I'm New To Investing In Startups, any tips?
Startup investing is not for everyone.
Investing in startups can be lucrative and exciting, but it’s important to understand that it comes with some risks. Keep in mind, majority of startups fail because entrepreneurs are testing their ideas to find traction and eventually make profits.
Never invest more than you can afford to lose.
Startups are only a good investment if you are prepared to lose 100% of what you are investing.
Startups are highly illiquid.
When you invest in a startup, you should expect that your money will be tied up for at least three to five years, if not more. “Although you can have the opportunity to liquidate through secondaries, it’s not a guarantee, and your investment will likely take years to mature and materialize
It takes time to see results.
Even if a startup succeeds, it still could take years before there’s a result from your investment.
Only invest small amounts.
Investing in startups should be a small percentage in your portfolio.
Invest in what you understand.
Investing in companies and/or sectors you are familiar with and understand is one of the keys to success.
Research, Research and Research!
The great thing about our platform is we help contribute to your research by providing you with information on the companies or real estate opportunities that can be part of your due diligence process. Make sure you take advantage of the Q&A tab in the campaigns to ask the founders/developers questions and don't be scared to make friends with others who are considering or have invested in a campaign your interested in.
Never put all your eggs in one basket. It's best to spread your investments across multiple deals and not just one.
Disclosure: These are just tips, not investment *Recommendations* nor *Advice* and you should make your own decisions when deciding what to invest in.
What Is The Minimum I Can Invest?
Companies are allowed to set their own minimum for investments, however, the minimum investment Crowd WallStreet platform allows is $100.
Who Can Invest On Crowd WallStreet?
- Retail Investors
Venture Capital Firms
What Type Of Companies Are On Crowd WallStreet?
In Simple terms, companies that just make sense. The purpose behind Crowd WallStreet is to give miniority companies. Some of the industries we allow are:
Is Crowd WallStreet A Registered Funding Portal?
Is Crowd WallStreet A Broker-Dealer?
Is Crowd WallStreet An Investment Advisory Firm?
Where Does My Investment Go?
Your investments are transferred to an escrow account, in custody of North Capital. If the company fundraise succeeds, your money will be released to the company. If not successful, it will be refunded to you.
Due to regulation, Crowd WallStreet is prohibited by law from touching or managing your investment.
How Much Can I Invest?
First you must understand whether you qualify as an accredited investor or not (retail investor).
If you are an accredited investor, there are no investment limits for investing in Reg CF campaigns.
If you are a non-accredited investor, your investment limits for Reg CF campaigns depend primarily on your annual income level and net worth. (Learn More)
Reg A+ offering, there are no limits to how much accredited investors can invest in these offerings, while non-accredited investors can invest up to 10% of their net worth or annual income per offering, whichever is greater.
Failure to provide true and correct information regarding your income, net worth, or previous investments may result in your investment commitments being cancelled and your account frozen.
Do You Recommend Companies To Invest In?
It’s illegal for Crowd WallStreet to endorse or recommend any company.
Just because we accept a company to raise capital on our platform does not mean we endorse the company.
We conduct our due diligence on companies for fact-checks to make sure the information provided is true, legal and make sense to help protect our investors and the integrity our company.
Can I Write A Check?
All investments must be facilitated online through the Crowd WallStreet Regulated Securities Portal.
Can I Self-Certify Myself As Accredited Investor?
As a Accredited Investor there is no investment limit.
Once you have self-certified yourself as an accredited investor on our platform, you are able to invest without limits.
Keep in mind, your self-certification may be randomly selected for audit or questioned, so make sure you are truthful, providing a false representation is a violation of our terms of service and can result in your account being suspended.
How Much Can I Invest In A REG CF As A Non-Accredited Investor?
The amount you can invest during any 12 month period depends on your annual income level and net worth. As a non-accredited investor, you can invest the greater of
Remember this limit applies across all Reg CF deals, so if you invest in Reg CF deals on other platforms, you will need to disclose this too (and keep the disclosure updated) so we properly track your limit.
If your annual income or net worth is less than $107,000, you can invest 5% of the greater of your annual income or net worth; or
If both your income and net worth are equal to or more than $107,000, you can invest 10% of the greater of your annual income or net worth, not to exceed an amount of $107,000.
Does It Cost To Invest With Crowd WallStreet?
The short answer is no. It is free to create an account on Crowd WallStreet and Invest. We make our money by charging fees to the company raising money. However, companies can opt to offset those costs by having investors pay a percentage of the processing fee.
If you are paying via a wire transfer, there may be additional fees charged by your bank related to the transfer of funds, make sure you speak with your bank and ask them about their wire transfer fees before investing.
Why do you require my social security number for some investments?
We understand your concern regarding the security and protection of your Social Security Number. We ask for your SSN due to anti-money laundering regulations and fraud checks.
Our applications communicate with our servers using Transport Layer Security (TLS) protocol issued by DigiCert.
When Will I Receive My Shares?
At the close of an offering, all investors whose funds have been “cleared” will be included in the disbursement. You will receive an email from Crowd WallStreet with your Subscription Agreement, which will serve as your proof of purchase moving forward.
What Is A Common Share?
Common stock is a type of security that represents ownership of equity in a company. In exchange for your investment, you can receive common stock.
