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How Long Until I See a Return?

It could be a very long time and possibly never in terms of an equity investment! The mortality rate for new ventures can be quite high depending on the industry and the founders previous experience.

For example, it took the early investors in Harmonix (creators of Guitar Hero) over 10 years to earn a return.

You are usually waiting until the company goes public (rare) or is acquired through a merger or acquisition.

Having a balanced portfolio of both equity and debt based investments can help mitigate loss.

How is the Valuation Determined?

There's an old adage that goes:

"The worth of a thing is the price it will bring."

Market demand often determines the valuation of an asset. Typically, before a company raises fund, at least one professional investor has invested in the company. Professional investors are much more likely to understand the current market value of startups. This valuation shifts with time, depending on the amount of capital chasing companies in that market segment.

Currently early-stage high-growth startups are often valued at $3 to $20 million for their first financing. Lifestyle businesses are valued at less. Companies that have raised several rounds of financing and are further along are worth far more.

How Do I Earn a Return?

People invest for a variety of reasons usually with an expectation of a return on investment ("ROI").

Most startups will be a "growth story" and will need to re-invest profits back into the company. Investors in startups rarely expect to receive dividends but rather anticipate that the company will grow and either go public or get acquired.

Some companies are offering Convertible Notes including the Simple Agreement for Future Equity ("SAFE") . The note or SAFE can convert to stock if the company raises a "priced round" from professional investors. If the company is successful, the value of the stock can increase with each subsequent round of financing, until the company is acquired or goes public.

In a Debt based offering, often connected to real estate, the investor is primarily investing to earn interest on their principle invested. Payments can made monthly, quarterly or semi-annually and can be interest only payments or principle plus interest.

Of course, when investing in something as risky as a startup, there may be no return at all.

Will the Issuing Company Always Use Your Portal in the Future?

After fundraising, our portal(s) remain available to our issuing companies to continue handling their Investor Relations as a Service. We believe that our services are compelling, especially for assisting with tax document preparation such as Schedule K-1 creation and disbursement.

However, there is no guarantee the issuing company will continue to use our services. They may also decide to raise their next round of financing on a different funding portal.

Will I Receive an Annual Report?

If you are an investor in a Regulation Crowdfunding offering, the company is required to issue an annual report once a year with financial statements and a discussion of its business, no later than three months after the end of its fiscal year.

Companies are not obligated to file annual reports if it:
  • files for an IPO
  • is acquired by a purchaser
  • repurchases your investment
  • has fewer than 300 shareholders after one year
  • if it goes bankrupt, or
  • after three years if it has less than $10 million in assets

    Some founders and companies who can easily raise funding from venture capitalists may decide not to file annual reports, as the only penalty is they may not use Regulation Crowdfunding again until they do so. If a company stops reporting, you may not have current financial information about its condition or prospects.
  • How Can I Help the Companies I Invest in?

    Campaign companies are first and foremost looking for "brand champions" ! YOU are their best source of fandom.

    Follow them on social media, share news about your investment with your network and evangelize their product or service. Enthusiasm is infectious! If you're really excited about what your campaign company is doing let your friends know. Investing is more fun with a friend! Consider joining or starting an investment club.

    "Pride in Ownership" is still alive and well and you have every right to benefit from the upside of your investments.

    Can I Contact the Founder(s) Directly?

    The short answer is "no" but there are exceptions. We will not disclose any email or phone numbers we obtain as part of our issuer on-boarding, however most business plans contain contact information for investor relations.

    Our portals provide a way for investors to submit questions for any offering curated by the founders in their "Frequently Asked/Answered Questions" as well as engage founders via our forum. In fact for Regulated Crowdfunding ("REG-CF") ALL communication must be mediated through the portal during the raise.

    Do not expect founders to accept social media requests on FaceBook or LinkedIN.

    What Updates Should I Expect After Investing?

    We encourage all of our issuing campaign companies to make regular announcements. Many have social media pages and email lists that you should discover and monitor.

    Our portals also contain both curated Frequently Asked/Answered Questions from investors and we maintain an open forum with threads for each of our campaign companies where investors and issuers can get together for dialogue.

