Frequently Asked Questions
What is crowdfunding?
Crowdfunding is the financing of business ventures by large numbers of individuals and professional investors over the internet. Crowdfunding can take on several different forms, including reward or gift based (where investors receive a gift or other reward for their investment), donation based (where investors make donations for altruistic reasons and/or for tax deductions), lending based (where investors provide loans and receive interest payments in addition to their principle) or equity based (where investors receive shares in the business in exchange for their investment). Crowdfunding makes use of social media websites like Facebook, Twitter and LinkedIn to get the word out about a new business and to attract investors. Most experts believe crowdfunding represents the future of financing for businesses and individual projects. Crowdfunding is experiencing double-digit growth every year and offers investors and businesses a cost-effective way of financing on a global basis, by expanding the pool of investors from whom funds can be raised beyond the traditional group of owners, relatives and venture capitalists.
How is equity crowdfunding different?
Equity crowdfunding allows investors to receive ownership (i.e. “equity”) in the business venture in exchange for their investment. Equity crowdfunding has become very popular as security regulators around the world establish new exemptions and regulations to permit this kind of fund raising from both accredited and non-accredited investors. Investors can now enjoy the benefits of being a shareholder in the business and the possibility of greater returns on their investment.
How does FundingNomad work?
FundingNomad is an equity and debt based crowdfunding platform that allows issuers or businesses to raise capital from global investors. FundingNomad is focused on opportunities in entertainment, stage productions, musicals, movies, films, exhibits, recreation and leisure, as well as resort and luxury real estate. Investors can create a free account to view deals available to them (based on their geographic region and accreditation status) and invest as a passive owner in individual or pooled investment opportunities offered by companies with strong track records of success and industry experience. Investors receive equity ownership along with predictable cash flows for projects that have attractive payback times and returns, and in the case of real estate projects are secured by commercial property.
Is FundingNomad an angel network?
No. Angel networks introduce investors and entrepreneurs but tend not to get closely involved in the investment process. It is up to each investor and issuer to negotiate a deal individually and get lawyers to draft up the necessary contracts. FundingNomad is a crowdfunding platform that presents exclusive deals to investors that have been fully vetted and selected by our professional team of experts. Many angels and institutional investors choose to invest through FundingNomad because of the increased efficiency and access to deal flow.
Is FundingNomad an investment fund?
FundingNomad typically uses an investment fund model for crowdfunding deals in order to align our interests with our investors. Many of the deals we offer are for investments in individual projects, while others are for a group of projects, known as a pool. In both cases, FundingNomad invests on behalf of the investors and manages the fund. This is a very common way of investing in entertainment deals where an entertainment company will be producing multiple shows and/or similar shows can be combined to provide diversification, greater returns or tax benefits to investors. All deals on FundingNomad are identified appropriately so investors know what kind of project they are investing in.
Is FundingNomad like peer-to-peer lending?
Not exactly. Most peer-to-peer (or P2P) lending platforms match individual lenders or businesses directly with borrowers. Debt deals offered by FundingNomad are structured as a single loan to businesses and are vetted and managed by the FundingNomad compliance team.
Who uses FundingNomad?
Individual investors, institutional investors, investment groups, venture capitalists, angel investors, government entities, and banks all use FundingNomad. These investors are based around the world, from North America and South America to Asia and the Middle East.
Issuers include producers, filmmakers, entertainment companies, leisure and recreational operators, and hospitality/resort real estate developers who use FundingNomad to fund their entertainment deals. These issuers are looking for funding of approximately $1 million to over $50 million.
Why should I use FundingNomad?
FundingNomad is the best way to invest or raise funds for entertainment deals that include stage shows, musicals, film/movie productions, direct-to-digital media, exhibit experiences, recreation/leisure projects, and resort/hospitality real estate developments. The benefits include:
- Direct access to previously inaccessible private opportunities
- Vetted deal flow of exclusive entertainment offerings
- Transparency and due diligence into issuers
- Regular returns on investment
- Security, trust & support on our state-of-the-art platform
- An all-in-one platform for browsing, researching, and investing
- Access to the FundingNomad investor database
- Global reach to new investors worldwide
- Compliance with regulations and requirements
- Clear tracking and measurement of your deal progress
- Customizable deal structures and options
- Security, privacy, and access controls
What is general solicitation?
