Crowdfunding generally refers to a financing method in which money is raised through soliciting relatively small individual investments or contributions from a large number of people. Over the last few years, crowdfunding websites in the United States have proven a popular way by which to solicit charitable donations and to raise funds for artistic endeavors like films and music recordings.
Under recently adopted rules, the general public now has the opportunity to participate in capital raising for small businesses.
You can only invest in a crowdfunding offering through the online platform, such as a website or a mobile app, of a broker-dealer or a funding portal such as seriesOne. Companies may not offer crowdfunding investments to you directly - they must use a broker-dealer or funding portal.
The funding portal must be registered with the SEC and be a member of the Financial Industry Regulatory Authority (FINRA). You can obtain information about our funding portal by visiting the SEC’s EDGAR website. Keep in mind that you will have to open an account with our funding portal in order to make an investment, all written communications relating to your crowdfunding investment will be electronic.
The seriesOne Site
This Site is an SEC-registered funding portal and a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”) operated by seriesOne Crowd, LLC to act as an intermediary platform website through which Issuers offer and sell their securities to potential investors pursuant to Section 4(a)(6) of the Securities Act of 1933, as amended.
Issuers that register with and are approved by the Site to sell securities are able to create and post offering materials on the Site for potential investors to review.
Information about specific offerings, including SEC-required documents, promotional material like videos, and communications about an offering, are publicly viewable on the site.
Potential investors interested in using the Site to participate in investment opportunities and/or to communicate on the site with others about them must register with the Site by opening an account. This entails providing certain personal and non-personal information to the Site, its affiliates and/or service providers prior to making an investment, including documentation related to the investor’s income and net worth. This information is used to verify an investor is qualified to invest in investment opportunities posted on this Site. For further information on investment limitations when using this Site, please see “Investment Limitations under Reg CF” below.
Offer, Purchase and Issuance of Securities on seriesOne
After opening an account, an investor will be able to search for various investment opportunities on the Site; review all campaign and investment materials posted on the Site; and communicate about a specific offering with the issuer and its agents as well as with other investors on the site.
Once an investor decides to purchase securities from a particular Issuer, the investor authorizes a transfer of funds to an escrow account where they are held until the offering campaign is completed. The Site does not and cannot hold funds and they must not be sent to it. The escrow account is maintained by a separate qualified escrow agent with a depositary such as a bank. After completion of the campaign, the escrow agent will release the aggregate funds contributed from all investors and the Issuer will issue securities to all investors.
The Securities Offered on seriesOne
Investment opportunities posted on the Site are debt securities for small businesses. Federal securities law requires securities sold in the United States to be registered with the U.S. Securities and Exchange Commission (“SEC”), unless the sale qualifies for an exemption. The securities offered on the Site have not been registered under the Securities Act, and are offered in reliance on the crowdfunding exemptive provisions of Section 4(a) (6) of the Securities Act.
Securities sold on seriesOne are restricted and not publicly traded, and are therefore illiquid. No assurance can be given that any investment opportunity will continue to qualify under one or more of such exemptions under the Securities Act due to, among other things, the adequacy of disclosure and the manner of distribution, the existence of similar offerings in the past or in the future, or a change of any securities law or regulation that has retroactive effect.
Please be sure to read the “Investment Appropriateness and Risks” section below carefully. For a discussion of the specific risks involved in making an investment in a particular Issuer’s offering, please be sure to carefully review the risks discussed in each Issuer’s offering materials, including the section titled “Risk Factors” in such materials.
Annual Reporting Obligations of Issuers on seriesOne
Pursuant to Reg CF, each Issuer that posts offerings of securities on the Site is required to annually file with the SEC a Form C-AR and financial statements. This must be done no later than 120 days after the end of the Issuer’s fiscal year covered by such filing. Each Issuer must also post its Form C-AR and financial statements to its own website.
The Form C-AR contains updated disclosure substantially similar to that provided in the Issuer’s initial offering statement on Form C, including information on the Issuer’s size, location, principals and employees, business, plan of operations and the risks of investment in the Issuer’s securities; however, offering-specific disclosure is not required to be disclosed in the Form C-AR.
Investors should be aware that in certain circumstances, an Issuer may no longer be required to continue its annual reporting obligations under Reg CF, including in the event (i) that the Issuer has fewer than 300 stockholders of record after filing at least one Form C-AR in the last year, (ii) its total assets are equal to or less than $10 million after filing a Form C-AR for at least three years prior, (iii) the Issuer undergoes liquidation or dissolution or (iv) all of the Issuer’s issued securities are repurchased by the Issuer or another party. In the event that an Issuer ceases to publish annual reports, investors may no longer have available to them current financial information about the Issuer.
