Crowdfund Investing For Dummies book cover

Crowdfund Investing For Dummies

Authors:
Sherwood Neiss ,
Jason W. Best ,
Zak Cassady-Dorion
Published: February 11, 2013

Overview

The easy way to get started in crowdfund investing

Crowdfund investing (CFI) is going to be the next big thing on Wall Street.  U.S. investment banks, brokerage houses, and law firms are gearing up for the creation and regulation of new financial products that will be available to the general public starting in early 2013.  The introduction of these products will revolutionize the financing of small businesses and startups for these key reasons:

  • Entrepreneurs and small business owners, who have had difficulty obtaining capital through traditional means (such as bank loans and angel investors) in recent years, will have access to investors around the world through social media.
  • For the first time, investors (so-called unqualified investors) will be able to purchase an equity stake in a business or new investment vehicle.

The Securities and Exchange Commission (SEC) is overseeing the creation of online portals that will allow entrepreneurs and small investors to connect. When these portals go live in 2013, Crowdfund Investing For Dummies will be on the front line to educate business owners, other entrepreneurs, and investors alike.

 Crowdfund Investing For Dummies will walk entrepreneurs and investors, like yourself, through this new investing experience, beginning with explaining how and why CFI developed and what the 2012 JOBS says about CFI.

Entrepreneurs will find out how much funding they can realistically raise through CFI; how to plan and launch a CFI campaign; how to manage the crowd after a campaign is successful; and how to work within the SEC’s regulations at every stage. 

 Investors will discover: the benefits and risks of CFI ;how much they can invest; how a CFI investment may fit into a broader investment portfolio; how to provide value to the business or project being funded; and how to bow out of an investment when the time is right.  

Crowdfund Investing For Dummies is an indispensable resource for long time investors and novice investors alike.

The easy way to get started in crowdfund investing

Crowdfund investing (CFI) is going to be the next big thing on Wall Street.  U.S. investment banks, brokerage houses, and law firms are gearing up for the creation and regulation of new financial products that will be available to the general public starting in early 2013.  The introduction of these products will revolutionize the financing of small businesses and startups for these key reasons:

  • Entrepreneurs and small business owners, who have had difficulty obtaining capital through traditional means (such as bank loans and angel investors) in recent years, will have access to investors around the world through social media.
  • For the first time, investors (so-called unqualified investors) will be able to purchase an equity stake in a business or new investment vehicle.

The Securities and Exchange Commission (SEC) is overseeing the creation of online portals that will allow entrepreneurs and small investors to connect. When these portals go live

in 2013, Crowdfund Investing For Dummies will be on the front line to educate business owners, other entrepreneurs, and investors alike.

 Crowdfund Investing For Dummies will walk entrepreneurs and investors, like yourself, through this new investing experience, beginning with explaining how and why CFI developed and what the 2012 JOBS says about CFI.

Entrepreneurs will find out how much funding they can realistically raise through CFI; how to plan and launch a CFI campaign; how to manage the crowd after a campaign is successful; and how to work within the SEC’s regulations at every stage. 

 Investors will discover: the benefits and risks of CFI ;how much they can invest; how a CFI investment may fit into a broader investment portfolio; how to provide value to the business or project being funded; and how to bow out of an investment when the time is right.  

Crowdfund Investing For Dummies is an indispensable resource for long time investors and novice investors alike.

Crowdfund Investing For Dummies Cheat Sheet

Crowdfund investing is a new funding opportunity for small businesses and startups that holds tremendous potential, but it's not a free-for-all. Entrepreneurs, business owners, and investors alike should know the legislative boundaries set by the JOBS Act (which opened the door to this funding resource in 2012), the risks involved in this type of funding, and the potential rewards it offers both to companies and their supporters.

Articles From The Book

116 results

Financing Articles

How to Develop an Infographic to Market Your Crowdfund Investing Opportunity

One of the most valuable networking tools you can use is an infographic. Kelly Hoey of WIM says she wouldn’t have been so successful without diverse relationships. The figure shows her infographic indicating the relationship to organizations and people critical for the success of her organization.

Credit: Women Innovate Mobile network map 2012

You can use Post-it notes on the wall, a mind-mapping program, or a free infographic program, but get it down.

President Lyndon Johnson kept communication channels open with senators and representatives. He knew his success with Congress required good relationships and kept this as a priority. He kept big maps on his wall that had the following information:

  • Where each bill was in committee

  • What stage the bill was at

  • What needed to happen for the bill to reach the next stage

He called individual congressmen, who could be obstacles at any stage, helped them understand how important this was to him, and promised whatever needed to get it through.

Keep in mind these words by Sir Arthur Conan Doyle: “Skill is fine, and genius is splendid, but the right contacts are more valuable than either.”

