Cheat Sheet
- Equity Crowdfunding and Rewards Crowdfunding are very different, but also very similar. The preparation is different, what you are selling is different, but the need to build an audience and speak effectively to that audience is identical.
- The JOBS Act (in the US), in essence, allows you to “advertise” when raising money for small companies. You were not allowed to do this before.
- Public offerings (think IPO) are super expensive and private raises, (like Angel and Venture Capital) are inefficient because they are largely dependent on luck… who is within your network, what neighborhood you grew up in, etc.
- Risks are different for Equity and Rewards based Crowdfunding. Equity crowdfunding you are taking on investors, and all that comes with that. Rewards-based crowdfunding there is very little risk so long as you make a strong attempt at completing the project.
- However, if you spend your rewards campaign raise on strippers and Lamborghinis then you are committing fraud and could be investigated and thrown in jail. Luckily this is EXTREMELY rare.
About This Episode
If you thought Rewards-Based Crowdfunding was a new industry, wait until you check out the Equity Crowdfunding Industry!
We have talked about Equity Crowdfunding once before, but this episode we are going to take a look at the legal liability of Equity Crowdfunding, and also touch on Rewards Liability as well.
And it is an especially important episode as Indiegogo JUST started offering to support Equity Crowdfunding Campaigns.
I hate to jump the gun and cry “Game Changer!” but frankly Indiegogo is further cementing its role as the “anything goes” crowdfunding platform.
That being said, to start you on your legal journey I have brought Mark Roderick on the show.
Mark is a lawyer that has been helping entrepreneurs raise money for years.
When he saw the JOBS Act on the horizon, Mark saw an incredible opportunity to help small businesses.
If you haven’t done it before, raising money is a bit of a pain.
You either have to have millions of dollars to IPO, or you have to know the right people.
With Equity Crowdfunding you can sell shares to anyone all over the world over the internet.
Equity Crowdfunding isn’t as easy as Rewards Crowdfunding.
With Equity Crowdfunding you have to have your paperwork in order.
Accounting, corporate governance, and business plan have to be all top notch.
…And then you have to do the same work as a regular campaign building an audience and putting together your pitch.
Generally, this means that you are looking to raise larger sums of money.
And for some businesses Equity Crowdfunding is the way to go!
For a legal conversation, the discussion is surprisingly entertaining. I promise you will learn something that will aid you in your journey.
Resources Mentioned
Circle up – Consumer Products Equity Crowdfunding
RealCrowd – Real Estate Crowdfunding
