Introduction to GET Crowdfunding
What is Crowdfunding?
Crowdfunding is the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet. Crowdfunding is a form of crowd sourcing and alternative finance. In 2015, it was estimated that worldwide over US$15 billion was raised this way.
GET Crowdfunding model is based on two types of contributors: the project initiator who proposes the idea and/or project to be funded & individuals or groups who support the idea.
What type of Crowdfunding is offered by GET?
There are different types of crowdfunding supported by GET
2. Peer to Peer
3. Donations and Rewards
What is Equity Crowdfunding?
Equity Crowdfunding is the online offering of private company securities to a group of people for investment and therefore it is a part of the capital markets. Equity crowdfunding is also referred to as crowd-investing, investment crowdfunding, or crowd equity. Equity crowdfunding is a mechanism that enables broad of investors to fund venture companies and small business in return for equity. Investors give money to a business and receive ownership of a small piece of that business.
What is Peer-to-peer lending?
P2P lending is the practice of lending money to individuals or businesses through online services that match lenders with borrowers. Lenders can earn higher returns compared to savings and investment products offered by banks, while borrowers can borrow money at lower interest rates. There is the risk of the borrower defaulting on the loans taken out from peer-lending websites. Many peer-to-peer loans are unsecured personal loans, though some of the largest amounts are lent to businesses. Secured loans are sometimes offered by using assets as collateral. They are made to an individual, company or charity.
What is Donations & Rewards Crowd Funding?
Donations based crowdfunding: The funder donates funds without expecting any return. Donations are typically used to support disaster relief, famine or education programmes etc Rewards-based crowdfunding: The funder transfers funds with the expectation of a reward, which may be in the form of a token gift or an early/exclusive release of a product or service offered by the venture company. All-or Nothing (AON) campaigns are the campaigns supported on this platform. These AON campaigns require a project to hit 100 percent of its funding target. If the target is not achieved, GET returns funds are to the funders.
Why invest through Crowdfunding?
The risk is spread amongst more individuals/companies. Most companies who raise investment through crowd funding are start-ups and in most cases they are Greenfield projects with unproven track record and thus the shared risk provided by crowd funding reduces a huge burden on one or few investors on a project.
Is an Equity investment appropriate for me?
If you can’t afford to wait 2+ years for a return, the answer is also NO.
You need to have a strong belief in the future potential of the company you are backing. A assessment is needed of the industry and future anticipated trends including existing ventures with similar or equivalent business cases.
Is Peer to Peer investment appropriate for me?
Compared to equity investments, loans generally may have less repay back periods but may also be unpaid considering the rate of Non Performing Loans (NPLs) obtaining on the market it is prudent to have a closer analysis of the venture you intend to back.
How can I decrease the risk?
You are more likely to avoid loss by diversifying your investments, focusing in areas you have expertise in, and investing in companies you see potential. Even professional investors have a hard time predicting exactly how companies will earn money in the future. Investing in what you understand, and find personally valuable is an important signal of a good investment.
How many investments should I make?
We recommend making a bunch of small investments each year, rather than one large one. For instance, if you decide you can safely invest $500 per year, it’ll be less risky to make ten $50 separate investments instead of a single $500 for instance.
What is the minimum or maximum I can Invest?
GET recommends a minimum of $50 for Equity investments, $20 for Peer to Peer projects and $10 for Donations and Rewards Campaigns.
GET recommends a maximum of upto $10,000 per individual investment across the board.
Can I easily re-sell my investment?
It’s safest to assume you cannot resell your investment to another investor. First, there is not yet a liquid secondary market for private companies. Second, almost every equity security listed on GET prohibits resell, as private companies are recommended to carefully guard the number of shareholders on their “cap table” unless recommendations for Public Listing has garnered majority approval of shareholders of a venture.
Will my percentage ownership be diluted?
Yes. An equity share will almost certainly be diluted.
Successful companies host multiple series of financings, all the way to Initial Public Listing. For each financing, the company issues additional shares to the new investors. As long as the value of the company increases with each funding round, this is healthy and normal. For example, the first investor can purchase 10% of a company for $50,000. In two years that stake may be diluted down to under 2%, but may be worth $120,000.
Will my Equity investment have voting rights?
It’s rare for an investment on GET to offer voting rights directly to smaller investors because project promoters fear it can scare off future investors who invest in later rounds, due to the hassle of collecting thousands of signatures. You should assume your investment does not include voting rights unless specified otherwise. Your share will almost certainly be diluted when companies raise further funding.
How to Invest
Which ventures should I fund?
GET is designed to be a platform connecting investors with ventures. GET does not recommend you invest in any particular venture, even if a venture appears to be more featured on https://www.getnorthwards.africa/
In an effort to reduce fraud, we apply standards when deciding which ventures can fundraise on GET, but you should conduct your own due diligence to decide which ventures, if any, are right for you.
The information regarding fundraising activities on GET is provided by the project promoters and/or companies themselves. GET may assist a company in presenting this information, but we don’t verify its accuracy or endorse the company.
How should I conduct due diligence?
