Frequently Asked Questions
1. What is crowdfunding?
Crowdfunding allows for multiple individuals to make small contributions in businesses looking for capital, which allows these companies to fund their new projects.
Historically, new businesses had to either get a loan from a bank or from family and friends to raise capital. Crowdfunding has given a new funding option for startups and early stage companies.
Throughout history, only the very wealthy sector of investors, such as angel investors, venture capitalists, “business insiders” had the right to invest and benefit from high-growth/ high ROI companies at the earliest stages, thus getting in “on the ground up”.
Now the tide has turned. A new legislation called JOBS Act of 2012 now eases securities regulations in key areas to allow the selling of equity in private companies to the general public. This makes it possible for crowdfunding, also known as crowdinvesting.
2. What is a crowdfunding portal?
A crowdfunding portal is an online platform that allows for crowdfunding campaigns/ deals/ offerings. A crowdfunding portal must register with the U.S. Securities Exchange Commission (SEC), a federal regulation committee. These funding portals have strict requirements in place to protect their investors.
3. What is the difference between different crowdfunding platforms?
Investors have a couple types of crowdfunding platform options available to them: rewards-based crowdfunding and equity-based crowdfunding.
Rewards-based gives the investors some freebies or swag bags from the company with no monetary benefits. Equity gives you share ownership in the company, allowing you to participate in their profit.
4. How is crowdfunding regulated?
To prevent fraud, startups must disclose information including its business plan, tax returns, financials, and background checks.
Certain companies are not eligible for equity crowdfunding - for example, public companies and companies that have acted badly in the past.
Per the U.S. Securities Exchange Commission website:
Regulation Crowdfunding enables eligible companies to offer and sell securities through crowdfunding. The rules:
require all transactions under Regulation Crowdfunding to take place online through an SEC-registered intermediary, either a broker-dealer or a funding portal
permit a company to raise a maximum aggregate amount of $1,070,000 through crowdfunding offerings in a 12-month period
limit the amount individual investors can invest across all crowdfunding offerings in a 12-month period and
require disclosure of information in filings with the Commission and to investors and the intermediary facilitating the offering
Securities purchased in a crowdfunding transaction generally cannot be resold for one year. Regulation Crowdfunding offerings are subject to "bad actor" disqualification provisions.
5. What are the benefits of investing in equity crowdfunding?
A 100 dollars investment in Uber as a startup would now be worth north of half a million dollars as a publicly traded company. Now imagine if you had invested in Uber, or Facebook, or Snapchat, before they were publicly traded –– you would have made a fortune. Being able to get into these investments at the ground floor will give you the opportunity to have ownership of shares in promising new companies with high growth potential.
Because of the Jobs Act (Jumpstart Out Business Startups Act), you now have the opportunity to invest in those companies at their inception.
6. Should I invest during a bad economy?
One of the biggest benefits of investing in crowdfunding is that there is no correlation to the stock market. Equity pricing tend to be fixed and will not go up and down with the markets. Your investment is not connected to market volatility.
7. Can I invest even if I am not an accredited investor?
Due to the Jumpstart Our Business Startups Act (JOBS Act) passed by Congress in 2012, all investors, accredited & non-accredited, are now allowed to invest in private companies, startups, early stage companies, pre-IPOs, usually through crowdfunding.
If an investor has less than $100,000 of annual income or net worth, they may invest $2,000, or 5% of their annual income or net worth, whichever is greater.
If an investor has more than $100,000 of annual income or net worth, they may invest 10% of their annual income or net worth, whichever is less.
8. What is the minimum investment in crowdfunding?
The beauty of crowdfunding and the laws that were passed to support small and average investors make it possible for you to invest as little as $100. However, every offering has different requirements, therefore minimums are specific to each deal.
9. What is the typical return on investment?
Returns are not guaranteed. With higher rewards comes higher risks. Every investment is different and there is always a chance to lose all your money.
10. What are the risks to my investment?
All alternative investments, including equity crowdfunding, are considered speculative and subject to a high degree of risk, including the risk of losing the entire investment.
There are additional measures of protection you can look for. Some offerings include insurance such as “TigerMark from Assurely” to protect investors from fraud and other qualifying circumstances.
11. Can I sell or trade my equity?
Not yet, but we are working on it!
12. What is the typical time for my return on investment?
We look for deals that ideally have viable exit potential within 2-5 years.
We know with higher rewards comes higher risks. That's why CrowdChayne is proud to bring solid companies that we have vetted. Our marketplace is highly curated. Invest with CrowdChayne, and take advantage of our 20+ plus years of experience in the banking and financial industry.
Let us guide you in this new age of capitalism with real companies, real return, real wealth creation. CrowdChayne is the solution. Welcome to the movement.
IMPORTANT INFORMATION: The information provided herein does not constitute an offer to sell securities or the solicitation of an offer to buy securities. Returns are not guaranteed. All alternative investments, including equity crowdfunding, are considered speculative and subject to a high degree of risk, including the risk of losing the entire investment.This information is not intended to replace any information or consultation provided by a financial advisor or other professional. The estimates, projections and forward-looking statements contained herein may or may not be realized, and differences between estimated results and those realized may be material. Such estimates, projections and forward-looking statements are illustrative purposes only. Accordingly, there can be no assurance that the estimates, projections of forward-looking statements contained herein will be realized or are accurate and complete. Information is subject to change without notice and may not be updated. CrowdChayne is under no obligation to update any information included herein.