Foundry Law Group Blog

Part II: Crowdfunding and JOBS Act Simplified – Players and Best Practices

Now that we know what crowdfunding is, where it came from, where it is heading, and what potential it has, let’s focus on who the players in a crowdfunding campaign are, and some best practices for each player. In Part III, we will find out what a successfully launched crowdfunding campaign looks like – stay tuned.

There are 3 essential players in a crowdfunding campaign. Then there some peripheral players (cheer leaders, supporters, or services providers) whose help the core team will find quite essential to a successful crowdfunding campaign.

The core players are: Entrepreneur/startup company, investors, and the intermediary (portal).

The peripheral players are service providers such as accountants, lawyers, marketing firms, the media, advisors, mentors, supporters, and most importantly, community champions. The table below further outlines the roles of these players, what they offer, what their obligations are.

EC Players Best Practices
Entrepreneurs (offeror companies)
  • Screen for bad actors on the team (to avoid disqualification under crowdfunding rules)
  • Identify & protect IP before launch (via IP Audit); Avoid public uproar or cease and desist notices on the first day of launch
    • Even RB Campaigns like Kickstarter require complete disclose of how inventions or products actually work
    • EC Platforms – Business Plans require full disclosure of inventions
  • Careful about Public Disclosure on Patents – At least a Provisional Application is suggested (especially due to first to file rules under the America Invents Act). US – lose within 1 year; Foreign – lose immediately
  • Avoid losing trade secrets – not a secret anymore; lost instantly
  • Brand – protect with trademarks or copyright before disclosure
  • Honor 3rd party IP and licensing terms and conditions of 3rd party content in the pitch (i.e., music, videos, photos, etc.); lack of © does not mean lack of copyright; seek permission beforehand and give attributions to the correct 3rd parties
  • Prepare to be fully responsible for all the statements made
Investors (especially non-accredited)
  • Do thorough due diligence
  • Request information
  • Study the startup team & company
  • Be truthful about own income
  • Understand your own risk tolerance
Intermediary (Portal/Platform)
  • Publish well-crafted rules and process for investors and offerors
  • Warnings on the portal to investors and offerors
  • Educate the unsophisticated investor public on risks and limits
  • Educate offerors (on IP Risks; Compliance Obligations. E.g., what amounts to Public Disclosure)
  • Screen startups for compliance based on onboarding rules
  • Offer a reliable, secure, and compliant portal
Offeror obligations compared FEDERAL Law | WA Law Similarities:

  • Disclose information about officers, directors and >20% owners
  • Disclose use of proceeds
  • Disclose the price to the public


  • Requires audited financial statements + tax returns for > $500K |Only GAAP compliant statements
  • File Annual Report with SEC + investors | Quarterly disclosures on Company web site only
  • Intermediary reqd. (broker/dealer OR Registered Funding Portal) | No intermediary required. Fill the Crowdfunding Form with DFI only.


Next Up: Part III: Crowdfunding and JOBS Act Simplified – What a Successful Campaign Looks Like

Leave a Reply