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EquityBender is a funding portal registered with the Securities and Exchange Commission (SEC) and a member of the Financial Industry Regulatory Authority (FINRA). We provide an online portal for investors to identify, evaluate, and invest in new ventures. EquityBender leverages a user-friendly electronic platform to facilitate the connection process between investors and start-ups. EquityBender believes in a transparent, collaborative, and value-add approach to support entrepreneurs and the investing public. Be part of the next generation of online equity investing. Today.
If you are seeking to invest in U.S. based early-stage technology companies, EquityBender may be the Crowdfunding Portal for you. Each year thousands of early-stage companies seek investments to grow their business. Until recently, only accredited investors with access to deal flow could participate in these investment opportunities. Today, EquityBender's online equity platform makes it possible for all investors to review issuer materials and invest using a transparent, secure, and cost effective portal.
Updated: Crowdfunding and the JOBS Act: What Investors Should Know
FINRA is issuing an update to this Alert to advise investors about the inflation-adjusted increase in investment limits for securities-based crowdfunding. The Jumpstart Our Business Startups Act (JOBS Act) established crowdfunding provisions that allow early-stage businesses to offer and sell securities and provided that crowdfunding dollar limits be adjusted for inflation every five years. The SEC issued inflation-adjusted crowdfunding dollar amounts on May 5, 2017, which are reflected below.
"Crowdfunding" generally refers to the use of the Internet by small businesses to raise capital through limited investments from a large number of investors. Under SEC rules, the general public can invest in capital raising by start-up companies. This advisory is designed to help the public understand the crowdfunding rules and processes so they can make informed decisions about the risks and rewards of investing in these early-stage businesses.
What Are the Rules?
Title III of the JOBS Act established crowdfunding provisions that allow early-stage businesses to offer and sell securities. The SEC subsequently adopted Regulation Crowdfunding to implement the crowdfunding provisions of the JOBS Act. The role of the Financial Industry Regulatory Authority (FINRA) is to oversee the registration of crowdfunding portals and to ensure that they comply with the federal securities laws and FINRA rules. Broker-dealers and funding portals that are registered with the SEC and are FINRA members are permitted to offer and sell securities on behalf of issuers to the investing public using crowdfunding.
Investors are subject to investment limits that we describe below. Investors should be aware that crowdfunding investments carry significant risk: you can lose some or all of your investment.
Who Can Invest?
Like stocks and bonds, anyone can invest in crowdfunding offerings. But because of the risks involved, you are limited in how much you can invest during any 12-month period in these kinds of securities. The inflation-adjusted investment limits depend on your net worth and annual income:
- If either your annual income or your net worth is less than $107,000, then during any 12-month period, you can invest up to the greater of either $2,200 or five percent of the lesser of your annual income or net worth.
- If both your annual income and your net worth are equal to or more than $107,000 then, during any 12-month period, you can invest up to 10 percent of your annual income or net worth, whichever is less, but not to exceed $107,000.
Say your annual income is $150,000 and your net worth is $80,000. JOBS Act crowdfunding rules allow you to invest the greater of $2,200 or five percent of $80,000 ($4,000) during a 12-month period. So in this case, you can invest $4,000 over a 12-month period.
Know Your Net Worth
To calculate your net worth, add up all your assets and subtract your liabilities. The resulting sum is your net worth. To learn more, read FINRA’s Know Your Net Worth, which includes a worksheet to help with your net worth computation. For purposes of JOBS Act crowdfunding, the value of your primary residence is not included in your net worth calculation.
When you calculate your annual income or net worth, you may include your spouse’s income or assets even if those assets are not held jointly. However, if you use a joint calculation, you and your spouse’s aggregate investment may not exceed the limit that would apply to an individual investor at that income and net worth level.
How to Invest
In addition to investment limits described above, other requirements and procedures have been put in place to protect and inform those who invest in crowdfunding offerings.
Among the most important, you can invest in an offering pursuant to Regulation Crowdfunding only through an online platform of a broker-dealer or a funding portal, a new type of intermediary that was created by the JOBS Act. Companies may not offer crowdfunding investments to you directly—they must use a broker-dealer or funding portal.
The broker-dealer or funding portal must be registered with the SEC and be a member of FINRA. To check registration status and additional information on broker-dealers, visit FINRA’s BrokerCheck. To check if a funding portal is registered, go to FINRA's Funding Portals Web page.
To begin the investment process, you will have to use a new or existing account with the broker-dealer or funding portal. While brokers can offer investment advice and recommendations, funding portals cannot. Also, a funding portal cannot solicit purchases, sales or offers to buy the securities being offered or displayed on the platform.
