7 Common Questions about Equity Crowdfunding

Why might I consider Equity Crowdfunding?

There are many reasons.  Here are three:

1. The possibility to earn money on your investment
2. Your investment dollars can provide capital to local companies who may use it to expand their business perhaps creating jobs, and strengthening commuitties
3. Potential to be an early stage investor in a start-up (an opportunity traditionally reserved for venture capitalists and not available to the general public)

I have some money saved, is it a good idea to invest it?

First consider what you may need the money for in the near term.  Home purchase, car purchase, pay down debt, etc.  If you have money saved that is not tied to a specific near/intermediate term goal you may consider investing it.  Even so you should always be sure to have established emergency savings, typically defined as an amount equal to 3-6 months worth of your living expenses.  

What investment Time Frame Should I consider?

You should have an investment time frame of at least 5 years.  That is to say that the money you are contributing to a Equity Crowdfunding issue should not be needed for any other purpose for at least 5 years.

Can I get my money back?

Different offerings will have different terms and conditions.  However all investments are made under the expectation of not only receiving your money back but also earning a profit.  Your ability to withdraw your original investment or any earnings will likely be due to the success of the company you are investing in.  

How do I know if I am making a good investment?

Learn everything you can about the company so that you are comfortable in making your investment.  It is suggested that you meet the owner(s), review all public offering documents and financials, and be sure that you understand the business model and terms of the investment offering. Stay tuned to ECFI (Equity Crowdfunding Institute)  for educational materials around this very topic.

What type of return might I expect for my investment?

Individual investment results will vary.  In reviewing a potential investment your analysis should lead you to an estimation of your expected rate of return.

How can I get started?

Two excellent resources right here in Vermont!

Designbook https://www.designbook.com/

Milk Money VT. www.milkmoneyvt.com