By Jonathan Wilson CrowdFundBeat guest contributor,
Corporate Counsel at Taylor English Duma LLPKendall Americo has a helpful introductory piece in Entrepreneur magazine on the top ten items to consider when you invest in a crowdfunded startup.
Americo says that investors should ask themselves ten key questions when they invest in a crowdfunded startup:
Is the investment for equity or a convertible note?
How and when does the investor get the money back?
How will the business make money?
How can the investor profit from an investment?
What rights come with an investment?
How will the investment money be used?
Who are the founders and key personnel?
What are the founders being paid?
Are the sales projections and profit projections reasonable?
What’s the risk associated with investing in the startup?
Another question I would add to the list is, “who are the startup’s primary endorsers and service providers?” Having well-known early investors, board members or other endorsers (such as accountants and lawyers) can add a great deal of value to a startup.
Having well-known advisors involved in a startup means that the startup will be able to enjoy the benefits of the experience and networking the advisor brings to the table. This can include valuable advice on how to accelerate the product development table and how to grow the management team, to valuable introductions to business partners and prospective institutional investors at a later stage.
Looking for well-known advisors in a startup can be a helpful indicator that the startup is headed for success. (Emerging Markets Law Blog).