Be aware that you will be limited in your ability to resell your investment for the first year—and you may need to hold your investment for an indefinite period of time. While you are allowed to transfer shares to certain parties such as a family member or the firm that issued the securities, this may not be easy to do.
Read and Understand Key Disclosure and Education Information
Since crowdfunding investments are likely to be early-stage ventures and may be highly risky, the JOBS Act and Regulation Crowdfunding include provisions designed to inform investors about these investments and their potential risks.
Companies that conduct offerings under Regulation Crowdfunding are required to disclose, among other things:
- A description of the business of the company and its anticipated plan of business, including its name, legal status, physical address and website address.
- A discussion of the material factors that make an investment in the company speculative or risky.
- A discussion of the company’s financial condition.
- The names and positions of the directors and officers; the name of each person who is a beneficial owner of 20 percent or more of the company’s outstanding voting equity securities; and additional information such as the business experience of the directors and officers over the past three years.
- The price of the securities or the method for determining the price.
This information is to be filed in a document called Form C and uploaded to the SEC’s Edgar system for access by investors and crowdfunding intermediaries.
Depending on the amount of money being raised—which includes any amounts raised by the company in the prior 12 months in reliance on JOBS Act crowdfunding—issuers are also required to make certain financial disclosures, including:
|Amount Raised||Inflation-Adjusted Required Minimum Disclosures|
|$107,000 or less||
|$107,000.01 to $535,000||
|$535,000.01 to $1.07 million||
Be aware that an audit of financial statements involves a higher level of scrutiny than a review.
Changing Your Mind
You have up to 48 hours prior to the end
of the offer period to change your mind
and cancel your investment commitment
for any reason. Once the offering period
is within 48 hours of ending, you will not
be able to cancel for any reason even if
you make your commitment during this
If the company makes a material change to
the offering terms or other information
disclosed to you, you will be given five
business days to reconfirm your investment.
Broker-dealers and funding portals that operate Regulation Crowdfunding platforms are required to:
- Provide educational materials to help investors understand this type of investing, as well as make available information about the offering and the company raising the funds (such as Form C).
- Provide communications channels that allow discussions to take place about offerings on the platform.
- Obtain a representation from the investor that he or she understands that they may lose their entire investment, and can bear such a loss.
- Provide prospective investors with questions designed to demonstrate an understanding, among other things, that it may be difficult to resell the securities and that investing in these types of securities involves risk.
While investing in early-stage businesses may bring rewards, it also carries risks. These tips can help you determine if a crowdfunding offering is right for you.
1. Ask yourself if you can handle the risk—and the potential loss of your investment. Both are real possibilities when it comes to companies that issue securities using crowdfunding. The venture may not succeed. Startups and early-stage ventures can and do fail. You should be able to afford, and be prepared to lose, your entire investment. If you are risk-averse, are just starting to invest, have only a little money to invest, or may need the money in the short term, crowdfunding investments likely are not for you.
2. Read and understand the educational and financial information, and all disclosures, provided by the issuer and crowdfunding intermediaries. If you are working with a financial professional, or seeking information over a crowdfunding platform’s communication channel, ask direct questions about the investment, including worst-case scenarios. It’s also a good idea to seek a second, or even third, opinion especially when it comes to highly speculative investments. This might include checking with an accountant who understands financial balance sheets and likely has no vested interest in the investment.
3. Recognize that fraud is a possibility. As with all investment opportunities, the possibility of fraud is real. Protect yourself by understanding the tactics a fraudster might use—and how to avoid them. As noted above, check out investment professionals using BrokerCheck and go to FINRA’s Funding Portals Web page. Under Regulation Crowdfunding, offerings must be conducted through a registered broker or funding portal. A basic Internet search is also valuable. Proceed with caution if you turn up legal or regulatory concerns about company officials, or news reports that raise other red flags.
4. Revisit your financial goals. Setting clear, prioritized goals—each with steps to achieve the goal, a price tag and a time frame—will help guide your investment approach, including whether crowdfunding offerings have a place in your portfolio. Basic strategies such as asset allocation and diversification can help manage risk and make sound investment decisions.What is EquityBender?
However, EquityBender does not (i) offer investment advice or recommendations; (ii) solicit purchases, sales or offers to buy the securities displayed on its platform; (iii) compensate employees, agents, or other persons for such solicitation or based on the sale of securities displayed or referenced on its platform; or (iv) hold, manage, possess, or handle investor funds or securities.
