For typically underfunded and overlooked startups, crowdfunding-style social investment portals represent a cheaper and more effective way of attracting the capital they desperately need to remain viable and thrive while developing new products and services.

As with lending and charitable giving, this community-based approach promises to democratize the way individual investors research and invest in new or emerging companies.

When creating new companies, startup founders will simultaneously be able to share intelligence on them through social exchanges that provide a smooth, easy process and equal access on different technological devices to naturally gain the trust of the crowd.

Only the Beginning

A handful of startups have already made the leap into the social investment platform game, thanks to the availability of technology packages that can support their objectives.

The first of those objectives is to arm potential investors — from average Joes to accredited investors and even smaller financial firms — with the information they need to find and share research on cash-hungry IPOs and startups. With recent regulatory changes, some have begun to provide direct access to a seamless investing process across different technology devices.

Previously, only accredited investors had the opportunity to invest in the latest tech IPO or Silicon Valley startups. But with the U.S. Securities and Exchange Commission’s recent enactment of Regulation A+ and the adoption of Title III of the JOBS Act, companies can now seek up to $50 million in investments from non-accredited investors in smaller amounts with less red tape.

The loosening of these capital-raising restrictions, coupled with the growing acceptance of crowdfunding, indicates that we’re nearing a tipping point toward the proliferation of social investment platforms.

Add these developments to the movement toward social media and crowdsourcing sites like Kickstarter and Indiegogo, and you have the recipe for an exciting new way to invest.

Do Enough Investors Want to Do This?

The short answer is “yes.” Recent surveys show support for a more social approach to investing — especially among younger generations that were raised expecting technology to keep up with their curiosity about whatever they want to do next. And what are they are doing next? They’re maturing and entering their wealth accumulation years. In other words, they’re becoming investors.

The emergence of social investment platforms, combined with the aforementioned reductions in regulatory restrictions, means that anyone with a Millennial mindset can find opportunities to invest in growing companies and potentially do so in just a few clicks — whether they’re in an airport, on their daily commute, or even in the midst of a lunch break.

In investment circles, “fast” is getting faster. But speed and technology aren’t the only things younger investors value. They value one another’s judgment as well as their own.

In a 2015 Capital One Investing survey, 87 percent of Millennial respondents said they trusted themselves more than financial professionals when it came to making investments. Just 68 percent of seniors reported a comparable level of confidence — even after years of experience making financial decisions.

And when it comes to seeking out advice ahead of making those decisions, 43 percent of young respondents in a Goldman Sachs poll said they weren’t inclined to spend more than an hour on getting outside investment advice. Thirteen percent said they were unlikely to seek outside advice at all.

Considering these sentiments, social investment platforms are well-positioned to capitalize on these Millennial preferences.

Success Awaits Those Who Think Small

One of the most capital-intensive ventures around is that of an automaker.

Automaker Paul Elio, for example, took on the challenge by using a social investment platform to educate potential investors about his opportunity, which involved building a safe, more fuel-efficient alternative vehicle, and doing it affordably. His Elio model — a three-wheel, two-person automobile — is designed to get more than 80 miles per gallon.

Based in Phoenix, Elio Motors became one of the first companies to use the new rules regarding crowdfunding to raise funds from non-accredited “average Joe” investors.

Even more impressive, the company went on to become the first small company to list shares in the public markets after the new securities regulation made its mini-IPO possible. Within days of becoming the first equity-crowdfunded company to go public, its market valuation topped $1 billion.

With social media movement in full swing, crowdsourcing sites like StartEngine — the platform Elio used to seed his company — are growing in popularity and acceptance, especially among younger generations, as a means to effect and fund change.

For many disenfranchised investors, it could be a welcome respite from trying to figure out how to gain access to a system under the influence of traditional financial institutions and wealthier investors. The SEC’s new rules have enabled startups to access a wider audience when pitching new ideas and seeking funding.

And, as evidenced by the tremendous success of Elio Motors, it’s a win-win all around that could usher in a sea change in how the investment world operates.

Image courtesy of Shutterstock.