When an entrepreneur publicly offers equity online the business idea and product is out there for the world to see. Therefore, it is important for entrepreneurs to learn ways to protect their business. First, an entrepreneur should hire a legal team to help draft and understand any documents that come with the investing process. Before posting an equity offering, the startup should consider obtaining a patent or copyright on their idea or product. So that even if the idea is being publicly offered, there is no risk of losing ownership.

Founding teams should also spend time understanding Term Sheets. A Term Sheet is a nonbinding legal document that is presented by the investor and outlines the terms and conditions in which he or she would be willing to fund the company. These legal documents are extensive and confusing and are often overlooked by CEOs. In order to avoid disasters due to misunderstanding the Term Sheet. Some Equity Crowdfunding platforms like Seedrs have began to standardize a template for this legal document. Mark Suster and other well known investors have provided advice on Quora. Therefore, with the help from a legal team, the CEO can better understand the legal agreement for which he or she is signing.

At Fund Wisdom we connect investors to startups raising capital online. You can view our offerings or learn more about our services. 

Sources:

http://www.quora.com/What-are-examples-of-good-startup-term-sheets
http://www.nvca.org/index.php?option=com_content&view=article&id=108&Itemid=136
http://seedrs.files.wordpress.com/2014/05/seedrs-term-sheet-19-may-2014.pdf
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