General solicitation allows companies to tell the general public they're raising money and are seeking investors. This can be done in social media, blogs, company websites, TV, advertisements, or on other public media. Different securities exemptions allow or disallow general solicitation. However, even when general solicitation is permitted, there are restrictions in what can and cannot be stated in the solicitation.
Does FundingNomad support general solicitation?
Yes. We believe strongly that crowdfunding is most successful when combined with general solicitation. However, different securities exemptions allow or disallow general solicitation. We allow our issuers to choose the exemption they want to list their securities under, and we take measures to ensure any solicitation follows the appropriate rules.
What security measures does FundingNomad take to ensure the privacy and safety of user information?
FundingNomad is a highly secure and protected crowdfunding platform. We have implemented a wide range of security measures to ensure the privacy, safety, and integrity of user information, including:
Network & Data Security:
- Amazon Web Services’ (AWS) infrastructure
- ISO 27001 certification
- Data Security Standard (DSS)
- Annual SOC 1 audits
- 2048 bit EV SSL Certificates
- Redundant network and power feeds
- Digicert SSL encryption
- Highly scalable, durable, and reliable cloud storage backup
- Disaster Recovery architecture with global data centers
- Compliant with the Motion Picture Association of America (MPAA) industry standard
Data Center Security:
- 24/7 incident management, network monitoring, premise security and monitoring
- ID badge and biometric scan required for entry
- Locked server cabinets
- Climate, temperature, fire detection and suppression protocols
- Power redundancy with UPS backups
- Network firewall protection and boundary control with ACL configurations
- FundingNomad Terms and Conditions of Use
How do I create an investor account?
Choose the Sign Up button or the Join As Investor button. You can sign up as an investor using your LinkedIn or Facebook credentials, or you can create an account using your email address and a secure password. Be sure to select the Investing option for how you plan to use your account, and agree to the Terms of Service. When you create an account, you will receive an automated email to verify and activate your account. You must click the link in this email before proceeding. If you have not received this activation email, please contact us at email@example.com. After verifying your email, you will be asked to complete your investor profile. After this, you will be able to view deals that match your accreditation status and country of residence.
How do I create an issuer account?
Choose the Sign Up button or the Raising Capital button. You can sign up as an issuer using your LinkedIn or Facebook credentials, or you can create an account using your email address and a secure password. Be sure to select the Raising Capital option for how you plan to use your account, and agree to the Terms of Service. When you create an account, you will receive an automated email to verify and activate your account. You must click the link in this email before proceeding. If you have not received this activation email, please contact us at firstname.lastname@example.org. After verifying your email, you will be asked to complete the issuer application. A member of the FundingNomad team will contact you shortly to discuss your application.
Why am I signing a document when I make an investment?
As part of the investment process, you will be asked to indicate how much you want to invest and you will be asked to sign a commitment document online. This commitment document is a legally binding document that says that you are agreeing to make an investment. You can complete this document right from your computer or mobile device, by filling in the indicated fields and signing the signature field using your finger on your trackpad or mobile screen, your mouse, or by choosing the type-to-sign option (which will generate a signature for you). You will receive a copy of any documents you sign online and you can review them from your personal dashboard.
Are e-signatures legal and secure?
The U.S., Canada, the UK, Australia, New Zealand, and many countries around the world have enacted laws providing electronic contracts the same legal validity and enforceability of pen-and-paper contracts. FundingNomad’s digital signing is a trusted and secure way to obtain electronic signatures that is compliant with the Electronic Signatures in Global and National Commerce (E-SIGN) Act and the National Conference of Commissioners on Uniform State Laws' Uniform Electronic Transactions Act (UETA). Our digital signing uses 256-bit SSL encryption by DigiCert and world-class Amazon Web Services security infrastructure to protect and secure all documents you sign.
FOR INVESTORS IN THE USA
What is the JOBS act?
