Crowdfund Investing For Dummies
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In addition to promoting the specific product or service being created by your crowdfund investment, you may find that you want to promote the company itself to other potential investors. Can you do so without breaking the law?

If the business is still raising capital, the entrepreneur or owner is very restricted regarding how he can market the investment opportunity. He can market it only through the online funding platform he’s using. He can’t send out an e-mail telling people what they’ll get by investing a certain sum of money, and he can’t make phone calls describing the specific investment opportunity.

If he breaks these rules, his entire crowdfund investment pitch can be shut down by the Securities and Exchange Commission (SEC), whose regulations govern this new type of investment.

An entrepreneur will have trouble hitting his funding target if he has to rely solely on his first-degree connections for investments. Based on what the SEC will allow, he needs you — and other investors like you — to spread the word about why investing in him is worth considering.

This may include your using your own Facebook, LinkedIn, Twitter, or other social networks to direct your contacts to the crowdfund investing portal where the offering is being made; there, they can learn more about what the company is doing and why you wanted to invest. You can share the URL of the online funding portal and encourage your networks to check it out.

If you’re an ambassador for a business in which you have an equity investment, unless you’re a broker-dealer, you can’t receive a commission for bringing investments to the entrepreneur. The percentage in question is called a finder’s fee, and it’s absolutely not allowed per the JOBS Act. The only way you can promote an offering is to do so out of your true desire to help the entrepreneur and the business to succeed.

About This Article

This article is from the book:

About the book authors:

Sherwood Neiss, Jason W. Best, and Zak Cassady-Dorion are the founders of Startup Exemption (developers of the crowdfund investing framework used in the 2012 JOBS Act). They deeply understand the process, rules, disclosures, and risks of capital formation from both the entrepreneur's and the investor's points of view.

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