1. The engagement letter refers to a legal agreement between the issuer and the crowdfunding platform / broker dealer that outlines the terms and conditions of the arrangement.

On SeedInvest

Unfortunately, we cannot negotiate or accommodate changes to the Issuer Agreement as such deal-by-deal negotiation would make our business model unworkable. This Agreement has been accepted by many prominent startup law firms and we’ve worked hard to ensure it is balanced and attentive to the needs of all parties.

1. Due diligence is an investigation into a business for the purpose of being able to make an informed investment decision.

On SeedInvest

• For offerings under both Regulation A+ and D, SI Securities conducts both business due diligence to comply with regulatory requirements and to fulfill our duty to our platform members. You should expect several requests for information to assist us in conducting our due diligence.
• Legal and confirmatory due diligence is conducted via a third party, Crowdcheck, and sometimes results in a Foundation Report that is viewable to investors on SeedInvest. Foundation Reports are only generated for companies raising under Regulation D. Companies raising under Regulation CF or Regulation A+ will instead have either a Form C or Offering Circular, respectively.
• If a due diligence report has already been prepared and is available from a third party (i.e., angel group, VC firm), please provide a copy to facilitate our diligence process.
• Failure to complete questionnaires truthfully and accurately, omitting a material fact, or failing to cooperate during our due diligence may result in termination of the offering and will, at the minimum, significantly delay the process.
• Background checks and other routine reviews may be conducted by other independent third parties contracted by SeedInvest. If any questionnaires have been completed, it would be helpful if you could share them with us as soon as possible. A copy will be provided to you at the time of onboarding.

1. A company profile refers to the online web page that describes your company and your raise to potential investors.

On SeedInvest

Your company profile is prepared by you, the Issuer. Our Operations Analyst will conduct a “fact check” on your company profile and investor deck for compliance. To protect everyone involved in the fundraising process, we need to be very careful about what statements we present in any “Communications with the Public”. Please review the profile regularly to ensure that the information meets your expectations and that there are no false, misleading, exaggerated, unsubstantiated statements, or material omissions.

1. A Special Purpose Vehicle (SPV) can be used as a funding structure, by which all investors (or investors under a given investment threshold) are pooled together into a single entity.
2. Note that currently only Regulation D raises can utilize SPVs. You cannot use a SPV for Regulation CF or Regulation A+ raises.
3. For more information about utilizing a SPV for your raise, read the guide to a Special Purpose Vehicle.

On SeedInvest

We can facilitate the creation of a special purpose investment vehicle (a.k.a. SPV) to pool investors into a single entity for Regulation D raises. This has the benefits of limiting the number of shareholders in your company’s cap table and streamlining ongoing reporting. Costs are $2,000-3,000 upfront to set-up the fund and $150/month for the life of the fund to maintain it. SeedInvest does not have a preference as to whether your company uses an SPV for its raise. We view the decision to use or not use an SPV or not in your raise as a business decision that you should make based on your circumstances. You may wish to consult with your lawyer to determine which route would work best for you.

1. Offering Documents are documents prepared by the issuer’s attorney and have detailed information and disclosures about the terms under which the offering is being conducted. Typically, this would consist of, at a minimum, a note purchase agreement and convertible promissory note if the issuer is doing a debt offering, or a subscription/stock purchase agreement if the issuer is raising equity.

On SeedInvest

SeedInvest has adopted the 500 Startups KISS (Debt) for Convertible Notes and the Series Seed Documents for Equity. If these forms are used with only minimal alteration, then we can waive our legal review fees to review the offering documents (typically $500 – $1,500) and expedite the onboarding process. If you insist on using your own documents, please ensure the following:

• No broker-fee prohibition (ensure proper disclosure).
• A special purpose vehicle should not be prohibited – typically such a prohibition would be found in the accredited investor representations and warranties (“formed solely for the purpose of this offering” language), if applicable.
• The transaction documents match the terms stated on your company Profile.

1. Rule 506 of Regulation D is considered a “safe harbor” for the private offering exemption of Section 4(a)(2) of the Securities Act. Companies relying on the Rule 506 exemption can raise an unlimited amount of money. There are actually two distinct exemptions that fall under Rule 506.
2. Under Rule 506(b), a company raise is subject to the following rules:
• The company cannot use general solicitation or advertising to market the securities;
• The company may sell its securities to an unlimited number of “accredited investors” and up to 35 other purchases.

On SeedInvest

If an offering is to be conducted pursuant to an exemption under Rule 506(b) of Regulation D:

• Your company’s information will be available only to those users who are logged in and have indicated that they are accredited investors via self-certification.
• Emails with company information may be distributed to such accredited investors.
• Please confirm that company has NOT conducted any general solicitation, including via other online platforms.

For more information about the different types of raises on SeedInvest, read the guide to Choosing an Offering Type.

1. Rule 506 of Regulation D is considered a “safe harbor” for the private offering exemption of Section 4(a)(2) of the Securities Act. Companies relying on the Rule 506 exemption can raise an unlimited amount of money. There are actually two distinct exemptions that fall under Rule 506.
2. Unlike Rule 506(b), under Rule 506(c), a company raise is allowed to generally solicit, but the company must verify each investor’s status as an accredited investor prior closing and accepting funds.

On SeedInvest

If an offering is to be conducted pursuant to an exemption under Rule 506(c) of Regulation D:

• Your company will have a publicly viewable profile, but only logged in accredited investors will be able to request access to your data room for sensitive information.
• Investors investing through the platform will have their status as an accredited investor verified by our broker dealer partner as part of the process.
• If you have existing offline investors in this round, we are happy to help with accredited investor verification for outside investors without charging fees on investors who are properly “carved out”.
• As part of the close, you will be able to rely on a “safe harbor” for accredited investor verification via a letter issued by our broker dealer partner.

