The Basics
What is crowdfunding?
Crowdfunding typically refers to the use of the Internet to raise capital from a large number of investors. Under SEC rules (Title III of the JOBS Act), the general public may now participate in capital-raise campaigns by startups and other companies.
What is Nvsted?
Nvsted is a St. Louis-centric crowdfunding marketplace that brings innovators and capital resources together. Nvsted provides a platform for startups and other local businesses to reach both non-accredited and accredited investors for their fundraising needs. It’s a viable complement and/or alternative to capital-raise scenarios such as bootstrapping, friends & family, and angel investors with a hyper-local focus.
How is Nvsted different from other crowdfunding sites?
Nvsted is the only Regulation Crowdfunding marketplace with a hyper-local focus, where the investment impact will primarily resonate within the St. Louis and/or Missouri region.
Don’t confuse us with Kickstarter and other reward- or perk-based crowdfunding sites. Nvsted is a marketplace to offer real securities (debt or equity) to everyday investors wanting to get in on the action and support the small and early stage business communities with the added perk of a potential return.
Non-accredited vs. Accredited Investors?
The SEC defines an accredited investor as someone whose net worth is greater than $1 million (including spouse but excluding the value of his/her/their primary residence) and/or who earned more than $200,000 annually for the past two years (or more than $300,000 combined with a spouse. An individual that does not meet these thresholds is typically referred to as a “non-accredited” or “unaccredited” investor (i.e. most people).
Risks
Why invest in early stage companies?
Investing in startups and other early stage companies differs from investing in the stock market and is inherently risky as new companies are likely to fail. So why bother? Everyone has their own motivations for investing, but Nvsted is about supporting companies, individuals, and the vision they pursue. The mutual passion for a service, product, or mission brings investors and companies together to help make that vision a reality.
What type of investment is appropriate for me?
Deciding between an equity or debt investment is a question of how much risk and return you are willing to accept. To be clear, both methods are risky.
Equity Investments
Those who take the equity route understand they likely won’t see a return for many years. Taking a piece of an early stage company is an indication that you believe in its long-term success and want in from the start. Those unwilling to accept the risk of losing every dollar they invest, and/or expect a return within the first few years, should NOT pursue an equity investment.
In contrast to the stock market, investment outcomes with early stage companies are quite binary, meaning the company is generally a complete failure or complete success and equity in early stage companies is not easily resold in a secondary market.
Please note, any “SAFE” instrument being offered should be considered an equity-like investment. That said, SAFEs are relatively new and unique mechanisms that deserve their own detailed explanation of the purpose, risks, and return scenarios involved. You can view that here.
Debt Investments
In contrast to equity investments, loans are slightly less risky but also typically offer less of an ultimate upside return. Realizing return on debt kicks in sooner than equity, often within the first year or two through interest and/or principal payments. That said, it is important to understand that loans may not be paid back if the company fails. Further As a general rule, never invest more than you can afford to lose.
Is it risky?
Investing in startups and other early stage companies is inherently risky due to the uncertainty and volatility of their success. Generally, such companies are either highly successful or complete failures and yield drastic gains or total losses for investors. That’s not to say you can’t see modest results by a company and/or on your investment. Just be prepared for the extremes. Regardless, whether you are considering investing in debt or equity, Investors should not dedicate more than a small percentage of their portfolio to early stage companies & small business investing, nor should they allocate an amount that would negatively impact their lifestyle or retirement plans if the investment was lost.
How can I mitigate risk?
While investing in startups and other early stage companies is different than the public stock market, general investing principles still apply, namely the practice of diversification. Often stated and true, it’s highly risky to put all your eggs in one basket. Spreading investments across multiple industries and company stages could prove beneficial, but it does not assure profit, nor guarantee against investment loss. In general, it is important to focus on industries and areas you have expertise, or at least general knowledge in, and it helps if you already use or are familiar with the company’s product or service. That connection will aid you when performing your own due diligence on an investment opportunity.
How often should I invest?
This ultimately comes down to investor discretion. It is often advised to make small investments throughout the year rather than one large buy-in. Investors who practice this strategy generally set an annual total they wish to invest and then incrementally invest that amount each month or quarter through a diverse portfolio to help reduce risk. In theory, with smaller dollar amounts spread across multiple investments, which are also generally across various industries and company stages, one, or a few, drastic losses wouldn’t be a complete disaster for an investor’s "diversified" portfolio. However, nothing is guaranteed - diversifying does not assure profit, nor provide a guarantee against investment loss. As always, never invest more than you can afford to lose outright.
