What is investment crowdfunding?

Historically only one or a small group of larger, accredited investors could invest in companies. Investment crowdfunding is a way to source money for a company by asking a large number of backers toeach invest a relatively small amount with it. In return, backers receive equity shares of the company.In this case the backers do not need to be accredited – anyone may invest. Investment crowdfunding may also entail obtaining debt,meaning a large group of individuals may invest in a small piece of a larger loan in which the term, terms, rate and anticipated return on investment are provided in advance.

Why is investing on your portal only available to Minnesota residents?

The State of Minnesota has been one of the frontrunners passing legislation allowing non-accredited investors to make investments in privately held companies (provided certain state mandated requirements are followed). Since this is not federal legislation the opportunity is only available to Minnesota residents. If you are not a resident of Minnesota you are not able to participate. Other states are following Minnesota’s lead – look online to see if your state offers a similar program and investment opportunities.

I have never invested in anything before and I don’t have much to invest – Can anyone really invest?

The new laws allow everyone to invest and include some guidelines that have lowered the prior barriers to entry. In most opportunities investment amounts start low (i.e. anywhere from $1000-5000) which lowers the threshold for many investors to participate. The investment amount is also capped at $10,000 to help minimize the impact should an investor not get the return on investment anticipated, or worse, lose their investment.

What is an accredited investor?

In simple terms an accredited investor is someone (or a group or entity) that has enough capital (or liquid equivalents) to make a substantial investment in a company, and should they lose their investment in its entirety, their overall financial status would still not be adversely affected. More specifically, to be an accredited investor, a person must demonstrate an annual income of $200,000 (or $300,000 for joint income) for the last two years with expectation of earning the same or higher income. A person is also considered an accredited investor if he has a net worth exceeding $1 million, either individually or jointly with his spouse. The SEC also considers a person to be an accredited investor if he is a general partner, executive officer, director or a related combination thereof for the issuer of unregistered securities. An entity is an accredited investor if it is a private business development company or an organization with assets exceeding $5 million. An organization cannot be formed with a sole purpose of purchasing specific securities. Also, if an entity consists of equity owners who are accredited investors, the entity itself is an accredited investor. In 2016, the U.S. Congress modified the definition of an accredited investor to include registered brokers and investment advisors. Also, if a person can demonstrate sufficient education or job experience showing his professional knowledge of unregistered securities, he is also considered an accredited investor.

Are your investments safe? Could I lose my money?

Let us start by saying all investments involve some (or many) forms of risk. So there is, of course, the potential to suffer a loss on your investment. As a rule of thumb, typically those opportunities with the greatest rewards will also involve the greatest risk. The burden of responsibility falls on the prospective investor (you) to 1) do your own due diligence to assess the opportunity you are considering investing in, and 2) to make sure that making an investment aligns with your own personal financial needs and goals. That is to say that if you are counting on the money you are investing for future needs such as bills, taxes, college, etc. then you should consider not making the investment. In newer start-up type businesses that are common for these type of offerings, sometimes things can take longer to materialize or the results can be materially different than anticipated. And while the opposite can be true as well (faster than anticipated growth, higher ROI, etc.) we encourage you, the investor, to err on the side of being conservative. Remember if things sound too good to be true they probably are.

How do I make money on the investments?

There are number of ways that investors can realize a return on their investment. For loan investments investors typically earn interest. For equity investments investors might receive periodic dividend payments or a lump sum of cash on the exit or sale of the company. Keep in mind that the opportunities presented are private entities and any equity does not have a public market. This means that it is likely you will not be able to sell your shares unless there is some form of liquidity event which is often controlled by the company you are investing in.

I don’t know how to read or interpret some of the documents provided by the company – what should I do?

Smart investing entails reading a broad variety of information about the opportunity including private placement memorandums, financial statements, forms and agreements, etc. This can all be daunting for smaller or first-time investors. If you are unfamiliar with these materials or uncomfortable assessing any opportunity we encourage you to utilize the resources of trained professionals such as investment advisors, attorneys and accountants to help you thoroughly vet each company and to understand the terms of your investment.

Will First Investment Partners help me with personal investment guidance and advice?

Unfortunately, although our company does provide access to investment opportunities, we are not in the business of providing financial planning guidance or advice to individual investors. If you are unsure about an investment or your personal investment circumstances we would encourage you to seek professional advice from a financial planner, lawyer and/or accountant to assist you.

What is due diligence?

Due diligence is the fact checking, analysis and research that is done to confirm the information provided to you by the companies on the FIP portal and to assess if the opportunity fits within the framework for your personal situation. If questions arise from your due diligence we encourage you to raise them directly to the company prior to making any investments. And be sure to not rely solely on information provided by the company – while they may have great integrity, when it gets down to it, it is their goal to have you make an investment. So be sure to seek outside information and validation of the information provided by the company.

Why can’t I invest more than $10,000 in any one deal? If I am an accredited investor – are your deals for me, and can I invest a higher amount?

The state guidelines have capped the investment amount on all deals on this portal at $10,000, and anyone may invest in these deals, regardless if you are accredited or not. If you are an accredited investor seeking larger investments feel free to contact the company directly to see if they have an investment opportunity that will meet your needs.

