Getting a slice of a virtual reality or e-commerce start-up has been limited to people with real money--accredited investors.
But as of Friday, a new Securities and Exchange Commission rule enables companies like Virtuix, which makes a suite of VR products, to raise capital from the Main Street crowd.
It's the latest piece of the 2012 Jumpstart Our Business Startups (JOBS) Act to be enacted, and the purpose is to open new sources of capital to small businesses. The rule, officially called Title IV, will lead to a "mini-IPO" market, some experts say.
"This is going to be a viable solution for a lot of the fastest growing consumer-facing companies before an IPO," said Ryan Feit, CEO and co-founder of SeedInvest, an equity crowdfunding site that's helping businesses such as Virtuix raise money. "A lot of companies we've spoken to are interested in the ability to reward their loyal customers, letting them get in on the ground floor."
Buyer beware though. This stuff is super risky.
Any early-stage bet is unlikely to pan out, but at least with traditional start-up investing, the money comes from institutions or individuals with plenty of spare change.
For those less well-endowed, this isn't like buying Apple or GE in a brokerage account, because there's no secondary market for selling shares. Getting your money back and certainly making a profit will require some sort of liquidity event, like an acquisition or IPO.
"We always tell first-time investors, `Never plan on flipping shares,'" said Feit.