Financing Articles

Strive to Hit Milestones after Receiving Crowdfunding Investing Funds

In your business plan and in your crowdfund investment campaign pitch, you told the crowd what you needed to do, when you needed to do it, and how you were going to do it. Those are your milestones. Summarize them into bullet points and put them on a piece of paper.

In his book Mastering the Rockefeller Habits (Gazelles, Inc.) — which is a great read, by the way — entrepreneur guru Verne Harnish uses a very simple tool to help entrepreneurs hit their milestones. He tells them to take the list of milestones and break it into priorities. Figure out your Top 5 priorities, and then identify one priority that supersedes the others — the Top 1 of the Top 5.

For example, if you’re starting an organic farm, some of your tasks include getting the seeds and animals, buying equipment, and signing the lease on the land. Your first priority should be signing the lease; it’s your Top 1. Within that priority you have various tasks: contacting the land owner, reading the documents, having them reviewed by attorneys, and so on.

You need to spell out and prioritize each of these tasks (even the very mundane ones). Checking off these items (working on 1 percent at a time) will make you feel like you’re progressing. That’s what the Rockefeller Habits are all about.

Work on that Top 1 until it’s done, and then move on to the second priority. Tell people about your Top 5. Make it a game. Share it with your crowd. They’ll appreciate the fact that you have a game plan in action.

If you need help deciding what to do and when to do it, use the chart shown. It helps you prioritize your tasks based on their importance and urgency. On the vertical axis, you have Urgency. You assign each task a number from 1 (not very) to 10 (very) based on how urgent it is that you get this task done quickly.

On the horizontal axis, you have Importance. For each task, you assign a number from 1 to 10 based on its relative importance to your overall vision.

After you chart your tasks, the upper-right quadrant of the chart is where you find the most urgent and most important thing(s) you have to do; anything that falls in that quadrant is a Top 5. Moving left, you have urgent but not so important things to do.

In the lower-right quadrant will be tasks that are important but not so urgent. And finally, the tasks that are not very important or very urgent will appear in the lower-left quadrant.

Do this exercise now, and organize your tasks based on your results. This is now your game plan for where to focus your attention.

Financing Articles

Diversify Your Crowdfund Investing Portfolio

If you haven’t been scared you away from crowdfund investing yet, that means you probably have some tolerance for financial risk. How much tolerance? That’s a question only you can answer (ideally with guidance from a financial advisor).

Creating an investment portfolio that meets your needs demands first assessing your level of risk tolerance. If you have nerves of steel and can withstand rocky financial times without selling every investment at the worst possible moment (when its value has fallen to the floor), you’re pretty high on the risk tolerance scale.

If you lie awake at night worrying that your stock index mutual fund ticked a quarter of a percent lower that day, you’re in an entirely different risk zone.

Depending on how much risk you can stomach and what your long-term goals are, you should diversify your investments — spread them among various asset classes — accordingly. The term asset classes refers to groups of investments that share certain characteristics, including risk.

Low-risk government bonds constitute one asset class, and high-risk junk bonds constitute a very different asset class. In between you have federal agency bonds, corporate bonds, international bonds, and more.

Within the equity world, you have large-cap stocks, small-cap stocks, international stocks, value stocks, growth stocks, emerging market stocks, and more. (The word cap here refers to capitalization, which is an estimate of a company’s value arrived at by multiplying its total number of outstanding shares by the current price of a single share.)

For every asset class, this truism holds: The lower the risk it represents, the lower the return (or potential return) it offers. Conversely, the higher the risk it represents, the higher the return (or potential return) it offers. That’s why people don’t get rich quick buying government bonds, and it’s why people who take chances on risky stock classes have a fairly good chance of ending up either richly rewarded or completely broke.

Higher-risk asset classes also tend to be much more volatile than lower risk asset classes. If you buy a U.S. Treasury bond, you don’t expect a lot of volatility from that investment; you know how much return you’ll be getting.

If you buy stocks in an emerging-market nation, on the other hand, you don’t have a clue what your return will be in any given year. You hope to jump on the roller coaster while the car is pointing uphill, but you never know when you’ll reach the crest and start rushing down the other side.

Many financial advisors make their living helping people determine how to craft a portfolio that fits all their needs, including their risk tolerance and need for returns. Most people (though certainly not all) find that as they get closer to reaching their long-term goals, such as retirement, their risk tolerance decreases.

Therefore, a portfolio cannot be a static thing; as your life circumstances change, you and your financial advisor must be prepared to adjust your investments accordingly.

The beauty of diversifying your portfolio with a variety of asset classes is that you can still invest in some of the high-risk classes, including startups and small businesses, without risking your long-term goals. As long as you know that crowdfund investing is firmly planted on the high-risk end of the investment spectrum, and as long as you maintain strict control over your investment choices, you absolutely can fit it into your portfolio.

Just don’t assume that all (or even any) of your crowdfund investments will turn into the next Google. Chances are very, very good that they won’t.