Investor returns from crowdfunding
"Crowdfunding can be a legitimate means of funding very small startups. It is an innovative, but obviously risky, method of raising small amounts of money. As such it is now regulated by the SEC under ""Regulation Crowdfunding"" They have published guides for these types of business startups to help them with required disclosures and reporting requirements: https://www.sec.gov/info/smallbus/secg/rccomplianceguide-051316.htm Here's the introduction to the relevant regulatory authority of the SEC: Under the Securities Act of 1933, the offer and sale of securities must be registered unless an exemption from registration is available.  Title III of the Jumpstart Our Business Startups (JOBS) Act of 2012 added Securities Act Section 4(a)(6) that provides an exemption from registration for certain crowdfunding transactions.[2]  In 2015, the Commission adopted Regulation Crowdfunding to implement the requirements of Title III.[3]  Under the rules, eligible companies will be allowed to raise capital using Regulation Crowdfunding starting May 16, 2016. It is obviously a new form of investment but you should be able to get historical data on the SEC's real time Edgar reporting system once there is some history. This is a search for all Form C's filed as of 12/2/16"
Remember that unless you participate in the actual fund that these individuals offer to the public, you will not get the same returns they will. If you instead do something like, look at what Warren Buffet's fund bought/sold yesterday (or even 60 minutes ago), and buy/sell it yourself, you will face 2 obstacles to achieving their returns: 1) The timing difference will mean that the value of the stock purchased by Warren Buffet will be different for your purchase and for his purchase. Because these investors often buy large swathes of stock at once, this may create large variances for 2 reasons: (a) simply buying a large volume of a stock will naturally increase the price, as the lowest sell orders are taken up, and fewer willing sellers remain; and (b) many people (including institutional investors) may be watching what someone like Warren Buffet does, and will want to follow suit, chasing the same pricing problem. 2) You cannot buy multiple stocks as efficiently as a fund can. If Warren Buffet's fund holds, say, 50 stocks, and he trades 1 stock per day [I have absolutely no idea about what diversification exists within his fund], his per-share transaction costs will be quite low, due to share volume. Whereas for you to follow him, you would need 50 transactions upfront, + 1 per day. This may appear to be a small cost, but it could be substantial. Imagine if you wanted to invest 50k using this method - that's $1k for each of 50 companies. A $5 transaction fee would equal 1% of the value of each company invested [$5 to buy, and $5 to sell]. How does that 1% compare to the management fee charged by the actual fund available to you? In short, if you feel that a particular investor has a sound strategy, I suggest that you consider investing with them directly, instead of attempting to recreate their portfolio. At this time, Google Finance doesn't support historical return or dividend data, only share prices.  The attributes for mutual funds such as return52 are only available as real-time data, not historical.   Yahoo also does not appear to offer market return data including dividends. For example, the S&P 500 index does not account for dividends--the S&P ^SPXTR index does, but is unavailable through Yahoo Finance. Thanks very much.  12b1 is a form that explains how a fund uses that .25-1% fee, right? So that's part of the puzzle im getting at.  I'm not necessarily trying to understand my net fees, but more who pays who and based off of what.   For a quick example, betterment bought me a bunch of vanguard ETFs. That's cool. But vanguard underperformed vs their blackrock and ssga etfs. I get that vanguard has lower fees, but the return was less even taking those into account.  I'm wondering, first what sort of kickback betterment got for buying those funds, inclusive of wholesale deals, education fees etc.  I'm also wondering how this food chain goes up and down the sponsor, manager tree.  I'm sure it's more than just splitting up that 1% "Because I'll be investing time, effort, energy and take some initial risks I would like to receive more shares (more than just purely financial contribution would suggest) I don't see money in that list.  How much money will you be contributing to your own project? Mutual understanding, focusing on big image, rather that covering each and every edge case. These kinds of one page agreements are an excellent ""idea"" and they work just fine when everyone is happy and everything is working well; they are an utter nightmare if anything goes sideways.  Coincidently, the reason you write anything down at all is to have everyone agree on the same big picture at the same time. People's memory of the original big picture gets fuzzy when their money might not come back to them.  You don't need to cover all edge cases, but you need to cover obvious negative outcomes.  What if you can't find a renter?  What if you're late paying someone back?  What if your vendor ""repairs"" something incorrectly?  What if you forget to get a permit and the vendor needs to come back to tear it all apart and redo the work?  What if your project needs more money, who is required to contribute, who has the option to contribute, who gets diluted?  Who is doing the work of managing the project, how much is that person getting paid, how is that person's pay determined, how can it be adjusted?  Is any work expected from any other investor, on what terms, who decides the terms?  What if you get an offer to buy the building, who decides to sell, etc and so forth and on and on and on... You write down an agreement so everyone's understanding of the agreement is recorded.  You write down what will happen in XYZ event so you don't argue about what you all should do when that event does ultimately occur.  You take as much equity as your other investors will allow you to have, and you give them as much as required to get their money.  Understand that the more cooks there are in the kitchen the more difficult it is to act on a problem when one arises; when not if. Your ego-stroking play to ""open source crowd-sourced wisdom"" is nothing more than a silly request for vague advice at no cost.  Starting a project on trust, transparency and integrity is naive.  This is about money.  