Crowdfunding is a relatively new and evolving method of using the Internet to raise capital to support businesses. A company raising funds through crowdfunding typically seeks small individual contributions from a large number of people. Individuals interested in the crowdfunding campaign – members of the “crowd” – may share information about the project, cause, idea or business with each other and use the information to decide whether to fund the campaign based on the collective “wisdom of the crowd.”
General Crowdfunding Rules
● The amount raised must not exceed $1,070,000 in a 12-month period;
● Individual investments in all crowdfunding issuers in a 12-month period are limited to:
● The greater of $2,200 or 5 percent of the lesser of the investor's annual income or net worth, if either the investor's annual income or net worth of the investor is less than $107,000; and
● 10 percent of the lesser of annual income or net worth (not to exceed an amount sold of $107,000), if both the investor’s annual income and net worth is $107,000 or more; and
● Transactions must be conducted through an intermediary that either is registered as a broker-dealer or is registered as a new type of entity called a “funding portal.”
● Both accredited and non-accredited investors may invest in crowdfunding offerings, which are subject to maximums based on their income and net worth
● Over a 12-month period (on rolling basis), an individual can invest in the aggregate across all crowdfunding offerings up to:
● If either their annual income or net worth is less than $107,000, they can invest the greater of $2,200 or 5 percent of the lesser of the investor’s annual income or net worth
● If both their annual income and net worth are equal to or more than $107,000, investors are allowed to invest up to 10 percent of the lesser of their annual income or net worth
● During the 12-month period, the aggregate amount of securities sold to an individual investor through all crowdfunding offerings may not exceed $107,000.
How To Assess an Investment Opportunity
Assessing an investment is all about doing the proper due diligence to be able to make an informed investment decision. Common factors that you should review include:
● Management team backgrounds
● Differentiation and defensibility
● Business model
● Competitive landscape
● Historical financial performance
● Financial projections
● Unit economics
● Capitalization table
● Use of proceeds
Usually investors are looking for an investment that represents an opportunity in an established or up and coming area with identifiable growth over a certain period of time, committed and skillful team, and momentum.
Investing On The Greenwood Project Portal
1. Browse Offerings
Conduct due diligence to determine which offerings appeal to you
2. Click “Invest”
Following your due diligence, click the “invest” button on the company’s offering page. This will start the investment process during which you will choose the amount of your investment and provide additional information. Your information will be pre-populated into the company’s offering documents, which you can sign electronically through the platform.
After signing the agreement, your funds will automatically be transferred and placed into an escrow account. The funds will remain in escrow until they are released to the company that you are investing in or returned back to you.
Once the fundraising round closes, you will receive confirmation of success and counter-signed legal agreements. In the case of an unsuccessful round or if you cancel your investment, the escrow agent will return the funds from the escrow back into your bank account.
Note: Companies are required to reach a minimum funding target to have a successful fundraising campaign. That means that investments are not finalized until the company raises enough money to meet its funding target and completes all other closing conditions. Once the funding target has been met, the money is released to the company and investors will receive the applicable securities. If the minimum funding target is not met, subscription amounts are returned to investors by the escrow agent. Greenwood Project does not receive or take custody of investor funds at any point during the investment process.