FAQ: Frequently Asked Questions
Question: Are there any fees to open an investor account?
Any company or individual presenting an Offering, must pay a $300 listing fee. In addition to the listing fee, there is a final performance fee if the Offering is successful in reaching its funding goal. The performance fee is established by agreement between the Issuer making the Offering and us. The performance fee must be disclosed to Investors in the materials presented in the Offering. The Site charges fees in connection with the posting of the offerings and sale of securities in reliance on Section 4(a)(6) of the Securities Act of 1933, as amended. The performance fee is paid by the Issuer and can be in cash and/or a combination of cash and the offered securities, generally not to exceed 5% of the total funds raised. As a registered funding portal, we will not have a financial interest in a company that is offering or selling securities on our platform under Regulation Crowdfunding. The securities of the Issuer paid to VC 500, if any, will be of the same class and have the same terms, conditions and rights as the securities being offered and sold by the Issuer on the portal.
Question: What type of securities are offerred?
The types of securities offered and sold on our platform, may include, among others, Common Stock, Preferred Stock, Corporate Bonds, and Debentures. Descriptions and definitions of these and other potential offerings are found on our Crowdfunding Terminology page. There is no assurance that the issuer will have funds available to satisfy payment obligations.
Question: What are the risks?
You should consider the following list of potential risks before making a crowdfunding investment:
Speculative: Investments in startups and early-stage ventures are speculative and these enterprises often fail. Unlike an investment in a mature business where there is a track record of revenue and income, the success of a startup or early-stage venture often relies on the development of a new product or service that may or may not find a market. You should be able to afford and be prepared to lose your entire investment.
Illiquidity: You will be limited in your ability to resell your investment for the first year and may need to hold your investment for an indefinite period. Unlike investing in companies listed on a stock exchange where you can quickly and easily trade securities on a market, you may have to locate an interested buyer when you do seek to resell your crowdfunded investment.
Cancellation restrictions: Once you make an investment commitment for a crowdfunding offering, you will be committed to make that investment (unless you cancel your commitment within a specified period of time). As detailed below for Changing your mind, the ability to cancel your commitment is limited.
Valuation and capitalization: Your crowdfunding investment may be the purchase of an equity stake in a startup company. Unlike listed companies that are valued publicly through market-driven stock prices, the valuation of private companies, especially startups, is difficult and you may risk overpaying for the equity stake you receive. In addition, there may be additional classes of equity with rights that are superior to the class of equity being sold through crowdfunding.
Limited disclosure: The Issuer must disclose information about the company, its business plan, the offering, and its anticipated use of proceeds, among other things. A start-up or an early-stage company may be able to provide only limited information about its business plan and operations because it does not have fully developed operations or a long history to provide more disclosure. The company is also only obligated to file information annually regarding its business, including financial statements. A publicly listed company, in contrast, is required to file annual and quarterly reports and promptly disclose certain events—continuing disclosure that you can use to evaluate the status of your investment. In contrast, you may have only limited continuing disclosure about your crowdfunding investment.
Investment in personnel: An early-stage investment is also an investment in the entrepreneur or management of the company. Being able to execute on the business plan is often an important factor in whether the business is viable and successful. You should also be aware that a portion of your investment may fund the compensation of the company’s employees, including its management. You should carefully review any disclosure regarding the company’s use of proceeds.
Possibility of fraud: In light of the relative ease with which early-stage companies can raise funds through crowdfunding, it may be the case that certain opportunities turn out to be money-losing fraudulent schemes. As with other investments, there is no guarantee that crowdfunding investments will be immune from fraud.
Lack of professional guidance: Many successful companies partially attribute their early success to the guidance of professional early-stage investors (e.g., angel investors and venture capital firms). These investors often negotiate for seats on the company’s board of directors and play an important role through their resources, contacts and experience in assisting early-stage companies in executing on their business plans. An early-stage company primarily financed through crowdfunding may not have the benefit of such professional investors.
Dilution: In some situations, the additional sales of the security offered may result in a limitation of voting power because of dilution.
Annual Filings with the SEC: Issuers who have successfully raised capital and issued securities are subject to annual filings with the SEC and shareholders. There is the possibility that those obligations may terminate in the future.
Question: What if I commit to invest, and then change my mind?
An investor may cancel an investment commitment for any reason until 48 hours prior to the deadline identified in the issuer’s offering materials. For more information about changing your mind, please refer to our Investor Guidelines.
Question: How do Issuers disclose information about their investment offerings?
Issuers of securities under Title III are required to submit a SEC Form C. The SEC requires that issuers provide certain information to Investors through the funding Portal’s platform and to the SEC directly via a filing of Form C on EDGAR, the SEC’s data handling system. The issuer will be required to post an offering summary on the portal. The offering summaries posted on the portal will disclose important information pertaining to each offering.
Each Investor is Strongly Advised to consult Legal, Tax, Investment, Accounting and/or other professionals before investing, and to carefully review all the specific risk disclosures provided as part of any offering materials and to post any questions in the issuers comment section of their campaign page prior to making an investment.
Question: Are there limits to how much I can invest?
The aggregate amount of securities sold to all investors by an issuer in reliance on Regulation Crowdfunding during the 12-month period preceding the date of such offer or sale, included in such transaction shall not exceed $1,070,000.
An investor is subject to further limits based on income and net worth. For more information about how to calculate these important limits, please refer to our Investor Guidelines.
Question: What information will I need to provide in order to invest?
Before you can make an investment, we are required to obtain from you a signed Investor Questionnaire that acknowledges and represents that you have read and understand the various educational materials on our platform and in our Crowdfunding Investor Guidelines. For each additional investment you wish to make, another signed Investor Questionnaire is required. Each questionnaire requires current information from you that confirms your eligibility to make an investment on our portal and provides the classification of your income and net worth establishing the amount of money you are permitted to invest in a continuous 12-month period. You must also indicate the amount of other crowdfunding investments you have made within the past 12 months.
For more information about the types of information we ask from you, please refer to our Investor Questionnaire.
Important VC 500 Links
Helpful Links Here On Our Site
General Information Links On Other Sites
Investor.gov: An online resource to help you make sound investment decisions and avoid fraud.
Investor Bulletin: For examples and guidelines on Investor limitations and calculating net worth.
FINRA: Dedicated to investor protection and market integrity.
SEC: The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.