EquityBender does not verify all of the information provided by companies listed on the Funding Portal and makes no assurance as to the completeness or accuracy of any such information. Additional information about companies raising money on the Funding Portal is also available on the SEC’s EDGAR Database. Please review the Form C carefully for a full description of each company and its offering, prior to making any funding commitments.
EquityBender also provides its users with the ability to communicate directly with the company’s management and with others in our investor community to discuss the offering and raise any questions or issues. We encourage our members to interact with companies raising money on the portal and with other registered members.
If either your annual income or your net worth is less than $107,000, then during any 12-month period, you can invest up to the greater of either $2,200 or 5% of the lesser of your annual income or net worth.
If both your annual income and your net worth are equal to or more than $107,000, then during any 12-month period, you can invest up to 10% of annual income or net worth, whichever is lesser, but not to exceed $107,000.
The following table provides a few examples:
greater of $2,200 or 5% of $30,000 ($1,500)
greater of $2,200 or 5% of $80,000 ($4,000)
10% of $107,000 ($10,700)
10% of $200,000 ($20,000)
10% of $1.2 million ($120,000), subject to cap
While your individual circumstances will vary, the following table sets forth examples of calculations under the net worth test in order to determine crowdfunding investment limits:
So, you should pay careful attention emails and notices you received from EquityBender!
- to the company that issued the securities;
- to an accredited investor;
- to a family member;
- in connection with your death or divorce or other similar circumstance;
- to a trust controlled by you or a trust created for the benefit of a family member;
- as part of an offering registered with the SEC.
Therefore, if you have any need for liquidity (ability to sell your securities and use the money for something else) in the near future, you should not invest in crowdfund offerings. You are strongly advised to discuss with your financial advisor.
We also want to note that even after the restrict period ends and you have the right to sell your shares, there is no guarantee that a market will exist and anyone will want to acquire your shares.
Although the offering documents (Form C) are filed with the SEC, neither the SEC nor any other federal or state securities commission or regulatory authority has recommended or approved any investment or the accuracy or completeness of any due diligence or the information or materials provided through EquityBender. Investors must be able to afford the loss of their entire investment without a change in their lifestyle.
Before investing, you are strongly advised to review the following additional resources to learn more about risks:
Following completion of an offering conducted through EquityBender, there may or may not be any ongoing relationship between the issuer and the portal. In addition, under certain circumstances an issuer may cease to publish annual reports and, therefore, an investor may not continually have current financial information about the issuer. In some circumstances issuers are permitted by rule to cease filing annual reports, other issuers may completely fail in their obligation to do so.
SAFE = Simple Agreement for Future Equity
A SAFE agreement or "Crowd Safe" is an investment contract between an investor and a start up company; the instrument promises the possibility of a future equity stake, if certain trigger events occur. There is no guarantee that these triggering events will occur. Each company can customize their Safe, therefore terms may vary.
Expanding on the industry standard
The Crowd Safe was created and open-sourced by Republic and is an equity crowdfunding- specific version a SAFE (a financial instrument widely used by angels and VCs investing in startups).
What do I get in return for my Crowd Safe investment?
When you invest with a Crowd Safe, you become an investor, but not an actual shareholder of stock, unless the company elects to convert the Safe into company stock. Since there is a fixed conversion price, you will always receive the same economic outcome (regardless of whether the company elects to convert) if and when there is a liquidity event.
Please note that under the Crowd Safe, an Equity Financing is not a liquidity event, in this case the company can choose to extend the term of the Crowd Safe or convert investors to Shadow Shares.
The company may also choose to include a “valuation cap” or “discount” (or both) in the Safe.
A valuation cap specifies the maximum valuation an investor will convert their investment into shares. At a financing event (specified in the Safe), investors will convert at the lower of the valuation cap or the price in the subsequent financing.
A discount provision gives an investor a discount to the valuation in a future round of financing; the investor will convert their investment into shares (or cash) at the discounted valuation.
When will I earn a return on my investment?
You will not receive a cash or stock return on your investment unless one of the events specified in the Safe offering documents occurs. Generally, you will be waiting for the company to either (a) go public or (b) get acquired by another company. It is important to understand that these securities are not easily traded or sold.
In the event of a subsequent equity financing, the company may elect to “Roll-over” Safe holders and continue the terms of the Safe, or to convert the investment into preferred stock.
If there is a liquidity event during the term of the Safe, you may elect to have your cash returned or to convert the Safe into company stock based on the purchase price and fair market value of the shares.
Please note that there is no guarantee that any of these events occurs; if no subsequent Equity Financing or Liquidity Event occurs, the Crowd Safe will not convert and therefore produce no return. Source: Republic