Can I easily re-sell my investment?
Investors in startups and other early stage companies should generally assume their investment is not re-sellable, as there is not a clear secondary market for private securities like there is for public securities through the New York Stock Exchange. Additionally, Regulation Crowdfunding prohibits the resale of those securities within the first year of investment, except to the issuer, an accredited investor, a family member or their trust. We suggest you do not bank on that possibility, and, again, assume you will hold these securities for the long-run.
Will future funding campaigns affect my ownership percentage?
Yes. As a early stage company grows, it will likely host multiple financing rounds which, if you’re an equity holder, will dilute your stake in the business. Don’t get too hung up on this though. If the value of the company increases, so will your investment. That said, nothing is guaranteed. Companies go through ups and downs, and may raise money at a lower valuation as well, or down round. This is not ideal and expedites dilution, but is often necessary to save the startup and preserve prior investment value.
Will my investment have voting rights?
This is ultimately determined by the company raising funds and the structure they decide to implement. Generally, most companies don’t offer voting rights with crowdfunded equity due to the many investors that come from this process. A company will not want to track down several hundred minority investors to execute on future fundraising rounds that are vital for its continued success. As such, most crowdfunding companies will be very appreciative of your monetary support, but you’ll have to let them run their business, which will be operated in favor of all.
How To Invest
Which companies should I fund?
The core function of the Nvsted platform is to connect entrepreneurs to investors, but also to allow companies to promote their vision and goals in a public, highly visible space. The crowdfunding company must create a profile and communicate their message in a way that resonates with investors. From the investor’s standpoint, it is for them to decide which companies appeal to them the most. The Nvsted team does not have the authority to advise on investing practices or portfolio strategy. It is the responsibility of the investor to conduct their own due diligence before investing.
How should I conduct due diligence?
The investor is responsible for conducting due diligence. Investors are advised to review company offerings in full, including their formal filings (Form C) to the SEC, and ask the respective crowdfunding company detailed questions before investing. Working with other prospective investors is a common way to approach crowdfunding companies and identify potential issues.
How much am I allowed to invest?
Regulation Crowdfunding limits investors in how much they can invest over a 12-month period, based on their (combined with spouse) income and net worth, which investors will be required to provide when setting up a profile on Nvsted. Your investments throughout the year will apply towards this calculated limit. Nvsted will not allow investors to go beyond this individual threshold.
Basically, anyone is allowed to invest up to $2,200 annually in Regulation Crowdfunding campaigns. If either your net worth or income are below $107,000, you may legally invest a maximum of 5% the lesser, net worth or income. If both your net worth and income are above $107,000, you may legally invest a maximum of 10% of the lesser. In any event, no one may invest more than $107,000 in Regulation CF campaigns in a given year. In Regulation Crowdfunding, accredited investors are subject to the same investment limitations as everyone else.
Can non-U.S. Citizens invest?
No. You may only invest in companies on Nvsted if you’re a U.S. Citizen or U.S. Person.
Do I have to be from Missouri or the St. Louis Region to invest?
No. The only restriction is that you must be a U.S. Citizen or U.S. Person.
How do I apply to invest on Nvsted?
To become an investor on Nvsted, you need to create a profile with your personal checking or savings account information, annual income, and net worth. You will also need basic information such as mailing address and contact information to get started.
I have completed my Nvsted profile. What next?
Start investing! Take some time to view the company profiles on the platform and connect with ones that interest you to learn more about their business and decide if an investment in their company is right for you.
How do I invest in a company?
Once you have setup your investor profile and find a company you want to support, click on the green invest button at the top right hand portion of the page. This specific window also shows current funds raised, the total number of investors and remaining time on the campaign.
How is Nvsted compensated?
If a fundraising campaign is successful, Nvsted takes a 5% concession fee out of the total dollar amount raised.
What type of investment is appropriate for me?
Although our site offers investors the opportunity to invest in many differ types of investment , we do not make recommendations regarding the appropriateness of a particular investment opportunity for any particular investor. We are not investment advisers. Investors must make their own investment decisions, either alone or with their personal advisors.
What will I get when I initially elect to invest?
