Perhaps a better title would be Five of the Top Investment Industries Ripe for Crowdfunding Opportunities. There are many, many more than I’ve listed here. In fact, I omitted technology from my top five listing even as I continuously review these options myself out of personal preference. They require a little more expertise and carry a little more risk with them as well. These options tend to fall in the make or break option and I’ve experienced more fails than successes. But even a single success could more than cover the losses of the failed investments. That being said, here is a countdown of five options to consider in 2015….
- Education. For-profit education has been besieged by regulators for the past half-decade and some very large companies have been fined, sued or shut down. That does not mean the industry is a bad idea, but it means shopping for the right investment needs careful consideration. My own practice has involves such P&E consulting efforts over the years. But in a nutshell, the kinds of investment opportunities that could prove most fruitful include online schools, beauty schools, allied health and dental assisting schools, nursing schools, and some continuing education providers around accounting and healthcare. Schools to avoid would be mechanic and similar trade schools, culinary schools, and low level IT schools. Look at the price of tuition and compare that to a realistic annual salary (called gainful employment) in their field upon students’ graduation. If the price of the program compared with the employment offered upon graduation looks too high to your sensibilities, then it probably is a bad investment.
- Energy and Mining. I opted for a two-for-one on this investment opportunity because I got grief about making a top six list by a colleague. They are, however, related industries in many ways. The key takeaway from this category is not just investments in energy and mining itself, which could be a great opportunity for the right opportunity, but also pay close attention to the many support services tied closely to these massive economic sectors. Green energy is still getting a lot of press but I have yet to see a non-government supported market out there. I like the concept but await a viable marketplace and would not suggest early stage investing there.
- SMB. Okay, this is cheating a bit I realize. But small to midsize businesses are where the lion’s share of crowdfunded investments are going and will most likely continue to be the opportunities presented to most accredited investors. Within this broad category look to the other four categories on this list and their associated support services as well as the following niche markets that are worth consideration: coffee boutiques, mobile game and application design, accounting & tax preparation, legal services and commercial machine and equipment leasing. These historically have been the largest net profit industries over the years.
- Health and Wellness. With Obamacare front and center on most company P&L’s, businesses that solve some of the regulatory issues, provide innovative or required regulatory services, or connect otherwise disassociated aspects of healthcare together have real viability in 2015. Further, dental offices, physician offices, allied health services, and “death care” services (an actual NAICS code #8122) are all well positioned. People won’t stop getting ill, being born or passing on and the many associated services affiliated with the main practices in healthcare could present interesting investment opportunities. In general, I would stay away from hospitals and hospital systems, but outpatient centers are consistently some of the most “net profit margin” rich options out there.
- Real Estate. No real big surprises here. The growth of real estate across crowdfunding has been well covered by me and many others. There are significant equity and debt opportunities across domestic real estate. Of particular interest are well located renovations and distressed debt which offer you annualized returns on average from 10-30%. But new complexes for commercial space are also in demand. Remember when you conduct your due diligence the adage “Location. Location. Location.” The market remains well positioned as we enter early 2015 and there is a lot of money looking to position itself in real estate. Crowdfunding offers the accredited investor a level field with the mega developers.
Dr. Rickel is a Senior Advisor at RAZR with executive experience across multiple industries. Member of CFIRA, NLCFA. Todd can be reached at $Doctor@razr.com.