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

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.

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

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.