If you have chosen to invest in a particular investment opportunity, we will electronically send you a confirmation of your investment commitment, including:
(1) the name of the company you have chosen to invest in;
(2) the total dollar amount of your investment commitment;
(3) the price of the subject securities you have elected to purchase (if known); and
(4) the terms by which you may cancel your investment commitment.
What happens if a material change occurs?
If there is a material change in a business you have invested in during an active raise, you will receive email communication notifying you of the change. After receiving this notification, you will have 5 days to reconfirm you are still on board given the new information. You can do this by visiting your dashboard and, after viewing the changes, selecting either “Confirm” or “Cancel”. A material event should be looked at as anything that could reasonably be believed to change your mind as to whether you want to invest, such as the company losing a key team member/contract/customer, or a positive event like receiving some unanticipated outside funding.
What type of payment methods are accepted?
Nvsted accepts ACH payments from your personal checking and/or savings account.
What is a Subscription Agreement?
This is the binding contract between you and the company you are investing in. It outlines the terms and conditions of your investment in that company. You can learn more about the types of securities that companies may offer here.
What is a Form C?
Form C is an application submitted by the issuer to the SEC prior to starting their raise. The Form C discloses important facts about the company and the securities it is offering to you. It is very important to review the Form C in order to understand the scope of the investment you are considering.
Does Nvsted manage my investments?
No. All monetary transactions are managed through our escrow partner, FundAmerica, during an active raise. The issuer is responsible for managing the investment if the raise is successful and closed. Read over the offering’s subscription agreement closely to ensure you understand how it works.
Can I update my investment?
Yes. You can either increase or decrease your investment up until 48 hours prior to the offering’s close date. Keep in mind that this is treated as cancelling your first investment and creating a new investment, so ensure you have enough funds in your account to cover the entirety of the updated amount.
What do the investment fees cover?
The $3 fee charged for each investment covers the cost of the ACH transaction and AML (Anti Money Laundering) check.
What is an AML (Anti Money Laundering) check?
AML checks take place on each of your investments to provide peace of mind to the issuer by protecting them against securities fraud, tax-ID fraud, money-laundering, financial crimes, market manipulation and more.
What is an ACH transaction?
ACH (Automated Clearing House) is an electronic transfer of funds from (or to) a bank account for the purposes of making a payment.
Cancellations
Can I cancel my investment and get a refund?
Yes. Investor funds are parked in an escrow account during an active raise, during which time investors are able to cancel their investments, for any reason, provided that the cancellation occurs at least 48 hours prior to the raise end.
If an investor chooses to cancel his/her investment, Nvsted will refund that investors principal contribution only. The $3 administrative cost per investor charged upfront is non-refundable. The administrative fee covers certain security checks and cash transfer costs for each campaign contribution. This policy applies to cancellations to remove oneself from a campaign entirely, as well as if an investor would like to modify his/her investment contribution.
What are the guidelines for canceling an investment?
You will have up to 48 hours prior to the end of any crowdfunding campaign to change your mind and cancel your investment commitment in that crowdfunding campaign for any reason. Once the offering period with respect to a particular crowdfunding campaign is within 48 hours of ending, you will not be able to cancel your investment commitment for any reason (even if you make your investment commitment during this period). However, if the company makes a material change to the offering terms or other information disclosed to you, you will be given 5 business days to reconfirm your investment commitment. If your investment is not reconfirmed it will automatically be deemed cancelled and your funds will be returned.
In addition to the above, in connection with any change in the closing deadline with respect to a crowdfunding campaign you have already committed to invest in, you will be notified of such new closing date and you will be permitted to cancel your investment, for any reason, up to 48 hours prior to the new closing deadline.
In any case we highly recommend that you only make an investment when you are 100% sure you’re ready to jump in.
How long will it take to receive my refund?
If your investment is cancelled, your principal will be returned from the campaign escrow account to your bank account on file. Refunds generally take 3-5 days to clear depending on your bank.
When will the fundraising round close?
This is set by the company and specified in its campaign materials (provided such closing date will not be less than 21 days from the date the offering is made public). View the company’s offering page to see when the fundraising round started and is slated to close.
Please note, a company may elect to change the closing deadline presented in its campaign materials (i.e. to make it sooner or later). However, should they choose to do so after you have committed to invest in the company, you will receive notice of (at least 5 days prior to) the new deadline and you will have the right to cancel your investment commitment up to 48 hours prior to the new closing deadline.
