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Equity Crowdfunding for Investors: A Guide to Risks, Returns, Regulations, Funding Portals, Due Diligence, and Deal Terms

ISBN: 978-1-118-85356-6
304 pages
June 2015
Equity Crowdfunding for Investors: A Guide to Risks, Returns, Regulations, Funding Portals, Due Diligence, and Deal Terms (1118853563) cover image

Description

Learn the ins and outs of equity crowdfunding with this informative guide

Equity Crowdfunding for Investors is a comprehensive, objective, and authoritative guide to the social and financial rewards of crowdfunding. Before now, angel investing – and the spectacular returns possible in this asset class – has been off-limits to all but the wealthiest Americans. Now equity crowdfunding portals allow the general public to buy shares in startups and fast-growing private companies for the first time in generations. This book provides the guidance individuals need to invest wisely, tempering the excitement of leading-edge technology, innovative business models, and exciting new brands with thorough, practical know-how – including investor limits and requirements, portfolio strategy, deal terms, and much more. Readers will learn the pros and cons of investing in equity crowdfunding so they can make an informed investment decision, as well as best practices for finding, researching, evaluating, and buying into potentially profitable startups. Digital components include tables, graphs, comparison charts, screen captures, checklists, and other tools that further enable readers to make suitable investment choices.

Equity crowdfunding is a new, exciting, and evolving way for growing businesses to raise capital and for average investors to buy equity in those businesses. It has been hailed as a "game changer" in the private capital markets, particularly the angel investment asset class, which includes angel investing. This book shows readers how to take full advantage of this new avenue of investment, without being taken advantage of themselves.

  • Make smarter investment decisions
  • Avoid being ripped off
  • Find the best information available
  • Understand the SEC rules and limits

Equity crowdfunding can produce huge returns. It also comes with huge risk. Some companies will succeed, but many will fail. Everyday investors can mitigate some risk and increase their chance of profit with the fundamental insight provided in Equity Crowdfunding for Investors.

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Table of Contents

Foreword ix

Preface: The New Angel Investors xv

Definitions of Key Terms xxv

Acknowledgments xxvii

About the Authors xxix

CHAPTER 1 The Foundations of Online Crowdfunding 1

CHAPTER 2 Equity Offering Platforms (under Regulation D) 19

CHAPTER 3 Equity Crowdfunding 49

CHAPTER 4 Intrastate Equity Crowdfunding 69

CHAPTER 5 Deal Flow 81

CHAPTER 6 Angel Investors 95

CHAPTER 7 Equity Crowdfunding Portals 117

CHAPTER 8 How to Invest, Part I: Portfolio Strategy 135

CHAPTER 9 How to Invest, Part II: Identify Suitable Offerings 153

CHAPTER 10 Equity Crowdfunding Securities 163

CHAPTER 11 Deal Terms 175

CHAPTER 12 How to Invest, Part III: Due Diligence 205

CHAPTER 13 How to Invest, Part IV: Funding and Postfunding 233

CHAPTER 14 Liquidity and Secondary Markets 243

Epilogue: Trends and Innovations 253

Equity Crowdfunding Resources 255

About the Companion Website 259

Index 261

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Author Information

DAVID M. FREEDMAN has worked as a financial and legal journalist since 1978. He has served on the editorial staff of The Value Examiner since 2005. He is coauthor of the 1987 book Death of an American, about the Singer v. Wadman civil rights lawsuit in Salt Lake City.

MATTHEW R. NUTTING practices corporate law with the firm Coleman & Horowitt in Fresno, CA, where he advises on all facets of business law, including a special emphasis in rewards-based and securities-based crowdfunding. He is a director of the National Crowdfunding Association and served as its National Legal Affairs Director. He is also the cofounder of CrowdPassage.

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Reviews

“This is a valuable primer and authoritative guide to an industry which is still misunderstood by many” (Master Investor, November 2015)

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Errata Document 15.80 KB Click to Download
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Errata

Do you think you've discovered an error in this book? Please check the list of errata below to see if we've already addressed the error. If not, please submit the error via our Errata Form. We will attempt to verify your error; if you're right, we will post a correction below.

ChapterPageDetailsDatePrint Run
70 Table 4.1 Correction
In Table 4.1, the data for Colorado is inaccurate. The annual raise limit is $2 million, and investment amounts are limited. (See updated table at http://www.freedman-chicago.com/ec4i/Intrastate-Securities-Exemptions.pdf.)
72 Correction to last full paragraph on page 72
In the last full paragraph, the Colorado raise limit is $2 million.
130-131 Figures 7.1 and 7.2 caption corrections
The captions under Figures 7.1 and 7.2 says ?Used with permission from EarlyShares.? Change the word ?permission? to ?approval.? (We created these hypothetical offerings, and EarlyShares does not own a copyright to this material.)
158 Asurvest reference correction
Peach, Inc., is no longer referred to as Asurvest. The company has a website at www.PeachLabs.io.
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Press Release

June 15, 2015
Equity Crowdfunding for Investors

Until recently, angel investing—and the potentially enormous returns this strategy can generate—has been an opportunity available only to the wealthiest Americans. However, recent changes in the law have produced equity crowdfunding portals that allow the general public to buy shares in startups and fast-growing private companies.

Equity Crowdfunding for Investors is an objective and authoritative guide to the social and financial rewards of crowdfunding. Written by David M. Freedman and Matthew R. Nutting—two noted crowdfunding experts—this comprehensive volume and its companion website offer the information, strategies, and guidance needed to understand this new universe of securities investing. Equity Crowdfunding for Investors explores the evolution of crowdfunding, from donation- and rewards-based crowdfunding to lending- and equity-based crowdfunding, and offers invaluable lessons about the risks, rewards, occurrence of fraud, and the wisdom (or madness) of the crowd.

Equity Crowdfunding for Investors details the best practices for finding, researching, evaluating, and buying into potentially profitable startups. The authors also show how angel investments can affect overall portfolio performance in terms of diversification, asset allocation, liquidity, and longterm financial objectives. In addition, the companion website includes the most up-to-date versions of equity crowdfunding resources, checklists, and tools to aid in making wise investment choices.

In the process of seeking financial returns and strategic benefits, angel investors can also derive social rewards: boosting community development, creating new jobs, supporting favorite products and brands, and helping good people make their dreams come true. Equity Crowdfunding for Investors is a practical guide for helping investors of all sizes achieve both financial and social returns.

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