Crowdfund Investing For Dummies
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If you’ve seen the movie The Social Network, you understand the need to protect your intellectual property. When using crowdfund investing strategies, you need to protect yourself and your business. You can do so in several ways:

  • Don’t tell anyone about it. This strategy is foolproof, but it means that you can’t run a crowdfund investing campaign. People need to hear and see what you’re talking about, or they’ll never trust you enough to invest in you.

  • Hire an intellectual property lawyer. You can — and may need to — go down the road of filing a patent and/or securing trademark and copyright protection for your ideas and materials. This route takes time and money, which may seem like a deterrent. After all, if your idea turns out to be a flop, that money was spent for no reason.

    However, failing to secure your intellectual property rights can lead to disaster, including a crowd revolt. At a minimum, you should consult an attorney if you have any inkling that you’ve created intellectual property that needs to be secured.

  • Rely on your funding portal for help. In addition to taking the steps suggested in the previous bullet, look for a crowdfund investing platform that requires investors to sign nondisclosure agreements and has data rooms where you can upload private information (so it isn’t available to the general public).

    These data rooms should be password protected. Portals that have data rooms allow you to see who looked at your files and for how long.

    When many companies are in the process of selling or merging a business, this is how they manage their sensitive intellectual property and let prospective buyers view what they’ve got. If anyone walks off and duplicates it, with a data room and log you can hold people accountable.

    Nondisclosure agreements will not prevent signers from passing on information to their friends or associates. If you have a great idea, the best way to protect it is through patent, copyright, or trademark registration.

  • Roll the dice. You can simply choose to put your intellectual property out in the open for everyone to see. Chances are, what you think is sensitive isn’t of interest to anyone else. But be prepared for the worst-case scenario so you aren’t devastated if a theft occurs.

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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