Startup Fundraising And Investing
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SeedInvest Basics

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What is SeedInvest?

Last modified 8 months ago by Ryan Feit

SeedInvest is a technology platform that enables equity-based accredited investor crowdfunding. SeedInvest was founded by professional investors involved in the passage of the 2012 Jobs Act.

What is an accredited investor?

Last modified 8 months ago by Ryan Feit

Investments are only available to accredited investors at this time. In order to view and invest in any of the companies listed on the site, each user must identify specific information about themselves and specify which of the accredited investor requirements he/she meets. When making an investment, each investor must again represent and warrant that they are an accredited investor. Accredited investors must meet one of the following requirements:

  • Have individual net worth, or joint net worth with your spouse, exceeding $1 million
  • Have income exceeding $200,000 in each of the past 2 years and expect the same this year
  • Have income (with your spouse) exceeding $300,000 in each of the past 2 years and expect the same this year
  • Invest on behalf of a VC firm or other registered investment company
  • Invest on behalf of a business with $5 million in assets or in which all the equity owners are accredited

For additional information on accredited investors, please visit our Terms of Use.

How does it work?

Last modified 8 months ago by Ryan Feit

For Investors:

  • SeedInvest does not charge investors to use its site
  • Easily view and gain access to investment opportunities
  • Seamlessly make an investment with just a few clicks
  • Use automated accredited investor verification tools, designed to maintain your privacy
  • Complete a streamlined due diligence process using proprietary online tools
  • Collaborate and partner with other investors on the platform
  • Easily track and manage your assets through the investment dashboard

For Companies:

  • Simplify and speed up your fundraising process
  • Promote your company broadly through fully-integrated social media & advertising tools
  • Access a network of accredited investors from around the world
  • Hold virtual due diligence sessions and board meetings from your desk
  • Streamline due diligence, execution of legal documents, and processing investments for quicker and easier closings
  • Efficiently manage and interact with your shareholders through our Virtual Boardroom

How does the JOBS Act impact fundraising?

Last modified 8 months ago by Ryan Feit

Currently we are focused on accredited investors only and all offerings are permitted through an existing exemption, Rule 506 of Regulation D. Companies have been raising capital through this exemption for years and are permitted to do so independent of the new rules outlined in Titles II and III of the JOBS Act.

On September 23, Title II of the JOBS Act will kick in and will, for the first time, empower companies to utilize the full power of the Internet and social media to raise capital. Companies will be able to generally solicit (advertise) to investors through social media, online advertising, the press, and any other medium. SeedInvest built its platform based on these sweeping changes in securities laws to make fundraising simpler for entrepreneurs. Companies will still only be able to raise capital from accredited investors.

In 2014, Title III of the JOBS Act will kick in. At that point, entrepreneurs will be able to raise capital on SeedInvest from non-accredited investors as well (the 98% of America that cannot currently invest in private businesses).

What type of companies are featured on SeedInvest?

Last modified 8 months ago by Ryan Feit

Regardless of the scope of your endeavor, our expectation is that you have dedicated the time and effort to researching, validating and executing your ideas. Investors on SeedInvest are typically not interested in financing ideas or projects, but in companies and businesses. Therefore, we recommend that companies meet the following minimum requirements:

  • At least a minimum viable product or prototype
  • Some proof of concept (includes customer traction or partnerships)
  • At least two full-time team members
  • A business which has already been incorporated in the United States

There is no typical company on SeedInvest but companies which have been successful thus far have shared the following characteristics:

  • Technology and consumer-facing businesses
  • Startups raising between $100,000 - $1,500,000 in aggregate (including offline)
  • Companies looking to raise Seed Rounds, Series A Rounds and Bridge Rounds
  • Companies which already have initial funding traction and terms

When do companies receive investments?

Last modified 8 months ago by Ryan Feit

In order to protect investors, SeedInvest requires companies to reach a minimum funding target in order to have a successful fundraise. Therefore, investments are not final until the company raises enough money to meet its funding target. When investments are initiated, the money is held securely in an independent escrow account. Once the funding target has been met, the money will be released to the company and investors become shareholders. If the funding target is not met, investments will be returned promptly by the escrow agent. Neither SeedInvest nor North Capital ever receives or holds any investor funds during the process. 

The amount you are investing will be released to the issuer once the issuer reaches its minimum investment target. If the issuer does not reach its target, your investment will be promptly returned to you.

How much does it cost for companies to use SeedInvest?

