Making an Investment
Investment transaction is streamlined and transparent.
We’ve simplified the process to make it easier to understand and quick to execute with standardized investment documents, online signature, direct online investing.
Your investment is held in escrow until the round closes.
In each round there is a target for the round and a maximum. Your investment is held in escrow until the round has reached its target. At that time the money is sent to the company and you become an investor in the business.
You’re an investor in that business and you will be sent the deal documents. Your rights are laid out in the investors rights agreement. We also facilitate your communication with the company through a post-close forum, and other tools, that are only available to investors in that company.
What will I actually own?
It is important to read the investor documents (Step 2 of the invest process) but investors typically receive preferred shares issued directly by the company. These shares represent an ownership stake in the company. If the business is sold at some point, these shares entitle the investor to a percentage of what is earned in the sale of the business. In addition, if there is a dividend, you receive your share of the distribution.
Investors holding shares of preferred stock are often paid out ahead of the holders of common stock on dividends or proceeds from a sale, up to a certain amount. When the 'preference' is equal to the amount the investor originally paid for the shares, the holders are typically said to have a ‘1x’ liquidation preference.
In other cases, investors may receive common shares, or convertible debt in the company. The rights of these investors will differ from above. As always, please review the offerings documents carefully to understand the investment. If you have questions or concerns, be sure to consult your personal advisors.
Will I get my investment back?
The companies you find on CircleUp are privately held companies. Their shares are not traded on a public stock exchange like larger companies such as Apple or Procter & Gamble. As a result, the shares cannot be easily traded or sold (they are what investors call 'illiquid').
As an equity investor in a private company, you would receive a return on your investment if and when the company distributes money. If a private company distributes money, it typically does so in one of three ways: 1) It gets sold to another company or a new set of investors such as a private equity firm; 2) It pays a dividend; or 3) It is listed on a stock exchange such as the NYSE. If those things happen, then you, as an investor, are entitled to your pro-rata share of the distributions that occur. For example, if you’ve invested in a food company that is purchased by General Mills, then you would receive your portion of the money that is paid out upon the sale of the business to General Mills. The company distributes the money directly to its shareholders. It is important to know that these investments can easily last years and there is no way to predict if or when you may receive a return.
Are these investments risky?
Yes (they can be). Many small businesses in the U.S. go out of business every year. It is difficult to know how companies will grow, what changes might occur in the market, or the many ways a company can stumble. If the company goes out of business, your shares will be worth nothing. The securities offered by Fundme Securities LLC on the CircleUp site may not retain any value.
How is the valuation of the company determined?
Issuers set the valuation of the company whereby there cannot be any assurance the valuation is accurate or in agreement with the market or industry valuations. Valuations are intended to be in line with industry comparables on a revenue and net profit basis.
How does the investment process work?
Your investment is not final until the company raises enough money to meet its Investment Target. When you make your investment, the money is held securely in an independent escrow account at a major national bank. Once the Investment Target has been raised, the money is transferred to the company and you become a shareholder. If the minimum is not met, the bank will return 100% of your investment directly to you. CircleUp will never receive or hold any investor funds during the process.
Is there an investment minimum and maximum?
Yes. The minimum investment is different for each investment and is set by the Company, based in part on how much capital is being raised. In Step 1 of the Investment process, you will find the minimum investment amount for that particular opportunity listed.
Please email us if you have questions: firstname.lastname@example.org
Are there limits to the number of investors in each deal?
Yes, a limited number of investors are accepted into each deal on CircleUp, typically no more than 50. Historically, the Securities and Exchange Commission limited the number of investors for any non-registered security to 500 investors. Unless changed, in the future, with the JOBS Act, signed into law on April 5th, 2012, the number of permitted shareholders will increase to 2,000.
What does "target" and "max" mean in the company raise?
In each round there is a target raise and then a maximum raise. The companies must hit the target in order to "close" on the investment. If the target raise has been reached, the company may still raise up to the maximum amount listed. If the target is not reached, the money that investors had already sent to escrow will be returned to each respective investor. The round is first come first serve.
Can I invest through my LLC, C-Corp, or LP?
Yes. In those cases we complete the process offline and need some additional information from you. You would need to supply the following information in order for us to complete the investment: 1) A copy of the articles of incorporation or organization of the entity that will be investing; and 2) Signed investment documents signed on behalf of the entity rather than you personally.
If you would like to invest in a company on CircleUp through your entity, please email us at email@example.com.
Can I invest in a company on CircleUp if I am located outside the United States?
Yes. In that case we complete the process offline and need some additional information from you. Please supply us with the following information: 1) A copy of your photo ID or passport. 2) A copy of the signed investment documents. 3) Your non-US Tax ID number.
If you would like to invest in a company on CircleUp and you're located outside the United States, please email us at firstname.lastname@example.org.