How truCrowd(tC) does equity crowdfunding?

What is truCrowd(tC)?

truCrowd(tc) is an equity crowdfunding portal (as described in the JOBS Act of 2012, Title III only), providing issuers (entrepreneurs and emergent businesses) from the United States with an un-curated, socially networked and secure online environment where they can raise equity capital from non-accredited investors from around the world.

Also called crowd financing or crowdfund investing, equity crowdfunding describes the collective action of individuals who, in exchange for equity, pool their money together, via the internet and social media, in order to support efforts initiated by other people or organizations.

This is how truCrowd(tC) does equity crowdfunding:

  • First, our platform is a tool that enables both investors and issuers to use social media extensively as the best way to get in touch with the people that they already know (they have to be a social network user).
  • Second, we list the equity offerings in an un-curated fashion. That means that after meeting a minimal disclosure requirement (proactive due diligence), any issuer (entrepreneur, small or emergent business) can list an equity offering. We do not make any judgments and/or recommendations on what equity offering will be presented to the investors.
  • Third, because we believe in the “wisdom of the crowds,” we will let the crowd decide what equity offering will be finally funded. This is how we understand the reasoning behind Title III of the JOBS Act.
  • Fourth, truCrowd(tC)’s only rule for posting an equity offering is related to the amount of self-disclosure an issuer provides, to facilitate in a proactive way, the due diligence process initiated by the investors (proactive due diligence). At the investor’s specific request, the issuer should post as much info as needed for the crowd to decide if the equity offering should be funded or not.
  • Fifth, we use virtual data rooms for both security and intellectual property protection.

Our goal is to bring private equity investments to every individual (subject to the legal investing limits), which previously has been reserved only for a select few, while facilitating the capital formation process. truCrowd(tC) offers everyone an alternative source of investment return to traditional share, bond, and mutual fund investments. Although this new type of investment is of the riskiest type, the returns possible are the highest possible.

We help everyone to become a mini angel investor.

How does it work for investors?

After creating an investor account, the investor may browse the offerings posted by issuers. He/she can follow interesting offerings to ask questions from the issuers seeking funding and to observe discussions between the issuers and other investors that follow their equity offering.

Once investors have found an opportunity in which they would like to invest, they confirm their interest by following the offering. At that time, the issuer has to approve the investor to see confidential and privileged information about the issuer and the offering (background checks, detailed business plan, other self-disclosed information for the due diligence process).

When an investor decides to invest in an offering, they do it by pledging to invest a certain amount subject to the investor’s legal crowdfunding investing limit.

It is only when the offering receives the total funding required that the money will be transferred from the investor’s bank account into the Offering’s Checking Account - a joint account between the issuer and truCrowd(tC). At that point, truCrowd(tC) verifies that the equity is properly transferred to the investors. Then truCrowd(tC) releases the funds to the issuer. The issuer is then the only party able to access the funds in the joint account.

If the targeted amount is not raised, nothing will happen.

The investor can change his/her mind (remove the pledge) at any time up to the day when the funds will be transferred out of his/her bank account. After a successful equity offering, truCrowd(tC) will send a reminder email with the date when the funds will be transferred out and the time and date up to point the pledged can be removed.

Once an equity offering ends successfully, the investor's investment portfolio is updated on truCrowd(tC), and he/she may continue to interact with the issuer and the other investors through the Offering’s Comm Channel.

What are the main benefits for investors?

By investing part of their funds (maximum 5% of your annual income if the annual income is less than 100,000 USD or 10% otherwise), the investors will have the following benefits:

  • They will receive an equity holding in the funded company. We recommend using the venture capitalist model and to invest in as many companies as possible, knowing that some will fail, but those that succeed might bring returns that cover many times any losses.
  • A return on investment, if/when the company is listed on a stock exchange, is sold or pays a dividend. At some point there will be a secondary market for such investments.
  • A chance to fund the next big thing (see Google or Facebook, Twitter, etc.).
  • A way directly to support someone you know is following his/her dream to start and build a business that will bring innovation and jobs.
  • The opportunity to support the development of the business by contributing their own expertise.

How does it work for issuers (entrepreneurs and emergent companies)?

After establishing an “issuer account,” the issuer must build up the equity offering by meeting the requirements listed on the account. First, there will be a minimum amount of self-disclosure (about 150 items, including background checks) required to let the investors (collectively) perform their due diligence. Second is the creation of a strong business plan. Optionally, the issuer will have the ability to acquire a valuation report (provided by one of our partners) to help both the issuer and the investors understand the value of the equity offered. Creating the equity offering should take between 45 and 90 days, depending on the skills of the issuer’s team.

When the equity offering is ready for launch, the issuer has the possibility to create several rounds of financing based on circles of closeness (categories where all social media contacts should be placed), the closest circle being (we assume) “family and friends.” The equity offering will be launched in steps with the closest circles being invited to invest first.

Once investors have found an opportunity in which they would like to invest, they show their interest by following the offering. At that time, the issuer has to approve each investor to see confidential and privileged information about the issuer and the offering (background checks, detailed business plan, other self-disclosed information for the due diligence process). After approval, the investor will have access into the equity offerings virtual data room where the issuer has posted confidential information about the issuer, the company, and the offering. Also, there will be logs for every action performed by the investors while in the Offering’s Data Room. On each entry in the Offering’s Data Room, the investors will have to accept the terms of a NDA.

The equity offerings are live on the site for a maximum of 90 days. During this time, truCrowd(tC) will market its platform and describe equity offerings listed on its platform, but it is crucial that the issuers conduct their own marketing through their own social networks, and be responsive and active on Offering’s Social Media. Issuers with the most active contribution and weekly updates are more likely to be successful with their fundraising campaigns.

truCrowd(tC) provides a range of social media tools that allow the issuer to socialize and share his/her equity offering more easily. The issuer can add updates to the equity offering while it is live on the site. The issuer also can talk about the offering with potential investors through the Offering’s Social Media. During the crowdfunding process, the Offering Social Media is open to any investor who follows the offering and was approved by the issuer.

When the funding goal is reached, the issuer will prepare the share certificates and any other documents related to the transfer of equity (we partnered with venturedocs.com to provide an affordable option; the issuer, however, might use his/her own provider). When the documents are ready, we will withdraw (via ACH) the pledged funds from the investor accounts and place them in the Offering’s Checking Account – a joint account between issuer and truCrowd(tC). At that point, truCrowd(tC) verifies that the equity is properly transferred to the investors. Then truCrowd(tC) releases the funds to the issuer. The issuer is then the only party who can access the funds in the joint account.

Because any investor can change his/her mind until the day the funds are transferred out from his/her account, and any change of mind could lower the raised amount below the funding target. truCrowd(tC) will maintain a waiting list that will be used to replace the amounts “lost” due to the investors who changed their mind.

If the minimum amount is not reached within the listing period, the funding round has not succeeded. In this case, nothing will happen.

After a successful crowdfunding, the issuer will continue interaction with investors and provide updates through the Offering’s Social Media. We encourage the communication because the new investors can be a useful source of advice and motivation. Also, the investors have the right to know the news and information regarding the offering. The post-offering communication should be made according to a preset post offering communication plan.

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