Investment Limitations under Reg CF
Potential investors using the Site to purchase securities are prohibited by Reg CF from purchasing a total dollar amount of securities from all Reg CF sites exceeding the following amounts during the 12-month period preceding such purchase:
If either the annual income or the net worth of the investor is less than $107,000, the investor is limited to the greater of $2,200 or 5% of the lesser of his, her or its annual income or net worth.
If the annual income and net worth of the investor are both equal to or greater than $107,000, the investor is limited to 10% of the lesser of his, her or its annual income or net worth, not to exceed $107,000.
To calculate an investor’s “net worth”’ Reg CF relies on the same method used for determining “accredited investor” status under Regulation D of the Securities Act, which excludes the value of an investor’s primary residence. Investors may include their spouse’s income for the purposes of the test. Both the SEC’s Investor Bulletin and FINRA’s Investor Alert contain detailed information about how to perform these calculations.
Cancelling an Investment Commitment
Investors may cancel an investment commitment until forty-eight (48) hours prior to the deadline identified in an Issuer’s offering materials posted on the Site. The Site will notify investors by [email] when the target offering amount has been met.
If an Issuer reaches its target offering amount prior to the deadline identified in its offering materials, it may close the offering early so long as it provides investors notice of the new offering deadline at least five (5) business days prior to the new offering deadline. The Site may continue to accept investment commitments during this 5-day period.
If an investor does not cancel an investment commitment 48 hours prior to the offering deadline, the funds will be released to the Issuer by the escrow agent upon closing of the offering. The investor will receive securities in exchange for his, her or its investment. If an investment commitment is cancelled, the Site will direct the return of any funds that have been committed by investors in the offering.
If a material change is made to the offering materials, including a change to the offering deadline, the Site will require investors to reconfirm their investment. If an investor does not reconfirm his, her or its investment commitment after a material change is made to the offering, the investor’s investment commitment will be cancelled and the committed funds will be returned to the investor.
Investment Appropriateness and Risks
You Are Solely Responsible for Determining an Investment is Appropriate for You
Prior to registering on seriesOne or making an investment commitment, a potential investor must consider the risks of investing in crowdfunded securities offerings and determine whether such an investment is appropriate. The Site and its employees are prohibited from offering advice about any offering posted on the Site and from recommending any investment.
This means the decision to invest or contribute must be based solely on the potential investor’s own individualized consideration and analysis of the risks involved in a particular investment opportunity posted on the Site, which is made at the investor’s own risk.
Potential investors acknowledge and agree that they are solely responsible for determining their own suitability for an investment or strategy on the Site and must accept the risks associated with such decisions, which include the risk of losing the entire amount of their principal. Investors must be able to afford to lose their entire investment.
The Site has no special relationship with or fiduciary duty to potential investors and investors’ use of the Site does not create such a relationship. Potential investors agree and acknowledge that they are responsible for conducting their own legal, accounting and other due diligence review of the investment opportunities posted on the Site.
Each investor is strongly advised to consult legal, tax, investment, accounting and/or other professionals before investing, and to carefully review all the specific risk disclosures provided as part of any offering materials, and to ask each issuer offering securities any questions or for additional information prior to making an investment.
There is no independent governmental or regulatory review of the offering or offering materials
No governmental agency has reviewed the investment opportunities posted on this Site and no state or federal agency has passed upon either the adequacy of the disclosure contained therein or the fairness of the terms of any such investment opportunity.
The exemptions relied upon for the investment opportunities posted on the Site are significantly dependent upon the accuracy of the representations of the Issuers offering securities through the Site and the potential investors registered with the Site. These risks highlighted in the following are non-exhaustive and are intended to highlight certain risks associated with investing in securities that are not registered with the SEC.
Restriction on Resale of Securities Offered
The securities offered on the Site are only suitable for potential investors who are familiar with and willing to accept the high risks associated with private investments. Securities sold through this Site are restricted and not publicly traded and, therefore, are illiquid unless registered with the SEC.
