Understand equity crowdfunding before you invest

Equity crowdfunding lets a private company sell securities — such as shares, SAFEs, convertible notes or revenue-sharing notes — to the general public online. Instead of a few large investors, a company can raise from hundreds or thousands of people investing smaller amounts. In the U.S. it happens under the SEC’s Regulation Crowdfunding (Reg CF), and every offering must run through a single SEC-registered funding portal or broker-dealer.

Generally anyone. You don’t have to be an accredited investor. Platforms require investors to open an account, verify their identity and confirm they understand the risks before investing.

Across all Reg CF offerings in any 12-month period:

• Accredited investors: no limit.
• Non-accredited, if either your annual income or net worth is below $124,000: the greater of $2,500 or 5% of the greater of your income or net worth.
• Non-accredited, if both are at least $124,000: 10% of the greater of the two, capped at $124,000.

The platform relies on your representations, so answer honestly.

Whatever security the offering describes — common or preferred stock, a SAFE (a right to future equity), a convertible note, a revenue-sharing note or a loan. Each comes with different rights to votes, dividends, repayment and information. Read the Form C and the security’s terms before you invest.

Usually not for a long time. Reg CF securities can’t be resold for one year except to the issuer, an accredited investor, a family member, or as part of a registered offering. Even after a year there is typically no public market, so plan to hold your investment indefinitely.

Yes, until 48 hours before the offering deadline (or before an announced early close). If the company makes a material change to the offering, you must reconfirm your commitment or it is cancelled and your money is returned. If the offering doesn’t reach its target, everyone is refunded.

With a qualified third-party escrow agent — typically a bank or credit union — until the offering closes. A funding portal is prohibited from holding or handling investor funds.

Before filing its Form C, a company may gauge interest by publishing information about a planned offering. During that time no money can be accepted, no investment commitments can be made, and any indication of interest you give is completely non-binding. You can only invest after the Form C is filed, through the funding portal.

Every offering must file a Form C on SEC EDGAR, and the funding portal must run background and securities-enforcement checks on the company and its officers, directors and 20% owners. Those checks reduce — but do not eliminate — the risk of fraud. Do your own research, ask questions in the offering’s communication channel and never invest more than you can afford to lose.

The company must file an annual report (Form C-AR) with the SEC and post it on its website until its reporting obligation ends under SEC rules. Many companies send more frequent updates, but that is not required.

• Total loss — most early-stage companies fail.
• Illiquidity — you may not be able to sell for years, if ever.
• Dilution — future fundraising can shrink your percentage ownership.
• Limited information — private companies disclose far less than public ones.
• Valuation — the company sets its own price; it may not reflect fair value.
• Minority position — you will typically have little or no control.

No. Funding portals are prohibited from offering investment advice or recommendations, soliciting purchases of securities, or paying anyone to solicit investors. Any decision to invest is yours alone.

No. Securities purchased through a funding portal are not FDIC- or SIPC-insured and may lose value.

Typically by the issuer — a percentage of money raised and sometimes fixed fees or securities. Each offering’s Form C discloses exactly how the portal is compensated. Nvest’s planned issuer pricing is a $5,000 flat platform fee plus 5% of funds raised. Any investor fee would be disclosed on the offering page before you commit.

Reg CF lets a company raise up to $5 million in 12 months through a funding portal or broker-dealer, with lighter disclosure. Reg A (Tier 2) allows up to $75 million, requires an SEC-qualified offering statement and audited financials, and must use a broker-dealer if an intermediary is involved — funding portals cannot conduct Reg A offerings.

Nowhere yet. Nvest’s funding portal registration is pending and Nvest does not host any offerings. Nvest may add an issuer marketplace after registration is granted.

Email funding@nvest.us. You can also contact the SEC, FINRA or your state securities regulator.