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

306 Pages·2015·2.07 MB·English
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Equity Crowdfunding for Investors TheWileyFinanceseriescontainsbookswrittenspecificallyforfinanceand investment professionals as well as sophisticated individual investors and their financial advisors. Book topics range from portfolio management to e-commerce,riskmanagement,financialengineering,valuationandfinancial instrumentanalysis,aswellasmuchmore.Foralistofavailabletitles,visit ourWebsiteatwww.WileyFinance.com. Foundedin1807,JohnWiley&Sonsistheoldestindependentpublish- ing company in the United States. With offices in North America, Europe, AustraliaandAsia,Wileyisgloballycommittedtodevelopingandmarket- ingprintandelectronicproductsandservicesforourcustomers’professional andpersonalknowledgeandunderstanding. Equity Crowdfunding for Investors A Guide to Risks, Returns, Regulations, Funding Portals, Due Diligence, and Deal Terms DAVID M. FREEDMAN AND MATTHEW R. NUTTING Coverimage:top:©blurAZ/Shutterstock; bottom:©cosma/Shutterstock Coverdesign:Wiley Copyright©2015byDavidM.FreedmanandMatthewR.Nutting.Allrightsreserved. PublishedbyJohnWiley&Sons,Inc.,Hoboken,NewJersey. PublishedsimultaneouslyinCanada. Nopartofthispublicationmaybereproduced,storedinaretrievalsystem,ortransmittedin anyformorbyanymeans,electronic,mechanical,photocopying,recording,scanning,or otherwise,exceptaspermittedunderSection107or108ofthe1976UnitedStatesCopyright Act,withouteitherthepriorwrittenpermissionofthePublisher,orauthorizationthrough paymentoftheappropriateper-copyfeetotheCopyrightClearanceCenter,Inc.,222 RosewoodDrive,Danvers,MA01923,(978)750-8400,fax(978)646-8600,orontheWeb atwww.copyright.com.RequeststothePublisherforpermissionshouldbeaddressedtothe PermissionsDepartment,JohnWiley&Sons,Inc.,111RiverStreet,Hoboken,NJ07030, (201)748-6011,fax(201)748-6008,oronlineathttp://www.wiley.com/go/permissions. LimitofLiability/DisclaimerofWarranty:Whilethepublisherandauthorhaveusedtheirbest effortsinpreparingthisbook,theymakenorepresentationsorwarrantieswithrespecttothe accuracyorcompletenessofthecontentsofthisbookandspecificallydisclaimanyimplied warrantiesofmerchantabilityorfitnessforaparticularpurpose.Nowarrantymaybecreated orextendedbysalesrepresentativesorwrittensalesmaterials.Theadviceandstrategies containedhereinmaynotbesuitableforyoursituation.Youshouldconsultwitha professionalwhereappropriate.Neitherthepublishernorauthorshallbeliableforanyloss ofprofitoranyothercommercialdamages,includingbutnotlimitedtospecial,incidental, consequential,orotherdamages. Forgeneralinformationonourotherproductsandservicesorfortechnicalsupport,please contactourCustomerCareDepartmentwithintheUnitedStatesat(800)762-2974,outside theUnitedStatesat(317)572-3993orfax(317)572-4002. Wileypublishesinavarietyofprintandelectronicformatsandbyprint-on-demand.Some materialincludedwithstandardprintversionsofthisbookmaynotbeincludedine-booksor inprint-on-demand.IfthisbookreferstomediasuchasaCDorDVDthatisnotincludedin theversionyoupurchased,youmaydownloadthismaterialathttp://booksupport.wiley.com. FormoreinformationaboutWileyproducts,visitwww.wiley.com. LibraryofCongressCataloging-in-PublicationDataIsAvailable ISBN9781118853566(Hardcover) ISBN9781118857847(ePDF) ISBN9781118857809(ePub) PrintedintheUnitedStatesofAmerica 10987654321 Disclaimer T heinformationinthisbookisintendedforeducationalpurposesonly,not to be construed as specific investment advice for particular individuals. The authors are not investment advisers. Readers should consult qualified tax,legal,andotherappropriateadviserspriortoengaginginanybusiness orfinancialtransactions.Becausethelawsandregulationsunderpinningthis book are new and ever-changing, please refer to updated information at www.wiley.com/equitycf. v Contents Foreword ix Preface:TheNewAngelInvestors xv DefinitionsofKeyTerms xxv Acknowledgments xxvii AbouttheAuthors xxix CHAPTER1 TheFoundationsofOnlineCrowdfunding 1 CHAPTER2 EquityOfferingPlatforms(underRegulationD) 19 CHAPTER3 EquityCrowdfunding 49 CHAPTER4 IntrastateEquityCrowdfunding 69 CHAPTER5 DealFlow 81 CHAPTER6 AngelInvestors 95 CHAPTER7 EquityCrowdfundingPortals 117 vii viii CONTENTS CHAPTER8 HowtoInvest,PartI:PortfolioStrategy 135 CHAPTER9 HowtoInvest,PartII:IdentifySuitableOfferings 153 CHAPTER10 EquityCrowdfundingSecurities 163 CHAPTER11 DealTerms 175 CHAPTER12 HowtoInvest,PartIII:DueDiligence 205 CHAPTER13 HowtoInvest,PartIV:FundingandPostfunding 233 CHAPTER14 LiquidityandSecondaryMarkets 243 Epilogue:TrendsandInnovations 253 EquityCrowdfundingResources 255 AbouttheCompanionWebsite 259 Index 261

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