Last modified last month by Ryan Feit

There is no charge to be listed on SeedInvest or to utilize our basic feature set:

Basic Package (FREE):

  • Be published as a Prospect on the portal
  • Build and track investor interest through advanced tracking features
  • Manage file sharing with a customizable, state-of-the-art data room
  • Host live, online video due diligence sessions with potential investors
  • Spread the word with social sharing and online advertising toolkit
  • Get listed for a rapidly growing network of accredited investors

Advanced Package ($250/month):

  • Launch your Fundraise on the portal
  • Connect with our accredited investor network about your company
  • Leverage our patent-pending online accreditation verification tools
  • Automate compliance with new, pending Regulation D requirements
  • Accept online investments (investors execute legal documents and fund investments)

If your raise is successful, we will pass along our direct costs for setting up a third-party escrow account. In addition, if you elect to have all investments pooled into a fund, we will also pass along our direct costs for setting up the fund. If your raise is successful, you will have the option of subscribing to our ongoing package:

Ongoing Package ($150/month):

  • Streamline reporting to shareholders through Virtual Boardroom
  • Manage shareholders through our online shareholder interaction suite
  • Automate LLC compliance (pooled deals only)

Companies who raise funds on SeedInvest through our partner broker-dealer, North Capital Private Securities Corporation, will pay a small commission to North Capital if their investment round successfully closes.

For Investors

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Who can be an investor? Am I eligible to invest on SeedInvest?

Last modified 8 months ago by Ryan Feit

Currently only accredited investors can access offerings on SeedInvest and make investments. However, in 2014, Title III of the JOBS Act will kick in. At that point, entrepreneurs will be able to raise capital on SeedInvest from non-accredited investors as well (the 98% of America that cannot currently invest in private businesses).

When will I get my investment back?

Last modified 8 months ago by Ryan Feit

The companies listed on SeedInvest are typically privately held companies and their shares are not traded on a public stock exchange. As a result, the shares cannot be easily traded or sold. As an investor in a private company, you typically receive a return on your investment under the following two scenarios:

  • The company gets acquired by another company
  • The company goes public (undergoes an initial public offering on the NASDAQ, NYSE, or another exchange)

In those instances, you receive your pro-rata share of the distributions that occur. It can take 3 - 5 years (or longer) to see a distribution as it takes years to build companies - and in many cases, there will not be any distribution as a result of failure.

What do I need to know about early-stage investing? Are these investments risky?

Last modified 8 months ago by Ryan Feit

Companies on SeedInvest are high-risk opportunities and may not retain their value. Investing in startups and small businesses is inherently risky and standard company risk factors such as execution and strategy risk are often magnified at the early stages of a company. In the event that a company goes out of business, your ownership interest could lose all value. Furthermore, private investments in startup companies are illiquid instruments that typically take between three and seven years (if ever) before exit.

While there are no guarantees that this strategy will reduce your risk, most investors choose to mitigate risk by practicing portfolio diversification. Investing smaller amounts across a large number of opportunities is good practice in the private markets just as it is in the public markets and is a great investor benefit facilitated by the JOBS Act.

For additional information on risk regarding early-stage investing, please visit our General Risk Factors page.

How does a convertible note work?

Last modified 8 months ago by Ryan Feit

A convertible promissory note is a debt instrument that is often used for angel investing. Convertible notes typically convert into equity of the issuing company if the company reaches certain milestones. Typically the convertible note issued by the company will convert to equity upon the company completing a Series A round in the future. Key terms:

  • Conversion Discount - Grants initial investors the right to convert the amount of the loan, plus interest, at a reduced price (discount %) to the purchase price paid by the Series A investors.
  • Interest Rate - Interest accrues and the total amount of interest is added to the loan amount and converted into shares of preferred stock upon the closing of the Series A round.
  • Valuation Cap - ceiling on the valuation determine the conversion price of the note. For example, if the cap is $5 million, and the next qualified equity round of the company values the company at $10 million, then the note will be converted at a $5 million valuation (or a 50% discount to the subsequent round).
  • Note Term - Maturity date in which the company must either repay the note or trigger conversion by completing a Series A round.

If you have any questions about how convertible notes work, please contact us and we can explain this in more detail.

Can I fund a company anonymously?

Last modified 8 months ago by Ryan Feit

Yes. We allow investors on our platform to choose to not publicly disclose their investments. Non-disclosed investments will be shown only in the investor’s personal workspace and highlighted in red on their profile page when logged in.

How do I know if the team members are who they claim to be?

Last modified 8 months ago by Ryan Feit

The identities of the founding team members are all verified through a third-party service and we mandate that each company provide their articles of incorporation (or similar documentation) to the data room for your review. Each investor, however, is ultimately responsible to conduct due diligence independently and should only make investments which fall in their comfort zone.

What is an Accredited Investor?

