The companies provide updates through a forum and investors are encouraged to engage with the company through scheduled conference calls.
If the company grows, your investment will grow alongside the company. If there is a dividend, you’ll be entitled to your share of distribution. If the company is sold to another company or large investment firm, you will receive your share of the proceeds directly from the company - a return on investment for your early belief.
Risks and Returns
While CircleUp can not predict or guarantee returns, investors are encouraged to understand that private investing is an illiquid asset class that typically requires investors to hold their investment for several years. Independent research from the Kauffman Foundation found investors in consumer companies at a similar stage had returns of 3.6x with an average hold of 4.4 years. Those returns typically require investors to diversify and invest in multiple deals and there is no guarantee that investors will receive any return on their investment(s).
What kind of updates will I get from the company?
Unless otherwise specified in the investment documents, companies determine the best way to keep their investor community updated on the progress of the business. We encourage all companies to provide at least annual financial reports and semi-annual narrative investor updates to their shareholders. However, unless specified otherwise in the documents, there is no requirement for the company to provide ongoing communications. The investor community may not know the most recent or current status of his/her investment. As always, when you have questions about your relationship with the company we encourage you to ask the entrepreneur.
What access do I have after the round closes?
Your access to the company you invested in, and information rights, will be based on the individual equity documents found in step 2 of the invest process. We also encourage you to ask the entrepreneur for their vision of the relationship with you and the other investors. We believe that most entrepreneurs on the site see value in having a "crowd" of passionate investors.
How can I help the company post-close?
Word of mouth marketing is critical to the success of a small consumer products company. One easy way to help the company after the investment round is closed (to prevent general solicitation) is to talk about them on social media - Facebook, LinkedIn, Twitter, and with your friends. We also encourage you to speak with the CEO and other members of the company.
What are the tax implications of this investment?
We cannot give individual tax advice, and we encourage you to talk with your accountant or other tax advisor. Please note that most companies listed on CircleUp are C corporations. For federal income tax purposes, a C corporation is recognized as a separate taxpaying entity. A C corporation conducts business, realizes net income or loss, and pays taxes separately from shareholders.