While crowdfunding can be an excellent way for companies to raise capital and engage with a broader base of investors, it also comes with certain risks and challenges. One potential problem for companies in a crowdfunding campaign is dealing with investor-driven claims.
Standard private company D&O insurance excludes investor protection for companies leveraging JOBS Act exemptions to raise capital. TigerMark is the only D&O insurance policy to cover claims from investors.
These claims could include:
Misrepresentation claims - Investors might claim that the company made false or misleading statements during the crowdfunding campaign, either in the pitch, financial projections, or other promotional materials. Such claims could lead to legal disputes and reputational damage for the company.
Breach of fiduciary duty claims - Investors may argue that the company failed to fulfill the promises or obligations outlined in the crowdfunding campaign or the investment agreement. For example, if the company fails to deliver rewards or perks promised to backers, it could lead to claims for breach of contract.
Failure to deliver products or services -If the company raises funds through crowdfunding to develop or deliver a product or service and fails to do so within the specified timeline or with the promised features, investors might make claims for non-performance or breach of contract.
Poor performance and financial loss claims - If the company experiences financial difficulties or underperforms relative to its projections, investors may feel they were misled or that the company misrepresented its potential, leading to potential claims for financial losses.
If you have more questions or are interested in speaking to someone about acquiring a TigerMark policy we’d be happy to chat - you can reach one of our team members at email@example.com