Equity Crowdfunding for Investors: A Guide to Risks, Returns, Regulations, Funding Portals, Due Diligence, and Deal Terms

CHAPTER 2

Equity Offering Platforms (under Regulation D)

For Accredited Investors Only

The success of rewards-based crowdfunding platforms like Kickstarter (which we described in Chapter 1) proved that large numbers of people would happily fund artists, startups, and small enterprises that they believed in, even when the promised reward was modest and/or had not yet been produced. It was only natural that intermediaries in the angel capital world would exploit and adapt the rewards-based crowdfunding platform infrastructure, harnessing the power of website technology, social media, and e-commerce to accomplish the following objectives:

• Unite startups and growing companies with angel investors.
• Announce equity offerings and disclose deal terms.
• Enable investors to collaborate on due diligence.
• Facilitate investment transactions.

From the issuer's point of view, equity offering platforms present a streamlined process compared with the old, “off-platform” angel capital funding model. Off-platform, it typically takes 8 to 12 months for an entrepreneur to find angels who are interested in an offering and negotiate a deal. Today on equity offering platforms it typically takes two to eight weeks from the time an issuer lists its offer to closing a deal with investors, and in some cases less than a week or even a day. Further, equity offering platforms attract strategic investors to deals from across the country, whereas in the past it was frequently a matter of promoting a deal through ...