What if after investing I change my mind – can I get my original investment back?

Investments are a binding arrangement between you and the company. As such, you are not able to change your mind after making the investment. Once you make any investment you will need to live with this decision. So be sure an opportunity is the right fit for you and your circumstances prior to making any investment commitments.

What is MNVest?

MNVest is the official name of the legislation that passed in Minnesota that calls for the creation of Minnesota state administrative rules that allow Minnesota businesses to raise capital from Minnesota residents.A Community Public Offering, or CPO, is the unofficial name for an offering made using these administrative rules. Additionally, whether referred to generally as a CPO or, specific to Minnesota offerings, a MN Vest-related offering, both are a form of what is known as Crowdfunding. Crowdfunding gained popularity allowing people to raise money from the general public in return for promotional products or, in some cases, nothing at all. Until now, Crowdfunding did not allow for is a securities transaction, or more simply, the ability for a company/individual to raise capital from the public in return for giving formal ownership in his or her business to those providing funds. Thus Crowdfunding, in the context of MN Vest, now allows for MN-based companies to work with MN-based resident investors to raise money, from the public, and offer an ownership position in the company in return for investment.

How do I raise money – is it debt or equity?

Business owners can set the rules for the investment they seek as long as they fit within the MNVest guidelines. You can choose whether you want to raise money using a debt instrument or selling equity in your company, and you can choose the overall terms such as interest rate for debt or valuation of shares. Keep in mind that your business model and accomplishments will need to substantiate the value you are offering to your investors to be successful.

Do I have to give away a substantial part or even control of my company?

The answer is that it depends on the stage of your business, the strength of your story and business model, and any milestones you have reached. These all help determine value and, in turn, how much of the company the amount of money you want to raise represents in ownership. There are certain guidelines in this area that help establish the value of your company. For example, if you already have sales and profits, your value might be based on a multiple of profit. But at the end of the day the most important factor is how much an investor believes in your management and your chances to deliver on your goals.

What is the largest amount of money I can raise?

As a rule, you can raise up to $1 million without having to provide audited financial statements. You can raise up to $2 million, but the business will need to provide specific historical financial documentation (audited financials) as well as forward looking information.

What is the smallest amount of money I can raise?

There is no minimum amount specified in the MNVest guidelines.

How long does it take to receive the money?

The speed at which funds can be raised varies based on how attractive your deal is. If investors like your deal and you do a good job preparing your information, despite the fact that the maximum investment from any investor is $10,000 (which means you might need a number of investors to reach your goal), you can raise funds quickly. In some cases, as quickly as 30-60 days. But on average, we would recommend planning on taking about 6 months to raise the funds. Of course, there are no guarantees. If investors do not connect with your deal it could take longer. All funds go into an escrow account and once the goal is achieved the company may drawn down the funds to use.

Who manages the investors once they put their money into my company?

First Investment Partners and this portal are merely the conduit you use to make the connection and start a dialogue with the investor. It is your (the company) responsibility to manage all interaction with investors including answering questions, closing their investment, post offering communications, etc.

I don’t know how to create some of the documents that I need to supply to investors – can FIP help?

Any good business surrounds itself with advisors to help fill any voids in their knowledge and skill base. We recommend that every business use the services of experienced and successful lawyers, accountants and advisors to ensure they are complying with business rules and regulations from a variety of perspectives. These advisors can typically prepare the information needed to post your business on our portal. Although FIP has access to many of these resources, they are solely for our internal use – we do not provide these services to companies using this portal.

After investing if someone changes their mind do we have to give their money back?

An investors decision is a binding agreement between them and the company. Once a subscription agreement (or note agreement in the case of debt) is completed and funds have changed hands then the investor is fully committed and the funds are owned by the company. The company has no obligation to return any funds to investors who may have changed their minds or whose needs have changed post their investment. As a result, it is incumbent on you, the company, to make sure that you have represented your business accurately and that your prospective investors understand the commitment they are making and are comfortable with it.

I have a business I would like to promote on your portal – what do I do?

Fill out our contact us form as completely as possible and a representative from our company will contact you to discuss your offering and next steps.

What is a pledge or bookmark?

A pledge or bookmark is an investor’s commitment to make an investment in a company. Although is not legally binding until a subscription or note agreement is executed and funds are sent, it is a good faith document and should not be entered into lightly.

What is a subscription agreement?

A subscription agreement is the formal “contract” between the company and the investor and spells out the representations, terms and ownership details for the investor’s investment. It is a binding agreement and asks the investor to make certain important representations such as Minnesota residency, which is required to make this type of investment.

How do I send you the funds?

Funds can be sent via paper check or electronic transfer. Details will be provided once a pledge/bookmark has been submitted by the investor and the subscription or note agreement is executed.

Where can I find a copy of the actual Minnesota Statutes about investment crowdfunding?

You can find the full legislation and statues here.

I am having difficulties logging in – how do I get in touch with tech support?

Please contact us should you be having any difficulties using our portal. Our contact form will ask for your contact info and a description of the issue you are experiencing. A tech support person will reach out to you promptly.

If I have invested and have questions do I contact FIP or the company directly?

All questions about your investment should be directed to the company directly. Should you have questions about the FIP portal (such as listing an opportunity) then please contact us.