Last modified 8 months ago by Ryan Feit

Investments are only available to accredited investors at this time. In order to view and invest in any of the companies listed on the site, each user must identify specific information about themselves and specify which of the accredited investor requirements he/she meets. When making an investment, each investor must again represent and warrant that they are an accredited investor. Accredited investors must meet one of the following requirements:

  • Have individual net worth, or joint net worth with your spouse, exceeding $1 million
  • Have income exceeding $200,000 in each of the past 2 years and expect the same this year
  • Invest on behalf of a VC firm or other registered investment company
  • Invest on behalf of a business with $5 million in assets or in which all the equity owners are accredited

For additional information on accredited investors, please visit our Terms of Use.

How does the investment process work? How do I transfer funds for an investment?

Last modified 8 months ago by Ryan Feit

The investment process may be slightly different for each investor depending on their personal investing prferences, but generally can be described as follows:

  1. Investors must first create an account and register as an accredited investor
  2. Once you find a potential investment opportunity, you should review the terms of the investment (this information can be found in the respective company’s dataroom in the Funding folder); you will have an opportunity to review the investment documents again during the funding process
  3. Once comfortable with the investment terms, you can invest by clicking on the Invest button located on the company profile page or the browse company page
  4. This will initiate the funding process under which you will be asked to:
    1. Enter your investment amount
    2. Verify your identity and accreditation status
    3. Execute the required legal agreements
    4. Enter the account information of your funding account (checking or savings)
    5. Once you confirm your investment, the funds will be transferred to an escrow for holding until the fundraising round is closed

If you find that you are more comfortable walking through the investment with us over the phone, please contact us using the chat bar or at contactus@seedinvest.com and we can facilitate the transaction offline.

Once the fundraising round closes, you will receive confirmation of success and counter-signed legal agreements. In the case of an unsuccessful round or a canceled investment by yourself, the proposed transaction will be cancelled and the escrow agent will return the funds from the escrow back into your bank account.

Post funding, what interaction do investors have with companies?

Last modified 8 months ago by Ryan Feit

SeedInvest provides funded companies and their investors access to a Virtual Boardroom which provides companies an efficient way to manage investor relations and get the most value out of their investors. Companies independently determine the best way to keep their investors updated on the progress of their company. We encourage all companies who use SeedInvest to provide at least annual financial reports and quarterly investor updates to their shareholders.

We also encourage companies to interact with their investors frequently so they can also benefit from leveraging their investors. A diverse investor group can provide more than just capital. Investors may prove to be valuable brand ambassadors and also offer strategic guidance and connections.

When do companies receive investments?

Last modified 8 months ago by Ryan Feit

Investments are released on a rolling basis; there is no minimum fundraising target or escrow goal. SeedInvest never receives or holds any investor funds during the process. 

How do I contact the company for diligence and general communication?

Last modified 8 months ago by Ryan Feit

We encourage investors to ask diligence questions on the moderated discussion board so that the company and other investors on SeedInvest can leverage community content. In the event that investors wish to have an individual or private conversation with the founders of a company, they may directly message the company by visiting the company’s profile page. Through the events page, investors may also participate in live video diligence sessions with the company as well as stay up to date with product demos, conference calls, or other events scheduled by the company.

As companies have limited human resources and time, we ask that potential investors thoroughly browse through the dataroom and discussion board prior to asking their diligence questions so that companies can focus on building a business. We ask and require that companies provide extensive information and build out complete profiles to front-load the fundraising time commitment.

For Entrepreneurs

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What are the requirements to become a prospect on SeedInvest?

Last modified 8 months ago by Ryan Feit

Prior to requesting approval to publish, we require companies to complete the following:

  • Meet General Business Requirements:
    • Stage: Demonstrate you have at least a minimum viable product or prototype.
    • Team: Have at least two full-time team members.
    • Incorporation: Must have been already incorporated in the United States.
  • Complete Company Overview:
    • The "Company Overview" section should provide a brief summary of the company’s strategy, traction, and milestones.
    • In addition to team members, we recommend that companies add their advisors, prior investors, any incubators they were part of, and legal counsel to help potential investors feel additional comfort with investment in your company.
  • Add Overview Presentation:
    • This is the most common medium by which investors conduct initial diligence and is the most important document upfront.
  • Enter Round Details:
    • This section explains the expected terms of your offering to potential investors.  Whether you are offering preferred stock or a convertible note, it is essential that you lay out your ask up-front.

We also highly recommend that you add a company video. This is your chance to show your passion, drive and motivation. A great company video will explain the company strategy and product, while giving potential investors insight into the team's personality.

Companies are also encouraged to add any other documents or files that are helpful in providing potential investors with sufficient information for a first round of diligence.

Once these requirements are fulfilled, you may submit your company for approval to publish. The SeedInvest team will review your materials and contact you with a notification of approval or follow-up items that may need to be completed prior to publishing.