The Jumpstart Our Business Startups Act or JOBS Act, is a law intended to make it easier and more cost efficient for small issuers to raise capital in the United States and, if public, meet ongoing disclosure obligations. . It was signed into law by President Obama on April 5, 2012 andincludes the adoption of a new equity crowdfunding rule that pre-empts state regulation (Title III equity crowdfunding), the amendment of the accredited investor exemption to allow advertising (Rule 506(c)), and the amendment of Regulation A to increase the amount that can be raised under this exemption (Regulation A+). The Rule 506(c) rules (Title II) became effective on September 23, 2013 and the Regulation A+ rules on June 25, 2015. Title III went into effect on May 16 2016.
What is Title II of the JOBS act?
Title II of the JOBS Act allows a company to raise an unlimited amount of capital from accredited investors and employ “general solicitation” to market security offerings provided they follow the rules and guidelines of Rule 506(c) of Regulation D. Under this new exemption, companies can now use the Internet or other mediums (such as LinkedIn, Facebook, blogs, company websites, TV, advertisements, etc) to advertise their security offerings. This can give a company the chance to attract a large number of new investors in a short period of time. Although companies can advertise to the public, they can still only accept money from accredited investors.
What is Title III of the JOBS act?
Title III CF (crowdfunding) of the JOBS act was designed for crowdfunding deals and enables companies to raise money from accredited and non-accredited investors and allows restricted general solicitation. Title III was passed on May 16, 2016. Companies can raise a maximum amount of $1 million through crowdfunding offerings in a 12 month period, but these must be made through a Broker-Dealer or a Portal Intermediary, and companies must provide detailed disclosure of corporate and financial information. There are specific financial and asset criteria that limit the amount that non-accredited investors can invest in a venture within a one year period. Crowdfunding portals also have significant restrictions and liabilities they need to adhere to when listing deals.
Does FundingNomad support Title III deals?
At this time, FundingNomad does not support Title III CF deals. There are many restrictions and liabilities with Title III fundraising, as well as reporting and compliance requirements for issuers. For example, Title III limits fundraising for companies to $1 million in a 12-month period. There are also restrictions on marketing and advertising of deals, as well as legal liabilities. However, as we see value for issuers and investors, and as regulations evolve, we will consider supporting Title III deals in the future.
What is Regulation D?
What is the difference between Reg D 504, 505 and 506?
Rule 504 provides an exemption for the offer and sale of up to $1 million of securities in a 12-month period. The company may use this exemption so long as it is not a blank check company and is not subject to Exchange Act of 1934 reporting requirements. General offering and solicitations are permitted under Rule 504 as long as they are restricted to accredited investors.
Rule 505 provides an exemption for offer and sale of up to $5 million of securities in a 12-month period. Under this exemption, securities may be sold to an unlimited number of accredited investors and up to 35 unaccredited investors who do not need to satisfy the sophistication or wealth standards associated with other exemptions. Purchasers must buy for investment only, and not for resale. The issued securities are restricted, in that the investors may not sell for at least two years without registering the transaction. General solicitation or advertising to sell the securities is not allowed.
Rule 506 provides an exemption for the offer and sale of an unlimited amount of securities in a 12-month period. There are financial statement requirements for companies and investors receive restricted securities, which may not be freely traded in the secondary market after the offering. The rule is split into two options - 506(b) and 506(c) - based on whether the issuer will engage in general solicitation or not to market the securities.
If the issuer will not use general solicitation or advertising to market the securities then the sale of securities can be issued under Rule 506(b) to an unlimited number of accredited investors and up to 35 unaccredited investors. Unlike Rule 505, all non-accredited investors, either alone or with a purchaser representative, must be sophisticated – that is, they must have sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment. Rule 506(c) is a new exemption that allows general solicitation, or public fundraising. 506(c) is quickly becoming the most common choice.
The main difference with 506(c) is the higher standard for ensuring that every investor is accredited. For issuers and platforms using either 506(b) or 506(c), they need to have a "reasonable belief" that an investor is accredited before accepting their investment. With 506(b), founders often take the investors own word, and take relatively few steps toward verifying it. That standard isn't good enough for 506(c); “reasonable steps” must be taken to verify that investors are accredited.
Does FundingNomad support Regulation D deals?
