Crowdfund Investing For Dummies
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Establishing trust adds significant credibility to your crowdfund investing deal, but how do you establish trust with strangers? Angel investor Jean Hammond says, “No one writes a check the size that will buy a small house unless they know you, like you, and trust you.” Jean has 20 active investments; one of her first was an early bet on Zipcar.

Investors will look hard at you as the company founder to determine if you’re the right jockey to bet on. Equity investors focus heavily on character. When investors weigh their decisions, they want to make sure that you, your company, and your idea rate at least 90 percent in the following ways:

  • Management is capable and motivated.

  • Market demand is as expected.

  • Production is scaled up as planned.

  • Competition is held at bay and intellectual property is defendable.

  • Liability and litigation are avoided.

  • The company has sufficient capital.

  • Existing customers are able and willing to pay.

Keep in mind that even if all these factors rate 90 percent or higher, your chances of success are still only 48 percent, so this is truly risky business for an investor!

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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