What happens if a company I invested in does not reach its target offering amount before my stated deadline?
If a company you invested in is unable to obtain enough investment commitments to meet its target offering amount as of the stated deadline, we will unfortunately need to shut down the offering, at which point you will receive electronic notice of such cancellation (and the reasons for such cancellation) and a refund of your principal investment. Remember, unfortunately, administrative fees are non-refundable.
Can I cancel my investment after the offering is closed?
Yes. You can request a cancellation, from the issuer, within 60 days of the offer’s closing date. The ACH transactions must clear in a manner similar to checks which takes 3 to 5 days.
Investor Updates
Should I expect regular communication with the company I invest in post-raise?
You should not expect regular communication with the companies. Regulation Crowdfunding only requires that companies issue an annual report for investors, which is filed with the SEC. Most crowdfunding companies are lean machines spending all of their time operating and executing against their goals. That said, companies generally provide quarterly updates to investors but are under no legal obligation to do so.
How can I help the company I invest in post-raise?
There are many ways to provide continued support to the company you invest in post-raise, such as product feedback, introductions to contacts in your network, and encouraging family and friends to check out their products or services.
Do I have direct access to the founder?
No. Nvsted does not hand out personal contact information for company founders. All communication between investors and founders is facilitated through the Nvsted platform.
Will I receive an annual report?
Under Regulation Crowdfunding, each crowdfunding company who successfully raises funds will issue an annual report to the SEC with financial statements and a discussion of its business, no later than 3 months after the end of their fiscal year. Investors will have access to this report. Additional and/or more frequent communication with investors is at the company’s discretion. Please note, a crowdfunding company may opt out of supplying an annual report after Year 3 under certain circumstances.
Will the crowdfunding company always use Nvsted in the future?
While a crowdfunding company is welcomed to use Nvsted as long as they choose, it is unlikely they will list their company on this platform forever. Companies may choose to switch to a different portal, or pursue alternate methods for raising funds that are more suitable for their business stage.
Earning Returns
How do I earn a return?
Nvsted does not manage these transactions once the campaign closes. The specific terms for any returns are set between the issuer and investor in the subscription agreement (See What is a Subscription Agreement?).
Typically, the issuer utilizes a transfer agent to manage its capital stack post-raise, where the transfer agent will handle the financial transactions between issuer and investor. The terms of investment returns should be identified in the respective documents provided by the crowdfunding company as part of its offering (e.g. the respective Form C) and should be thoroughly reviewed by an investor prior to investing.
Please note, an investment in any of the campaigns presented on this platform is highly speculative and RISKY, and there is no guarantee that the subject company will be successful and/or that you will ever receive a return on your investment (or be able to recoup your investment amount).
How is valuation determined?
Nvsted does not have the authority to determine valuations for a crowdfunding company. It is completely up to the crowdfunding company to leverage its own network of industry professionals to set their own valuation cap.
How long until I see a return?
Depending on the structure, it may take just a year or something considerably longer to realize a return on your investment, and in some cases, maybe never. Debt securities typically start interest and/or principal repayments within the first year, whereas realizing a return on an equity investment could take multiple years, depending on the company’s growth trajectory, traction, and fundraising capabilities. Generally, when a company goes public or is acquired, you might expect to realize a major gain on an equity play.
Please note, an investment in any of the campaigns presented on this platform is highly speculative and RISKY, and there is no guaranty that the subject company will be successful and/or that you will ever receive a return on your investment (or be able to recoup your investment amount).
How are securities delivered to me?
Assuming your investment in a company has been successfully executed and funded (and further assuming it has been accepted by the Company), promptly following the closing of the subject offering you will receive both (either individually or together):
- a confirmation of your final investment:
- the closing date of the transaction;
- the name of the company you have invested in;
- the identity, price, and number of securities purchased by you (as well as the number of securities sold by the subject Company in the offering and the price(s) at which the securities were sold);
- If a debt investment, the interest rate and the yield to maturity calculated from the price paid and the maturity date;
- If a callable security, the first date that the security can be called by the company; and
- The source, form and amount of any remuneration received (or to be received) by us in connection with the transaction (including any remuneration received or to be received by us from persons other than the company); and
- to the extent applicable, fully signed copies of the invested security (and all related agreements, if any).