For more information about the different types of raises on SeedInvest, read the guide to Choosing an Offering Type.

1. Your company’s information will be made publicly available on SeedInvest.
2. Regulation A+ is a type of offering which allows private companies to raise up to $50 Million from the public. This includes accredited and non-accredited investors alike.
3. Regulation A+ is one way for companies to convert their customers into investors in the company.
4. Companies looking to raise capital via Regulation A+ will first need to file with the SEC and get qualification before launching their offering. The costs associated with a Regulation A+ offering are much lower than a traditional IPO and the ongoing disclosure requirements are much less burdensome, effectively making a Regulation A+ offering a mini-IPO.

On SeedInvest

If an offering is to be conducted pursuant to an exemption under Regulation A+:

• Before committing to an offering under Regulation A+, companies are permitted to “test-the-waters” (TTW). This allows you to gauge the likely success of a potential offering and make an informed decision on whether or not to proceed with an offering. There is no cost to conduct a TTW campaign on SeedInvest.
• Once you decide to pursue a Regulation A+ offering, SeedInvest will work with you to manage the regulatory qualification process. This process involves drafting offering documents (the “Form 1-A” and “Offering Circular”) and receiving the go-ahead from the SEC.

For more information about Regulation A+ and how it works on SeedInvest, read How a Mini-IPO under Regulation A Works.

For more information about the different types of raises on SeedInvest, read the guide to Choosing an Offering Type.

1. Regulation CF is also known as “equity crowdfunding”
2. Like Regulation A+, Regulation CF is a type of offering which allows private companies to raise from the public and one way for companies to convert their customers into investors in the company.
3. Regulation CF allows private companies to raise up to $1 million from the public.
4. Companies looking to raise capital via Regulation CF will first need to file with the SEC, but the offering does not need to be qualified. The costs associated with a Regulation CF offering are much lower than a Regulation A+ offering and ongoing disclosure requirements are much less burdensome.

On SeedInvest

If an offering is to be conducted pursuant to an exemption under Regulation CF:

• Your company’s information will be made publicly available on SeedInvest and must occur entirely through SI Portal, an affiliated FINRA registered Crowdfunding Portal.
• There are no TTW provisions under Regulation CF
• All interaction with investors and investments must occur on the platform per regulations. There can be no exceptions to this and no offline investments can be accepted.
• SeedInvest will work with the company to file a “Form C” with the SEC, which is a condition to making a Regulation CF offering available to investors. It is important to note that the SEC does not review the Form C, and therefore is not recommending and/or approving any of the securities being offered.

For more information about Regulation CF and how it works on SeedInvest, read How a Mini-IPO under Regulation CF Works.
For more information about the different types of raises on SeedInvest, read the guide to Choosing an Offering Type.

1. An offline Investor refers to an investor who does not invest through the platform
2. There may be restrictions on offline investors we can accommodate
3. Due to regulatory restrictions, we cannot accommodate any offline investors for Regulation CF raises.

On SeedInvest

If an offering is to be conducted pursuant to an exemption under Regulation CF:

• If you are doing a Regulation D 506(c) raise, we are happy to help with accredited investor verification for outside investors without charging fees on investors who are properly “carved out”.
• Your company is strictly prohibited from accepting investments outside of the platform from investors referred to your company by us, without our consent. We have several important processes and compliance safeguards built into our online process. Circumventing these checks creates a great deal of risk for both you and SeedInvest.
• If you are doing a Regulation CF raise, all investments must be made online, no offline investments are possible due to regulatory restrictions.

1. All invested funds are held by an independent third party bank escrow until closing conditions have been met and a closing occurs.
2. If the escrow has a minimum target amount, all investor funds will be promptly returned if you do not successfully raise that amount within the specified timeframe.
3. An investor can revoke or cancel their investment for any reason and at any time before a closing occurs.

On SeedInvest

Please pay close attention to any minimum investment thresholds (if applicable) and the expiration date stated in the Escrow Agreement at the time of onboarding. If these conditions are not met, we are required to cancel the offering and promptly return all funds to investors.

1. Blue sky law is a state law designed to protect investors against fraudulent sales practices and activities.
2. Blue sky laws license brokerage firms, their brokers, and investor adviser representatives.
3. For more information about Blue Sky Filing, read the guide to an Special Purpose Vehicle.

On SeedInvest

Please ensure that Blue Sky filings have been made with respect to all prior securities sales and any prior closings related to the current offering.

1. Form D is a brief notice that includes basic information about your company and the offering, such as the names and addresses of your company’s executive officers, the size of the offering and the date of first sale.
2. Companies must file a Form D to use an offering exemption under Regulation D, and avoid having to register with SEC.
3. Companies that are not raising under Regulation D do not need to file Form Ds, instead they will be required to file a Form C (for those raising under Regulation CF) or an Offering Circular (for those raising under Regulation A+).

On SeedInvest

We’ll be checking that all Form D filings are up to date. Please ensure that Form D have been made with respect to all prior securities sales and any prior closings related to the current offering. Prior to any closing through us, we will ask you to confirm that the Form D filing will be made (if applicable).

1. Post-Closing refers to process after a company conducts a close on their investments.

On SeedInvest

• Issuer will need to provide copies of the filed Form D and Blue Sky filings immediately after closing to facilitate our FINRA Form 5123 filing.
• Issuer will need to provide a final set of transaction documents electronically within 2 weeks of closing.