Angel investors, or individual investors in infant companies, used to plunk down $50,000 or more in a startup firm.
Now microinvesting, where lots of small investors take equity positions in fledgling companies, has changed the game. For example, at MicroVentures people can invest as little as $250 and get an equity stake in a startup.
MicroVentures does the due diligence by performing background checks, assessing competition and vetting business plans. A private placement memo that details the company's business and its risks is then given to investors.
But there is plenty of risk. "Seeing a return could take five to seven years," says MicroVentures CEO Bill Clark. "And you could also lose all your money. It's high-risk."
Additionally, only about 2 out of 10 companies will become profitable, he says. So far, there are no returns at MicroVentures to measure. But like lots of other high-risk ventures, the payoff can be big -- as much as 10 times your original investment.