You are responsible for conducting your own due diligence. Groups of prospective investors working together are more likely to discover issues with a venture: the “wisdom of the crowd” at work. When companies are fundraising, investors are highly encouraged to ask detailed questions. If the project promoter gives answers that are not convincing, then you shouldn’t invest!
Can non-Zimbabwean Citizens invest?
Yes, unless the law of your country prevents you from investing.
How do I apply to invest in a company?
If a company is fundraising on GET, and you are eligible to invest, there will be a big green “Back Venture” button near the top of the profile. Indicate how much you’d like to invest, choose your payment method (we support RTGS, PayNow, Paypal), then agree to the terms and conditions.
I applied to invest. When do I hear back?
You’ll usually hear back within a day, unless there’s special circumstances. No money will leave your bank account until your application has been accepted. The size of your investment may be reduced to a lower amount or may be rejected.
I’ve been “waitlisted”. What’s that?
Investors are often waitlisted when ventures receive more money than they need (i.e., the round is oversubscribed). Instead of reducing the size of everyone’s investment, project promoters (or GET) may choose which investors to accept, and may prioritize those who can help their company the most. You can decrease your chances of being waitlisted by applying to invest early, connecting your social networks, and filling out your profile.
My application is accepted. Now what?
You have 7 days to ensure payment is sent to a GET account. If this time expires, your investment application will be automatically cancelled. Your funds will be held in an escrow account until the fundraising target has been met and the round closes. Your funds are then transferred to the venture and your investment is fully confirmed and executed.
How are contracts signed?
Everything is handled electronically. After signing contracts on GET, you’ll be emailed a PDF of the executed documents signed by both parties. A copy of your contract is also always available on GET.
How is GET compensated?
GET charges investors 1% of their investment or donation upto a maximum of $50. We also charge the fundraiser up to 2% of their total funding volume.
I changed my mind! Can I cancel my investment and get a refund?
Yes. You can change your mind at any time before the fundraise closes, even if you’ve signed the investment contract. You’ll receive a full refund, for any reason.
Are there any limitations on cancelling an investment?
No. While your funds are still in the escrow account, and if the fundraising round has not been closed, you can cancel your investment commitment anytime, for any reason.
Can the company cancel my investment?
It’s rare, but yes. Your investment may be cancelled if your funds are still in escrow: Project Promoters have the same cancellation rights that you have. Legally, ventures can cancel your investment for any reason, but a more typical example would be if they discovered you are aligned with a major competitor.
After the fundraising round is officially closed, and the venture has accepted the funds in the escrow account, your investment cannot be cancelled.
When will the fundraising round close?
A fundraising round will close at their offering deadline. However, a round may close earlier after their funding target has been met. In this case, you will receive a 5 day notice before the close date via e-mail. (Also, every round is open not less than 30 days).
What happens if the fundraising fails?
You’ll be notified via e-mail and receive a full refund of your investment.
How long will it take to receive my refund?
It depends on the method by which you’ve paid. We’ll initiate a refund as fast as possible but it can take up to 14 days.
What updates should I expect after investing?
You should not expect too much communication with project promoters. After all, you want them busy running the business, not talking to hundreds of investors all day. GET encourages ventures to update their investors once per quarter, but they are under no legal obligation to do so.
How can I help the ventures I invest in?
Most of the fun from investing in venture comes from how you can help them! You can offer product feedback, introduce project promoters to relevant people in your network, or evangelize product launches. Project promoters will often publish specific requests for help to their websites as well.
Do I have direct access to the project promoter?
No. We don’t hand out their email addresses or phone numbers. All communications with project promoters are handled via the GET website.
Will I receive an annual report?
If you are an investor investing in a PBC, you will not receive an annual report——just periodic updates from the project promoters.
If you are an investor in a PLC company, the company will issue an annual report once a year with financial statements and a discussion of its business, no later than 3 months after the end of their fiscal year.
Will the venture always use GET in the future?
After fundraising, GET provides the venture free continued access to our platform. But there is no guarantee the venture will continue to use our services. They may also decide to raise their next round of financing on a different funding platform. Promoters and their companies will however continue to be bound by terms and conditions of investment entered into when they raised funds through GET.
How do I earn a return?
If the company is successful, the value of the shares can increase with each subsequent round of financing, until the company is acquired or goes public. At this point, you can sell your shares. If you invest through a GET Fund, you will hold an interest in the GET Fund instead of holding the company’s securities directly. We will manage and sell the company’s securities on your behalf, and distribute any proceeds to you upon such a sale. Of course, when investing in something as risky as a venture, there may be no return at all.
How is the valuation determined?
Market demand often determines the valuation. This valuation shifts with time, depending on the amount of ventures chasing capital. Early-stage high-growth ventures are often valued in the range of $150,000 to $250,000 for their first round financing. Lifestyle businesses are valued at less.
How long until I see a return?
You are usually waiting until the company declares a dividend, is acquired or goes public. If you invest through a GET Fund, you may also hold interests in the fund for a very long time, but GET will decide how and when to sell the shares, then distribute any proceeds to the investors in the fund.