    All employees or individuals who have been hired by issuing companies must disclose their relationship in any posts made on our forum.

    We will monitor our communication channels for abuse, but do not generally moderate the content.

    What Happens if the Fundraising Fails?

    The reality is that many crowdfunding campaigns will fail to reach their stated minimum goals. It should be expected as not all great ideas make for great investments.

    If a campaign has failed to reach its minimum goal within 90-100 days we encourage the issuing company to withdraw and regroup.

    You'll be notified via e-mail and receive a full refund of your investment if it was funded by ACH or check. If you funded your investment via wire-transfer you will receive a refund minus any bank fees.

    When will the Fundraising Round Close?

    A fundraising round will close at its published deadline which may be up to a year after the offering was made effective.

    However, an issuer may close its round earlier after its funding target has been met. In this case, you will receive a 5 day notice before the close date via e-mail.

    Under Regulated Crowdfunding (REG-CF) there is a minimum 21 day period that a campaign MUST be open.

    Can the Company Reject or Cancel my Investment?

    The short answer is "yes".

    Your investment pledge may be rejected or canceled for a variety of reasons. Issuing companies will establish minimum investment amounts but will always favor larger investors for the simple reason of managing their shareholder registry known as a "cap table."

    Once a campaign has reached it's stated minimum goal and an investor has signed a subscription agreement and the funds have been released from escrow neither party may unilaterally cancel unless there is some "material event" or information that comes to light. It's rare but a company may discover that an investor works for a competitor and could refund the investment. Any significant changes to a offering must be filed with a regulator as an addendum and investors must be given the opportunity to positively accept the change otherwise they have a right to a refund.

    Can I Cancel my Investment Pledge and Get a Refund?

    You can cancel a pledge prior to funding it at anytime.

    If you've funded a pledge and the money is in escrow you may cancel anytime up to 48 hours prior to the campaign closing. While issuing companies are permitted to raise funds for up to a year, they may elect to end the campaign early. You will be notified immediately if there is any change to the end date.

    Once a campaign has reached it's stated minimum raise you will be invited to sign subscription agreements. Once signed, your investment funds are released from the escrow account to the issuer and no cancellation is permitted by the portal. If you find yourself in this situation, you are encouraged to contact the issuing company to see if something can be worked out. Depending on which regulatory exemption was used, you may be able to sell your interest to another investor if the company is not able to refund your investment.

    If an issuer experiences a "Material Event" namely something that significantly impacts the business or investor, an addendum to the offering will be filed and every investor must positively affirm their acceptance of the addendum otherwise it will have been deemed "rejected" by the investor and funds must be returned.

    How Are Your Portals Compensated?

    REG-CF

    For Regulation Crowdfunding, we charge the issuer company up to 7% of the total funding volume.

    MNvest

    For Minnesota based MNvest crowdfunding our issuer company fee schedule is as follows*
  • $2,500 on-boarding consulting
  • $2,500 publishing fee once registration is deemed effective, includes first month hosting & escrow
  • $1,000 month hosting & escrow fee
  • Maximum fee of $10,000 for raises up to $1M, and $15,000 for raises over $1M

    * SPPX reserves the right to discount it's fee schedule

    Donation Based Crowdfunding

    Our portal system can absolutely be used for donation based campaigns under a white label model, and often at rates competitive to using GoFundMe or PayPal! Contact us at +1 651.645.7550 for more details!

    White Label SAAS

    We can offer state based portal operators and Federal Funding Portal operators an attractive turn-key "portal as a service" under license for a simple 80/20 revenue split model. Contact us at +1 651.645.7550 for more details!
  • How are Securities Delivered to Me?

    After an investment is successfuly executed by pledging support, funding your investment and ultimately e-signing a subscription agreement, you will be able to login to your investor profile to find your executed agreements.

    If your issuer has elected to opt-in to our blockchain based issuance platform, your shares or ownership evidence will be delivered electronically such that you can take control of your private key.

    We reserve the right to produce and distribute paper certificates that are bound to a blockchain based distributed ledger system.