This Investor Notice is intended to provide you with important information about investing through crowdfunding portals.
Before investing, you should carefully review and understand this information.
Share-ability– giving a specific property the legal ability to be divided and distribute in shares; apportion to participate in, enjoy, receive, jointly:
If you don’t understand something or have a question, please contact us via email at firstname.lastname@example.org
This document is intended to help explain:
- What we do, and how we do it
- The process for buying securities through a crowdfunding portal
- The risks associated with investing in the securities sold through a crowdfunding portal
- Our relationship with the issuers on a Funding Portal, including information about the compensation we will receive from our clients
WHAT YOU SHOULD CONSIDER FIRST
Investing in the companies that are offered on a crowdfunding portal site is very different than investing in the public stock market. The companies on Portal Sites are likely to be small, with limited or no track records, unproven business models, little profits or even revenue, and managed by individuals with limited experience managing successful businesses.
With all those caveats, and even in view of the risks, we believe that the companies we work with will offer you excellent opportunities, both to make money and to invest in things you know and care about. But what we believe doesn’t matter. The first thing for you to consider, before you go further, is whether it is appropriate for you to invest in any of these companies based on your own personal circumstances.
Among the questions you should ask yourself are:
- Can I afford to lose all the money I invest?
- Do I understand the company I am thinking about investing in? Do I understand its product or service? Am I personally familiar with that market?
- Do I understand the business the company is conducting? Do I understand how the company can make money?
- Do I understand the Security I’m buying?
- Do I trust the owners and managers of the company?
- Do I understand the documents I’m being asked to sign?
- Have I asked my advisors for help evaluating the investment?
- If I lose all or part of my money, will I be okay psychologically? Will I get depressed?
Only if you can truthfully answer Yes to all those questions should you invest.
These definitions apply throughout this Investor Education Package:
Site – A site located on the internet
Platform – Another word used to refer to an Internet site.
Issuer – A company trying to raise money from investors on a Portal Site, by selling its Securities.
Security – A share of stock, a promissory note, a bond, or any other instrument offered by an Issuer on a Portal Site.
Title III – Title III of the JOBS Act of 2012, which allows “Regulation Crowdfunding.”
Funding Portal – A term used to describe Internet sites that are allowed to offer and sell Securities under Title III. We are not a Funding Portal.
SEC – The U.S. Securities and Exchange Commission. The website: www.sec.gov.
FINRA – The Financial Industry Regulatory Authority. The website: www.finra.org.
We are not a “Funding Portal.” We are not registered with the SEC or with FINRA to act as a financial intermediary in Securities that are offered and sold under Title III.
We are not a registered broker-dealer.
Think of us as a company that helps structure real estate projects and promotes projects by bringing together companies and investors. As such, we do not guarantee any particular outcome and are not responsible for what happens to your investment – all investments are undertaken at your own risk. We also do not guarantee the accuracy of the information you receive from issuers. Our job is to consultant issuers and help ensure that transactions between investors and issuers are “best in class” and meet high standards.
What We Do:
1. Select which Issuers we want to work with
2. Help Sponsors with Financial Modeling and Pricing
3. Help Sponsors develope Pitch Decks
4. Underwriting and Stress Testing Projects
5. Help Sponsors sett up a “SPV” as the Issuer
6 Help Sponsors developing Private Placement Memorandums for (Regulation D 506 and Title III)
7. Developing Trustee Agreements
8. Developing Term Sheets
9. Developing Mortgage and Note Terms
10. Developing Indenture Terms and Agreements
11. Portal Placement and Management (if applicable)
12. Conduct our own due diligence
14. Investor Sourcing
15. Coordinating Due Diligence for others
16. Negotiating Term Sheets
17. Developing Terms of Operating Agreements
18. Developing Terms of (Investor/Developer) Construction Agreements
19. Developing Terms of (Investor/Developer) Property Management Agreements
21. Coordinating the Closing
22. Transaction Management and Coordination of Funds Disbursement
23. Investor Relations
24. Loan Servicing
25. Distribution of 1099’s to Investors
26. Provide communication channels between you and the Issuer, to ask questions and exchange information
What We Don’t Do
- Offer investment advice or recommendations
- Guarantee any particular investment outcome with Issuers
Issuers pay us flat fees and commissions based on a successful money raise, or in other ways. They might also pay us for specified services we provide to them, and reimburse us for expenses we incur on their behalf. For each offering you invest in, the Issuer will disclose our compensation. In some cases, an Issuer might pay us in whole or in part with profits from the project.
After an offering is completed, we may or may not have an ongoing relationship with the Issuer. The Issuer may decide to use services provided by us (and pay compensation to) entities affiliated with us.
HOW WE SCREEN AND DON’T SCREEN ISSUERS
- Have a “reasonable basis” for believing that every Issuer we work with is eligible to offer its Securities on a Registered Portal, and is complying with Title II or Title III of the JOBS Act. We might perform our own due diligence, but we are generally allowed to rely on the representations of the Issuer.
- Have a “reasonable basis” for believing that every Issuer we work with has established means to provide accurate records of the holders (owners) of its Securities. Again, we might perform our own due diligence, but we are generally allowed to rely on the representations of the Issuer.
- Will not work with Issuers if:
- We have a “reasonable basis” for believing that an Issuer or any of its officers, directors, or beneficial owner of 20% or more of its outstanding voting securities is subject to disqualification under the rules “Disqualification of Issuers”
We do not conclude that the issuers we work with represent good investments for investors. You have to make those decisions on your own.
Risks Associated with Preferred Equity and Dequity Securities
SUBORDINATION TO RIGHTS OF OTHER LENDERS: Typically, when you buy a Dequity security on a Platform, while you will have a higher priority than holders of the equity securities in the company, you will have a lower priority than some other lenders, like banks or leasing companies. In the event of bankruptcy, they would have the right to be paid first, up to the value of the assets in which they have security interests, while you would only be paid from the excess, if any.
LACK OF SECURITY: Sometimes when you buy a Dequity security on a Platform, it will be secured by property, like an interest in real estate or equity. Other times it will not.
ISSUERS TYPICALLY WILL NOT HAVE THIRD PARTY CREDIT RATINGS: Credit rating agencies, notably Moody’s and Standard & Poor’s, assign credit ratings to debt issuers. These ratings are intended to help investors gauge the ability of the issuer to repay the loan. Companies on a Crowdfunding Platform generally will not be rated by either Moody’s or Standard & Poor’s, leaving investors with no objective measure by which to judge the company’s creditworthiness.
INTEREST RATE MIGHT NOT ADEQUATELY COMPENSATE YOU FOR RISK LEVEL: Theoretically, the interest rate paid by a company should compensate the creditor for the level of risk the creditor is assuming. That’s why consumers generally pay one interest rate, large corporations pay a lower interest rate, and the Federal government (which can print money if necessary) pays the lowest rate of all. However, the chances are very high that when you lend money to a company on a crowdfunding platform (buying a debt security is the same as lending money), the interest rate may not compensate you for the level of risk.