The Equity Crowdfunding Investor’s Rights
Never before in history have we functioned so efficiently as a global community and possessed an instrument with the power to congregate millions of people together – that power being online social media. In the bright lights of this huge stage, a company with minimal resources will get the chance to introduce itself to the public, raise capital, grow and expand. The moment crowdfund investing becomes legal in the United States, the general public’s access to investing in high-growth businesses will be wide open. Consequently, online crowds become an active participant in the markets. But what are the rights of an equity crowdfunding investor? How much of the story does he or she need to know about the intricacies of the business they plan to invest in?
The Right to Know Who You’re Investing In
Traditional financial investing channels come nicely wrapped in rich informational packages. In those cases, your private responsibility as an investor is to read all the documentation and make an educated decision. However, when you analyze a crowdfund investing campaign, you have to be prepared to do your own homework. As an investor, you give your money to people you know and trust. Whether the business owner is a friend or a friend of a friend, you have privileged access to much more than the deck of cards laid out on the table. It is your right as an equity crowdfunding investor to know, first and foremost, who you’re investing in. To do so, be sure to look into the entrepreneur’s background, reputation, list of followers, financial records and business acumen.
The issuer has the obligation to provide periodic reports on its progress to its investors. Before you pledge your money, be sure to thoroughly read – and agree with – the post-issuance communication plan. This document – required by all issuers seeking financing via truCrowd – should clearly inform you on the terms of post-investment communication. The plan will outline the frequency of the updates at a regularity that best suits the company’s pace, the type information they will contain and the promptitude with which the arising questions will be answered. At the very least, the reports have to be submitted on a quarterly basis and, if this is the case, you will know it before you invest. The updates must inform the supporting crowd on:
– the revenue the business has generated since the last report
– a list of major expenses (planned or unplanned)
– a record of achieved successes
– the difficulties encountered and the way they were, are or will be handled
– future action plans
– good and bad news
In addition, the SEC mandates business owners to provide investors with a detailed yearly report that includes financial statements. As an equity crowdfunding investor, you have the right to access privileged information on the company’s financial and global development.
The Right to Be Informed, in Sickness and in Health
Communication plays a key role in a business investment affiliation.One of the particularities of crowdfund investing is the opportunity to have direct contact with the business owner, who “marries” into this condition when they turn to equity crowdfunding. truCrowd provides an offering communication channel that will foster the issuer-investor dialogue and make it simple for both sides.
In crowdfund investing, quietness could be a sign that the entrepreneur is busy driving the business. Or, it could mean trouble. Good or bad, it is your equity crowdfunding investor right to know where the company is headed. The pioneers of crowdfund investing advise investors to request an update on the crowdfund investing forum if the entrepreneur hasn’t reached out to them within a timeframe of 90 days. If they fail to answer the request, the next suggestion is to send the owner a follow-up email to let them know there is a pending message on the forum. Be sure to the date and time of the question.
Along with the documentation associated with the business offering, truCrowd issuers must clearly outline the privileges and responsibilities of the investors, as well as their own. Understanding your specific rights as an equity crowdfunding investor goes far beyond reading the three basics we have listed here – the right to know the who before the what, the right to watch the post-campaign evolution of the business and the right to continuous periodic updates. Each company will have its own particularities that you must research before deciding to pitch in. Remember! Equity crowdfunding locks in your investment for at least 12 months and during that time you will surely want to know what information is lawful of you, as an investor, to request from the business owner.
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