What is equity crowdfunding?

Equity crowdfunding is a new funding method by which startups are able to connect with everyday investors in order to raise the capital they need. 
Equity crowdfunding is the name given to the process whereby people (the “crowd”) invest in a company in exchange for shares in that company.
What is an “issuer”?

The term “issuer”, in general, is defined as a “person who issues or proposes to issue any security.” On a more common language, issuer is the entrepreneur that offers equity in his company in exchange of capital.
What is “equity offering”?

Equity offering are small stakes in a company sold to individuals. In return of investment, the investor receives a form of ownership, commonly referred to as “equity”.
What is crowdfunding?

Crowdfunding is a new and evolving method to raise money using Internet and Social Media. Crowdfunding serves as an alternative source of capital to support a wide range of ideas and ventures. An entity or individual raising funds through crowdfunding typically seeks small individual contributions from a large number of people.
What is “material change”?

A change is deem as being material when the new information added could create a change in the original decision. In our case, new information added by entrepreneur might be so bad that a reasonable investor will not pledge.
What is Title III of the JOBS act?

Title III is the long waited “non-accredited crowdfunding” component to the JOBS Act, which allows non-accredited individuals to invest in private companies.
How is Title III of the JOBS Act different from Title II of the JOBS Act?

Title III of the JOBS Act will permit U.S. entrepreneurs to raise up to $1 million per year from the general public, including investors that do not qualify as accredited investors. It means Title III crowdfunding will permit almost everyone to invest.

Title II of the JOBS act enables general solicitation, or public fundraising. Companies can only accept money from accredited investors who are typically people with a net worth (excluding their primary residence) of $1 million, income of $200,000/year (or $300,000 with their spouse), officers and directors of the entrepreneur and various institutions that have more than $5 million in assets.
How is JOBS ACT Title III equity crowdfunding different from angel investing?

Angel investors are accredited investors with vast investing experience and have usually held executive positions at large corporations. 
Their typical investment amount ranges from $150,000 to $2,000,000.

JOBS Act Title III equity crowdfunding allows non-accredited investors to invest a maximum of 5% of their annual income if less than $100,000 or 10% if it is 
more than $100,000. Crowdfunding is also more internet/online-based than angel investing at this time.
Why is funding all-or-nothing?

This provision means the entrepreneur or business must determine a target amount for their crowdfund investing campaign and work diligently to accomplish that goal. If they reach 100% of the target amount, they will receive the money. If they do not succeed, they receive nothing despite the pledges toward their campaign.

Why is this provisions?

1. Business owners must be clear about how much money they require. The capital needed (e.g. $500K) should always be associated with clear objectives 
(e.g. $100K - increasing team, 200K - materials acquisition, 200K - marketing campaigns, etc.). Failure to raise the capital needed affects the entrepreneur’s 
capacity of completing objectives and indirectly influences the success probability, which is risky for investors.

2. To keep it lean. The all-or-nothing provision encourages lean startup methodology where the entrepreneur doesn’t want to think too big
 (e.g. asking for the maximum of $1 million to open several new locations) and risks getting nothing. Instead, the entrepreneur is encouraged to think more realistically (e.g. ask $500K for a single new location), so the chances of fundraising and operational success are greater and less risky.

3. To discourage fraud. Without the all-or-nothing provision, it could be easier for a fraudster to go online, set up a bogus business pitch and pocket whatever money they could drive into the crowdfund account before being exposed. The all-or-nothing provision essentially grants the crowd time to identify the frauds.
Why is investing in startups via equity crowdfunding better?

By investing part of your funds (maximum 5% of your annual income if less than $100,000 or 10% otherwise), you will enjoy the following benefits:

1. Receive an equity holding in the funded company. We recommend using the venture capitalist model and invest in as many companies as possible, knowing that some will fail, but those that succeed might bring returns that cover a loss many times over.

2. A return on investment if/when the company is listed on the stock exchange, sold or pays a dividend. At some point there will be a secondary market for such investments.

3. A chance to fund the next big thing (see Google or Facebook, Twitter, etc.).

4. A way to directly support someone you know who is following his/her dream and build a business that will bring innovation and new jobs.

5. The opportunity to support the development of a business by contributing your own expertise and knowledge (e.g. experience in a certain industry, SEO knowledge, management skills, etc.).