Securities issued in a transaction pursuant to Section 4(a)(6) of the Securities Act may not be transferred by any purchaser of such securities for a one-year period after such securities were issued, unless such securities are transferred: (i) to the issuer of the securities, (ii) to an “accredited investor” (as such term is defined in Rule 501 of Regulation D promulgated under the Securities Act) or such purchaser has reasonable belief that such transferee is an “accredited investor”, (iii) as part of an offering registered with the SEC, or (iv) to a member of the family of the purchaser or the equivalent, to a trust controlled by the purchaser, to a trust created for the benefit of a member of the family of the purchaser or the equivalent, or in connection with the death or divorce of the purchaser or other similar circumstance.
Investors in Small Companies May, and Frequently Do, Lose All of Their Investment
Investing in private securities offerings requires high risk tolerance, low liquidity need, and long-term commitment. Investment in small, especially start-up and early stage, companies is speculative and involves a high degree of risk. While promised or targeted returns on the amount invested should reflect the perceived level of risk in the investment, such returns may never be realized and/or may not be adequate to compensate an Investor for risks taken. Loss of an Investor’s entire investment is very possible and can easily occur. Even the timing of any payment of a return on an investment is highly speculative.
Among many factors to consider is that the Issuer's management may be inexperienced. Due to inexperience management may not be able to execute on its business plan. An investor may not be able to evaluate the Company’s operating history; indeed, there may be none.
The Issuer may have serious risks specific to its industry or business model. Demand for a product or service may be seasonal or be impacted by the overall economy. Small businesses, in particular, often depend heavily upon a single customer, supplier, or upon one or a small number of employee (s). It may have difficulty competing against larger companies who can negotiate for better prices from suppliers, produce goods and services on a large scale more economically, or take advantage of bigger marketing budgets.
The Company may not have audited financial statements or even be required to provide investors with any annual audited financial statements
Audited financial statements are not required for Reg. CF offerings under $500,000.00. The company is not required to provide you with annual audited financial statements or quarterly unaudited financial statements, except as explained above. The Issuer may not even have its financial statements audited, or even reviewed by outside auditors. Your decision to make an investment in the Issuer will be based upon the information the Issuer provides in its offering materials, which may not completely or even accurately represent the financial condition of the company.
The Issuer may lack adequate financial controls and procedures
The Issuer in all likelihood will not have an internal control infrastructure. It will not have the controls you would expect to find in a publicly-held company subject to the Sarbanes Oxley Act of 2002 (“Sarbanes Oxley”). Because the Issuer will not be subject to Sarbanes Oxley, its financial and disclosure controls and procedures will reflect its status as a development stage, non-public company.
There can be no assurance of no significant deficiencies or material weaknesses in the quality of the Issuer’s financial and disclosure controls and procedures. Indeed, if it were necessary to implement such financial and disclosure controls and procedures, the cost to the Issuer might even have a material adverse effect on the Issuer’s results of operations.
Lack of information to monitor and value an Issuer
As explained above, an Investor may not be able to obtain the information it wants regarding a particular Issuer on a timely basis, or at all. It is possible that the Investor may not be aware of material adverse changes that have occurred at the Issuer. An Investor may not be able to get accurate information about an Issuer’s current value at any given time.
The Issuer's management may have broad discretion over how the Issuer uses the net proceeds of an offering.
Unless the Company has agreed to a specific use of the proceeds from the offering, the Issuer’s management will usually have considerable discretion over how to use the capital raised. You may not have any assurance the Issuer will use the proceeds appropriately. You should pay close attention to what the issuer says about how offering proceeds are to be used.
Lack of control
Because the Issuer's founders, directors and executive officers may be among its largest stockholders, they may be able to exert significant control over the Issuer's business and affairs and may even have actual or potential interests that diverge from those of other Investors. This may worsen as time goes on if the holdings of the Issuer's directors and executive officers increase upon vesting or other maturation of exercise rights under options or warrants they may hold, or in the future be granted. In addition to holding or controlling board seats and offices, these persons may well have significant influence over and control of corporate actions requiring shareholder approval, separate from how the Issuer's other stockholders, including Investors, may vote in a given offering.
Completion of Offering and Relationship between Issuer and the Site
Investors that participate in an offering on the Site should be aware that once an offering has completed, and an investor has received securities from the Issuer, there may or may not be any ongoing relationship between the Issuer and the Site. Any questions or concerns related to such Issuer’s securities and continued disclosure provided in such Issuer’s annual reports on Form C-AR must be forwarded directly to such Issuer once an offering on the Site is completed. The Site assumes no liability or responsibility, directly or indirectly, for any damage or loss caused or alleged to be caused by or related to the use of or reliance on any disclosures made or services provided by the Issuer once the Issuer’s offering on the Site is completed.
