fine print. You have to know your rights. You have to understand every single fee, because all those costs get paid before you do.
Speaker 1: If you read the documents and can’t explain the fee structure simply to yourself, you need to just stop. Pause the investment. It’s a major red flag.
Speaker 2: Let’s focus on a really timely area. This edition highlights AI crowdfunding. It’s a proving ground for both great ideas and massive hype.
Speaker 1: Massive hype is right. The analysis gives 5 things to look for, but three are nonnegotiable checks for AI companies. First, they have to show a concrete end-to-end job being done, not just a feature.
Speaker 2: Second, they must have a data advantage—some kind of proprietary dataset that gets better with every user.
Speaker 1: And third, critically, they have to provide live proof: a demo or a beta you can actually test. I love the phrase from the blueprint: “assistant, you babysit.”
Speaker 2: I think we’ve all seen products like that that create more work than they solve.
Speaker 1: That’s the core of the AI diligence lens. You have to question what’s fully automated versus what’s just a tool that needs your constant correction. You have to look for the path from all that backer hype—which is huge in AI—to sustainable monthly recurring revenue.
Speaker 2: A cool demo gets funding, but a real business needs retention.
Speaker 1: This all sounds like a very high-commitment strategy. So let’s zoom out. Where does something this illiquid and risky actually fit into your net worth blueprint?
Speaker 2: It belongs firmly in what we call the growth layer of your blueprint.
Speaker 1: OK, so you have porous, stable, liquid assets like index funds.
Speaker 2: The growth layer is something else.
Speaker 1: Exactly. The growth layer is where you pursue higher potential returns, where you add new return drivers. With crowdfunding, you’re consciously trading away liquidity and simplicity for that potential of massive upside.
Speaker 2: And it also adds diversification, right? The outcome depends on the company’s traction, not the S&P 500.
Speaker 1: It’s a completely different risk driver, which is valuable. It hinges on product-market fit and cash collections, not daily index moves.
Speaker 2: So given the risk—the expecting-some-zeros part—we need ironclad sizing rules. How small are we talking?
Speaker 1: Sizing is everything. The overall allocation has to be small and the per-deal size has to be tiny. The rule of thumb is to start with, say, 0 to 5% of your investable assets across all crowdfunding, and you only scale that up after a year or more of proven discipline.
Speaker 2: And for each individual deal: minuscule. We suggest something like 0.1 to 0.3% of your investable assets per deal.
Speaker 1: The key insight here is you have to let diversification carry the risk, not your personal conviction in one deal. Aim for 20, 30, 40 or more positions over time. That level of diversification requires huge discipline, which is why the 90-day roadmap in Your Wealth Blueprint is so important. It forces process over impulse.
Speaker 2: In weeks one and two you set your guardrails. You actually write down your target allocation and your per-deal max. Then you just pick 3 portals—one equity, one real estate, 1 syndicate—and you just observe. No investing.
Speaker 1: Then in weeks 3 and 4 you do your diligence reps, right? You score live deals using a template. You hold a weekly IC meeting with yourself to force a pass-or-advance decision. You track the real metrics.
Speaker 2: And only then, in weeks 5 through 8, do you place your first tiny bets? Your first tiny bets—two or three micro positions, always within your max.
Speaker 1: And then weeks 9 to 12 are for review and codify. You write a one-page review of your process. But the most important step: you keep 90% or more of your new savings auto-routed to your core liquid portfolio.
Speaker 2: The core must always grow faster.
Speaker 1: OK, if we connect this back to your net worth, crowdfunding is a tool—a specific tool for a specific job. It is not a shortcut to wealth. Used with strict rules and honest reviews, it can add interesting return drivers and it will sharpen your investor instincts.
Speaker 2: But use carelessly, as this edition warns, it’s just accidental tuition. You’re paying to learn a very expensive lesson.
Speaker 1: We want to leave you with one final provocative thought based on the kill-switch red flag. This analysis emphasizes: if you invest in a company that hits its early milestones, you’ll naturally want to fund follow-on rounds. But you need to predefine your red line. What specific update would make you stop funding them?
Speaker 2: Even if the progress looks good on paper, maybe it’s a vague use of funds, or the team goes quiet, or the valuation just outruns the traction. Predefine that kill switch before you even send the first check.
Speaker 1: Remember to subscribe to Your Wealth Blueprint on our website, wearenoyack.com. Read the article behind today’s conversation and get our weekly newsletter straight in your inbox.
