How to Diligence a Crowdfunding Deal

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

Angel investors are familiar with startups raising funding who come through their normal channels.

Deals are often submitted on their software platform or referred by a trusted source.

In the world of crowdfunding, startups come through a new compliance channel called Reg CF.

The startup posts their deal on a software platform that allows anyone to invest using the Reg CF compliance rather than Reg D compliance.

Investors see an overview of the investment, a video describing how it works, and some documents for diligence.

The crowdfunding platform provides some diligence information.

Here's how an angel investor should diligence that startup:

First, the crowdfunding platform checked for compliance with the Reg CF requirements but has not necessarily performed the usual checks for investor diligence.

For example, the financials are not audited, so the investor must verify the financials provided.

Check the team to see how much experience they have and what role they currently play in the startup.

The product may look like it's ready to go, but the investor should verify the current status.

The deal has a valuation but is rarely stated in clear terms.

The investor should check to see what the proposed valuation is and if it is market rate.

Finally, the investor should check the terms of the offering to see what rights the investors have, if any.

Consider these steps in diligencing a crowdfunding deal.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let's go startup something today.

_________________________________________________________

For more episodes from Investor Connect, please visit the site at: http://investorconnect.org

Check out our other podcasts here: https://investorconnect.org/
For Investors check out: https://tencapital.group/investor-landing/
For Startups check out: https://tencapital.group/company-landing/
For eGuides check out: https://tencapital.group/education/
For upcoming Events, check out https://tencapital.group/events/

For Feedback please contact info@tencapital.group

Please follow, share, and leave a review.

Music courtesy of Bensound.