The percentage of your ownership is proportional to the number of common shares you own.
Unlike investing in public companies, equity crowdfunding investors that receive common stock often don’t get voting rights.
What Is A Preferred Share?
Preferred stocks are like stocks and bonds mix. Preferred stocks comes with some preferences. Holders of preferred stock are prioritized over holders of common stock in dividend payments. They offer limited or no voting rights for investors.
What Are SAFE's?
The acronym stands for Simple Agreement for Future Equity.
SAFEs are not common stock.
Unlike common stocks, SAFEs do not represent a current equity stake in the company in which you are investing. The terms of the SAFE have to be met for you to receive any shares in the company.
What Are Converitable Notes?
Hence the name, a convertible note is a type of debt that converts to equity after a conversion event triggers. This usually happens when a startup raises it's next fundraising round.
What Are Debt Investments?
Debt offerings are structured to pay interest as well as principal back to investors when the maturity date is reached. The investment of debt investors is secured by the company’s property or by promissory notes held by the company.
What Is Revenue Share?
Revenue share, also known as profit share, is a debt security (loan) fundraising instrument that provides lenders recurring payments based on the company’s financial results.
Companies can offer a set percentage of sales revenue or a percentage of a defined net profit from their business and pay it to the lenders (investors) on a quarterly or annual basis as a form of interest payment on the loan.
What Are Membership Units
Membership units are membership interests issued to an entity or a person that invested in an Limited Liability Company (LLC). Membership unit holders which are called "members" are entitled to a share of the company’s net annual income and have the right to vote on important decsions.
Where Can I Review A Company Financials?
You can review a company financials on their campaign page for both Regulation Crowdfunding and Regulation A+ offerings. You can find this information under the “Documents” tab.
Companies that are currently Testing the Waters are not required to display their finances until they go into "live" mode. If you have questions for a company, feel free to submit a question in the “Q&A” tab of their campaign page, and they will respond to you directly.
What If A Company I Invested In Does Not Reach Their Minimum Goal?
If a company you invested in does not reach their minimum funding goal, all funds will be returned to you within 10 business days after the closing of their offering.
What is a custodial account?
A custodial account, also known as a "Escrow Account/Escrow Agent" is a bank account that can be used to hold your investments. Custodial accounts are not managed or held by Crowd WallStreet; instead, our escrow agent North Capital manages them.
Custodial accounts are safe and secures your investments making sure no one can access your investment without your consent.
How Am I Taxed On My Investments?
Crowd WallStreet does not provide any guidance as to how such instruments may be taxed generally or how a specific investor purchasing these instruments would be taxed, and encourage you to discuss any tax questions with your tax, legal, accounting, and other financial advisers.
Keep in mind, most investments in seed-stage and early-stage companies can result in losses for the investor, so tax losses may be expected on your investment.
Can I Sell My Shares?
Investors are generally restricted from reselling shares for a one-year period after they were issued, unless the shares are transferred:
You will be introduced to the company’s transfer agent, which handles the company cap table management. They are responsible for the transfer of your shares after the close of the offering.
to the company that issued the securities;
to an accredited investor
to a family member (defined as a child, stepchild, grandchild, parent, stepparent, grandparent, spouse or spousal equivalent, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships.);
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.
Can I Get A Refund
You can cancel your investment anytime up to 48 hours before the fundraise is close.
You will receive a five day notice via e-mail when a company fundraise is about to close. You can cancel at any point up until you hit the 48 hour window.
If the company you invested in is doing a "rolling close", any investment prior to the close will be transferred to the company. However, the fundraise will still be open to receive new investments. You will still receive a five day notice if this occurs.
How Would I Receive My Refund?
When you cancel your investment or a company is unsuccesful meeting their target, a refund will automatically be sent back to the bank account or credit card that was used to make the investment.
All refunds will be completed by bank transfer or wire transfer.
How Long Will The Refund Take?
Although we will inatiate the refund immediately, it may take a few weeks before it shows up in your account.
What's The Cons Of Investing In Startups?
Valuations can be Misstated.
Many startups believe that the company is worth more than its real value. Companies that believe that their value is much higher than it truly is will expect a higher investment percentage of the company.
The lack of experience from founder/team.
The success of a startup partially depends on how hard the Founder(s)/Team behind the idea is willing to work and know what they are doing.
Your ability to resell your investment in the first year will be restricted with some exceptions. Except to the issuer, an accredited investor, a family member, or their trust.
Early-stage companies may only provide limited information about its business plan and operations because it is still developing its operations.
Can My Equity Ownership be diluted?
Since equity crowdfunding offers new shares, the stake of current shareholders will be diluted when companies raise additional capital from new investors. However, dilution is not always a bad thing. It is possible that additional investments can increase the value of your investment than to decrease it.
As long as the value of the company increases with each funding round, this is a good sign.
What Type of Real Estate Projects Can I Invest In?
Retail, medical offices, multi-family, industrial and self-storage.
How Are Investments Structured?
You will be investing in a Limited Liability Company (“LLC”) established by the Sponsor in which you will own shares in.
That LLC will then invest into an LLC that owns the real property.
Would I Recieve Distributions?
No distributions are guaranteed.
Typically, investors will receive Quarterly distributions. It is important to review the distribution schedule for each investment before making an investment.