Rule 506(c) is the most flexible exemption of Regulation D and FundingNomad does support 506(c) deals. If you are considering raising capital on FundingNomad, please contact us at email@example.com to better understand how Reg D 506(c) deals are structured.
What is Regulation A and A+?
Regulation A (or Reg A) contains rules providing exemptions from the registration requirements, allowing companies to use equity crowdfunding to offer and sell their securities without having to register the securities with the SEC. Reg A offerings are intended to make access to capital possible for small and medium sized companies that could not otherwise bear the costs of a normal SEC registration and to allow non-accredited investors to participate in the offering. On March 25, 2015, the SEC adopted rules of the JOBS Act and expanded Regulation A into two tiers, now called Reg A+ or Title IV:
- Companies can raise up to $20 million in a 12-month period
- Accredited and non-accredited investors can participate
- General solicitation (public advertising) is permitted
- Reviewed financial statements are required
- Issuers must pass a state-by-state coordinated review
- No on-going reporting requirements
- Companies can raise up to $50 million in a 12-month period
- Accredited and non-accredited investors can participate
- General solicitation (public advertising) is permitted
- Audited financial statements are required
- Exempt from state-by-state registration (only register with the SEC)
- Requires Audited Financials
- Non-accredited investors are limited at 10% of income/net worth per year
- On-going reporting requirements
Does FundingNomad support Regulation A deals?
FundingNomad does not support Regulation A+ deals. There are significant costs and delays in structuring a Reg A+ offering, as well as regulations regarding disclosures and reporting. However, as we see value for issuers and investors, and as regulations evolve, we will consider supporting Reg A+ deals in the future.
What is Regulation S?
Regulation S provides an exemption from the registration requirements of the Securities Act of 1933 for U.S and foreign offerings made to investors outside of the United States. It states that no registration or exemption is required if an offering is completely limited to foreign residents, each investor is not present in the U.S. when the sale is made, and each signs a certificate stating that the investor will not sell the securities into the U.S. unless they comply with U.S. securities laws. General solicitation is not permitted within the United States or to U.S. persons, and securities may not be made to U.S. persons (including U.S. persons physically located outside the United States).
Does FundingNomad support Regulation S deals?
FundingNomad supports Regulation S deals. If you are considering raising capital on FundingNomad, please contact us at firstname.lastname@example.org to better understand how Reg S deals are structured.
FOR INVESTORS IN CANADA
What is the Accredited Investor exemption for Canada?
Does FundingNomad support Accredited Investor deals?
FundingNomad supports the Accredited Investor exemption. If you are considering raising capital on FundingNomad, please contact us at email@example.com to better understand how Accredited Investor deals are structured.
What is the Offering Memorandum exemption for Canada?
In Canada, all provinces now support the Offering Memorandum (OM) exemption that allows companies to raise an unlimited amount of capital from Accredited, Eligible and Non-eligible (unaccredited) investors. The OM exemption does not require disclosure reporting but does require annual financial reporting and also requires an Offering Memorandum document (among other requirements). Accredited Investors are not limited in the amount they can invest, but Eligible and Non-eligible Investors do have certain investment limits.
Does FundingNomad support Offering Memorandum deals?
FundingNomad supports the OM exemption. If you are considering raising capital on FundingNomad, please contact us at firstname.lastname@example.org to better understand how OM deals are structured.
What are the Crowdfunding and Start-Up Crowdfunding exemptions in Canada?
Like the United States, Canada has recently implemented several new crowdfunding exemptions to help small businesses raise capital from accredited and non-accredited investors. Both exemptions allow issuers to raise small amounts of capital from investors without preparing a prospectus. Only certain provinces support these new exemptions.
Does FundingNoamd support Crowdfunding and Start-Up Crowdfunding deals?
FOR INVESTORS OUTSIDE THE USA AND CANADA
What exemptions does FundingNomad use outside Canada and the United States?
Exemptions outside of the United States and Canada are dictated by your country’s security regulators. However, your project can still potentially be listed on FundingNomad through our Cayman platform. There are many issues to consider when deciding on the right exemption to list your deal under. But we are here to help. If you are considering raising capital on FundingNomad, please contact us at email@example.com to better understand how to structure your deal.