Why on earth should anyone trust you with their money if you won't do the most basic step of stewardship and spend a couple hundred pounds to talk to a local professional about organizing your first ever project. To answer your question directly, the first precaution you should take is not taking money from any of your friends or family." They return capital to investors every year to keep the fund size smaller, since there are a set number of money-making opportunities in the space.  In other words, if they will make $1 billion per year regardless of invested capital, why not lever up a few times so you don't have to put as much in? "i realize the required rate will need to be below the expected growth rate. not really the issue.   i'm also not looking for insight into how i model these two possible options, i'm really just interested in how people would think about producing a discount rate for the projects.  ""but you determine the required return(discount rate) based on the perceived risk of the investment and your particular views""   this was the ultimate question i was getting at. what would YOU use?" TK didnt lose investor tens of billions of dollars. Also, for the past several years the whole market rewards growth over earnings, so that helped guys like Musk and Kalanick quite a lot and to a lessor degree, Bezos and Reddings.       For all assets, investor profits come from either earnings or valuation growth and Kalanick provided quite a bit of the latter. "What you are seeking is termed ""Alpha"", the mispricing in the market. Specifically, Alpha is the price error when compared to the market return and beta of the stock. Modern portfolio theory suggests that a portfolio with good Alpha will maximize profits for a given risk tolerance. The efficient market hypotheses suggests that Alpha is always zero. The EMH also suggests that taxes, human effort and information propagation delays don't exist (i.e. it is wrong). For someone who is right, the best specific answer to your question is presented Ben Graham's book ""The Intelligent Investor"" (starting on page 280). And even still, that book is better summarized by Warren Buffet (see Berkshire Hathaway Letters to Shareholders). In a great disservice to the geniuses above it can be summarized much further: closely follow the company to estimate its true earnings potential... and ignore the prices the market is quoting. ADDENDUM: And when you have earnings potential, calculate value with: NPV = sum(each income piece/(1+cost of capital)^time) Update: See http://finance.fortune.cnn.com/2014/02/24/warren-buffett-berkshire-letter/ ""When Charlie Munger and I buy stocks..."" for these same ideas right from the horse's mouth" Disclosure - I love Jack Bogle. Jack basically invented the index fund, and as a result, let the common investor have an opportunity to choose a long term return of (S&P-.05%) instead of losing nearly 2% that many funds in that day charged. The use of index investing has saved investors many billions of dollars.  The 1% round trip, total cost to buy/sell, was common. Fees for trading have since dropped. I happen to use Schwab who charges $9 for a trade. On $100,000, this is not .5% ($500) but less than .01%. I think it's safe to say that billion dollar mutual funds are paying even less for trades that I do. I believe Jack's example here is a combination of old data and hyperbole.  The cost is not so much for the trades, per se, but for the people managing the fund. An index fund has a manager of course, but it's pretty much run by a computer. What's a good proxy for the return of the market when utilizing CAPM for a WACC build up? I know I could rip data from Domadaran, but I'd like to calculate it for myself. Maybe S&amp;P 500 earnings yield plus the 10yr? Also don't like taking the round assumption of 7%. Ah, pardon me, so it's not *either* 10x return or zero, but also includes points in between there?  Is it path dependent? Do you have any history on the asset?  The usual crutches for dealing with unknown probabilities are using risk neutrality or arbitrage pricing, but if the market is inefficient then that will be an estimation at best. tl;dr: The CNN Money and Yahoo Finance charts are wildly inaccurate. The TD Ameritrade chart appears to be accurate and shows returns with reinvested dividends. Ignoring buggy data, CNN most likely shows reinvested dividends for quoted securities but not for the S&P 500 index. Yahoo most likely shows all returns without reinvested dividends. Thanks to a tip from Grade Eh Bacon, I was able to determine that TD Ameritrade reports returns with reinvested dividends (as it claims to do). Eyeballing the chart, it appears that S&P 500 grew by ~90% over the five year period the chart covers. Meanwhile, according to this S&P 500 return estimator, the five year return of S&P 500, with reinvested dividends, was 97.1% between July 2012 to July 2017 (vs. 78.4% raw returns). I have no idea what numbers CNN Money is working from, because it claims S&P 500 only grew about 35% over the last five years, which is less than half of the raw return. Ditto for Yahoo, which claims 45% growth. Even stranger still, the CNN chart for VFINX (an S&P 500 index fund) clearly shows the correct market growth (without reinvesting dividends from the S&P 500 index), so whatever problem exists is inconsistent:  Yahoo also agrees with itself for VFINX, but comes in a bit low even if your assume no reinvestment of dividends (68% vs. 78% expected); I'm not sure if it's ever right.  By way of comparison, TD's chart for VFINX seems to be consistent with its ABALX chart and with reality:  As a final sanity check, I pulled historical ^GSPC prices from Yahoo Finance. It closed at $1406.58 on 27 Aug 2012 and $2477.55 on 28 Aug 2017, or 76.1% growth overall. That agrees with TD and the return calculator above, and disagrees with CNN Money (on ABALX). Worse, Yahoo's own charts (both ABALX and VFINX) disagree with Yahoo's own historical data. Currently reading Peter Thiel's *Zero to One*, and he discusses just that. He knew the bubble was about to burst so he got as much investment as quickly as he could for Pay Pal. $100 million dollars raised the month before the bubble burst, according to him. There are two obvious cases in which your return is lower with a heavily leveraged investment. If a $100,000 investment of your own cash yields $1000 that's a 1% return. If you put in $50,000 of your own money and borrow $50,000 at 2%, you get a 0% return (After factoring in the interest as above.) If you buy an investment for $100,000 and it loses $1000, that's a -1% return. If you borrow $100,000 and buy two investments, and they both lose $1000, that's a -2% return. Depends entirely on the stock and your perception of it. Would you buy it at the current price? If so, keep it. Would you buy something else? If so, sell it and buy that.