It’s no secret that investing in early-stage, private companies is extremely risky. As with any investment, investors need to balance this increased risk with an increased potential reward.

So what kind of financial returns should you expect - and demand - as an equity crowdfunding investor? 

While equity crowdfunding is still in its infancy, we can look at a combination of past early-stage investment performance along with some current equity crowdfunding results to begin to build a picture of what types of returns investors might seek.

After all, if there is only a minor boost in returns offered between passive public market index funds and the active efforts involved in screening equity crowdfunding deals, many investors will likely stick with ETFs and index funds.

First, we will look at some private market studies on Angel Investors and Early-Stage VCs that suggest early-stage investments have historically obtained an average ~26% Internal Rate of Return (IRR).

Next, since ear...more