What documents are necessary for a company to raise money?

Last modified 8 months ago by Ryan Feit

Under the Rule 506 exemption of Regulation D it is not necessary to present a traditional private placement memorandum. You should consult your own legal counsel, but at a minimum, key documents typically include a comprehensive investor presentation and the appropriate legal documents. These documents should be generated by the company and its counsel.

How do I add my company to SeedInvest?

Last modified 8 months ago by Ryan Feit

Founding team members are required to create a personal account on SeedInvest. Once you are signed up and logged in, you can add your company via the "Add a Company" link under your settings drop-down menu (the arrow to the right of your name in the main navigation bar).

Once you set up your company profile, you can begin generating a following and garner interest after completing the minimum requirements to publish.

Will my company's information remain confidential?

Last modified 8 months ago by Ryan Feit

Information on your company overview pages is available to the public. By design, we encourage social and public consumption of your company's content. However, both from prior experiences as investors and entrepreneurs ourselves, we understand the importance of securing sensitive information and provide companies with a data room to securely share sensitive content with potential investors.

How is the valuation of my fundraising round determined?

Last modified 8 months ago by Ryan Feit

A company will typically join SeedInvest and launch a fundraising round with a valuation target in mind. Oftentimes, a company will launch a fundraising round on SeedInvest with pre-existing offline traction. The terms established with offline investors, who are often professional angels or venture capitalists, typically serve as the basis of the valuation and terms extended to online investors on SeedInvest.

Are there limits on the number of investors?

Last modified 8 months ago by Ryan Feit

Yes, there are investor limits. The JOBS Act increased the shareholder limit before public filing requirements kick in to 2,000 accredited investors or 500 unaccredited investors. Companies can effectively limit the number of investors by setting investment minimums and/or creating pooled investment vehicles.

Our company doesn't have a video. What should we do?

Last modified 8 months ago by Ryan Feit

You should create one - even if it is a simple 1-2 minute homemade video of the founders discussing the business. Early-stage investing is a very personal endeavor and evaluation of the management team is a key cornerstone of due diligence executed by any investor.

How long does it take to raise money?

Last modified 8 months ago by Ryan Feit

It depends on the company and not all companies succeed in raising capital. The time it takes to complete a successful financing can vary widely but companies should expect that it will take 60 to 90 days to complete.

Can I tell people about my listing on SeedInvest?

Last modified 8 months ago by Ryan Feit

Under current regulations, you can only let people know about your fundraise if they are accredited investors that you know. You currently cannot make a general solicitation (publicly advertise your fundraise). This includes sending out mass emails and using social media to publicize your fundraise (Facebook, LinkedIn, Twitter, etc.). You should consult your own legal counsel regarding these limitations. For more information, please refer above to “How Does The JOBS Act Impact Fundraising?”

What are the requirements to launch a fundraising round for my company?

Last modified 8 months ago by Ryan Feit

Prior to requesting approval to launch its fundraising round, we require companies to complete the following:

  • Get Published:
    • Get published as a prospect on SeedInvest (see requirements above).
  • Show Fundraising Traction:
    • Offline Traction: Raise or obtain commitments for 20% of your round size from bona-fide vcs/angels offline
    • Online Traction: Obtain bona-fide indications of interest for 20% of your round size from investors on SeedInvest.
      • Note: we will likely need to confirm traction directly with both offline and online investors.
  • Verify Yourself:
    • Verify your company’s legal entity and all members of the founding team. We process an identity check with third party partners through a secure process.
  • Populate the Data Room:
    • Investor presentation.
    • Financial model summary.
      • Historical financials (if applicable).
      • Annual P&L projections for the next 3+ years.
      • Cash flow projections for the next 12 months.
      • Projected uses of cash raised.
    • Most recent capitalization table, on a fully diluted basis.
    • Articles of incorporation or certificate of incorporation.
  • Upload Investment Documents:
    • Term sheet.
    • All financing documents and agreements (e.g., convertible note, purchase agreement, subscription agreement).
  • Connect Bank Account:
    • Link your company’s bank account so our third-party escrow provider knows where to deposit funds upon a successful fundraise.
  • Sign Agreements with SeedInvest:
    • Formalize our working relationship and sign-up for the Advance Package if you haven’t already.

What happens if my round is oversubscribed?

Last modified 8 months ago by Ryan Feit

In the event that the target amount is met or exceeded in investor commitments, other investors will still be able to commit capital to your round. However, it is at the discretion of you and the company’s board to approve oversubscription at round closing.

What is the data room?

Last modified 8 months ago by Ryan Feit

The dataroom is a permissions-based file management system that allows companies on SeedInvest to manage the uploading and sharing of fundraising files and documents.