Now technology has blown open the doors and given everyone – not just the professional investors and big institutions – a chance to get a piece of the action.
Would-be Warren Buffetts can go online and buy shares in start-ups and early stage companies for as little as £10.
But while there’s a chance you could be backing the next Google, Apple, or Facebook, there’s also a strong risk you could end up losing all your money.
This is the world of crowd investing, also known as equity crowdfunding.
The difference with other forms of crowdfunding is that you’re not lending money in return for interest on the loan, or donating money in return for rewards and perks, you’re actually buying a slice of the company.
Typically, firms seeking a cash injection upload their business plans, including how much they’re hoping to raise and how much of their business they’re prepared to sell and at what price.
Think of it like an online Dragons’ Den involving hundreds of investors rather than a handful of Dragons.
If the companies don’t reach their funding targets, they get nothing.
It has been increasing in popularity as confidence in online financial transactions has grown and financial regulators around the world have begun to relax rules governing who can invest.
Online platforms such as Crowdcube, Seedrs, InvestingZone and SyndicateRoom in the UK, and Crowdfunder and CircleUp in the US, have been successfully matching investors with companies looking for funding.
According to innovation charity Nesta, nearly 30 UK equity crowdfunding platforms have raised approaching £100m so far, but this young market is experiencing “a 201% year-on-year growth rate”.
In the US, where investment is still restricted to high-net-worth individuals or “accredited investors”, research company Massolution estimates the crowdfunding market as a whole to be worth more than $5bn (£3bn).
Wealthy “angel” investors are also taking their networks online – AngelsDen, for example – and encouraging smaller investors to join in.
“We felt passionate about the democratisation of investment,” says Luke Lang, co-founder of Crowdcube, an equity crowdfunding platform launched in 2011.
“We wanted to open things up to ordinary people – investing was too elitist.”
Crowdcube’s 100,000-plus registered investors have successfully invested £45m in 160 businesses so far. While the typical investment is £3,000, amounts committed range from £10 to £400,000, he says.
“We tapped into a real appetite from the great British public to back and support British businesses. We’ve been able to make investing more accessible and affordable.”