Crowdfunding is an evolving method of raising money through the Internet, but it has generally
not been used to offer and sell securities. That is because offering a debt vehicle to finance
business activities could trigger the application of the federal securities laws, and an offer
or sale of securities must be registered with the SEC unless an exemption is available.
The JOBS Act included an exemption to permit securities-based crowdfunding and established
the foundation for a regulatory structure for these transactions. It also created a new
entity – a funding portal – and allows these Internet-based platforms or intermediaries to
facilitate the offer and sale of securities without having to register with the SEC as
brokers. The SEC was tasked with adopting rules to implement these provisions, which are
intended to facilitate capital raising by small businesses while providing significant
Regulation CF enables individuals to purchase securities in debt crowdfunding offerings
subject to certain limits, requires companies to disclose certain information about their
business and securities offering, and creates a regulatory framework for the intermediaries
facilitating crowdfunding transactions.
Investment Limitations Under Regulation CF
Investors are subject to certain limitations to balance the risk that typically comes along
with small business lending. Specifically, Regulation CF limits the amount individual
investors may invest across securities offered under Regulation CF over a trailing 12-month
period. The limitations are as follows:
If the investor’s annual income or net worth is less than $107,000, then an investor may
invest the greater of:
$2,200 across all securities offered under Regulation CF over the trailing 12-month period
5% of the lesser of their annual income or net worth across all securities offered under
Regulation CF over the trailing 12-month period.
If the investor’s annual income and net worth are at least $107,000, then an investor may
invest the lesser of:
10% of their annual income across all securities offered under Regulation CF over the
trailing 12-month period
10% of their net worth across all securities offered under Regulation CF over the
trailing 12-month period.
Furthermore, for any 12-month period, the aggregate amount of securities sold to an investor
through all crowdfunding offerings may not exceed $107,000.
Investing Process Under Regulation CF
To invest in securities offered under Regulation CF on Funding Wonder, register as an investor
or click on the “Bid” button on the profile page of the company you are interested in.
Once you make an investment, your investment amount will be funded and held in escrow or an
escrow-like account at a third-party agent. Investors are allowed to cancel their investment
at any time up to 48 hours before a closing. In the event the target offering amount is
reached prior to the offering deadline, all investors that have confirmed their investment
by completing the investment flow on Funding Wonder will be notified five business days prior
to the new closing date, which is meant to give investors adequate time to cancel their
Furthermore, in the case that the Issuer has a material change in their offering (e.g., terms
are updated, company operations have materially changed), all investors will receive a notice
of that material change and are required to confirm their investment. In the case that the
investor does not confirm their investment within five business days, their investment will
be automatically canceled and the funds committed and placed in escrow will be returned to
After The Investment Under Regulation CF
Securities purchased in a debt crowdfunding transaction generally cannot be resold or
transferred for a one-year period. There are resale restrictions on investments made into
securities offered under Regulation CF for the first twelve months.
In addition, companies relying on the crowdfunding exemption must file information with the
SEC and post it on their websites on an annual basis. Receiving regular company updates is
important to keep debtholders educated and informed about the progress of the company and
their investment. This annual report includes information similar to a company’s initial Reg
CF filing and key information that a company will want to share with its investors to foster
a dynamic and healthy relationship.
In certain circumstances a company may terminate its ongoing reporting requirement if:
The company becomes a fully-reporting registrant with the SEC;
The company has filed at least one annual report, but has no more than 300 shareholders
The company has filed at least three annual reports, and has no more than $10 million in
The company or another party purchases or repurchases all the securities sold in
reliance on Section 4(a)(6);
The company ceases to do business.
Disclosure by Issuers Under Regulation CF
Companies that rely on Regulation CF to conduct a debt crowdfunding offering must file
certain information with the Commission and provide this information to investors and the
intermediary facilitating the offering, including among other things, to disclose:
The price to the public of the securities or the method for determining the price,
The target offering amount,
The deadline to reach the target offering amount,
Whether the company will accept investments in excess of the target offering amount,
A discussion of the company’s financial condition,
Financial statements of the company:
Accompanied by information from the company’s tax returns, reviewed by an independent
public accountant, or audited by an independent auditor.
A description of the business and the use of proceeds from the offering,