Insurance for Equity Crowdfunding: How TigerMark Protects Investors

The Missing Layer of Safety in Crowdfunding

One of the primary criticisms of the equity crowdfunding and digital securities sector has been the perceived lack of investor protection. Unlike public markets, where established insurance frameworks protect against director misconduct, the private capital markets (Reg CF, Reg A+) were historically exposed.

To address this, insurtech firm Assurely developed a specific insurance program designed to bridge the gap between traditional insurance and the new digital economy: TigerMark.

What is TigerMark?

TigerMark is a Directors and Officers (D&O) insurance policy specifically tailored for companies raising capital via Regulation Crowdfunding (Reg CF), Regulation A+, and Regulation D. It was developed in partnership with major carriers like AXA XL and Great American Insurance Group.

The program serves two distinct parties:

• The Issuer (The Startup): It protects the company’s directors and officers from personal liability in the event of lawsuits alleging mismanagement or misrepresentation.
• The Investor: It provides a unique “investor refund” benefit (formerly known as CrowdProtector) that can return the principal investment if the issuer is found guilty of fraud or misuse of funds.

How “CrowdProtector” Works

The core innovation within the TigerMark policy is the CrowdProtector feature. In a typical crowdfunding scenario, if a founder steals the funds or grossly misrepresents the business, investors are often left with zero recourse—the money is gone, and the company has no assets to seize.

With CrowdProtector coverage:

• Trigger Event: If an issuer is legally determined to have engaged in fraud, theft of funds, or intentional misrepresentation in their offering documents.
• Payout: The insurance policy kicks in to reimburse the investors for their lost principal, up to the policy limit.
• Trust Signal: Issuers can display the TigerMark/CrowdProtector badge on their raise page, signaling to potential investors that the offering is insured against fraud.

Why Issuers Need D&O Insurance

Many founders believe they do not need insurance until they are generating significant revenue. However, the act of raising capital itself creates liability. By accepting money from the “crowd” (which can include hundreds of unaccredited investors), founders expose themselves to:

• Class Action Lawsuits: If the company fails, disgruntled investors may sue, alleging that the risks were not adequately disclosed.
• Personal Asset Risk: Without D&O insurance, founders may have to pay legal defense costs out of their own pockets, putting their personal homes and savings at risk.

Summary

Trust is the currency of the digital securities market. For the industry to mature, investors need to know that mechanisms exist to protect them from bad actors. Programs like Assurely’s TigerMark provide this infrastructure, offering a “safety net” that allows legitimate founders to raise capital with confidence while giving investors peace of mind.