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PRE-REGISTRATION STAGE

If you are considering registering as an investor on FairStreet.

We put in a lot of effort on the back of our own personal experience to select the businesses that do fundraising on our platform. As much as possible, we want to ensure that these businesses are worthy of your trust and hard earned money.

Our aim is to help the entrepreneurs that create most of the jobs in the country. Any small business – from a neighborhood restaurant to a technology start-up – qualifies to be listed on FairStreet once approved.

We try to find the businesses that tend to slip under the radar. We believe that some of these businesses, which are not easily discovered, can deliver the most value to investors.

All investments present a risk-return tradeoff. We identify the opportunities that present a competitive risk return tradeoff so businesses that are riskier are included only if they present a higher possible upside.

We try to identify small and medium businesses that have not had direct access to investors across the country but present a sound investment proposal.

If you are an accredited investor, there are no limits on your investment. For non-accredited investors, we are guided by the limits set in the JOBS Act – between 5% and 10% of your annual income.

Yes. We do criminal background checks on the promoters of these businesses. We also speak to the principal owner of the business as well as their references to assess their future prospects and plans.

We are currently looking for businesses that have a bright prospect, an honest management and a clean background. For now, such screening is purely subjective and based on our own judgment and experience.

We then list the selected business in a Qualification Stage where we let the investors tell us the businesses they are most interested in by voting for them. Only the best businesses then proceed to actual listing for investment.

Presently, only accredited investors are eligible to invest on FairStreet. An individual can qualify as an accredited investor if the person’s:

  • net worth, or joint net worth with the person’s spouse, exceeds $1 million at the time of the investment, excluding the value of the person’s primary residence;
  • income exceeds $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year.

However, even if you do not qualify, you are welcome to browse our website if you find it interesting. We are keeping a close watch at the developments on the JOBS act and plan to allow investment for non-accredited investors when the SEC allows it.

Unless prevented by the laws of your country, anyone can invest here.

You can use a credit card from any country but our payment processor will charge your card in US dollars only. Prevalent currency exchange rates will apply if you have a non-US dollar credit card.

Yes, you are buying shares in the company. These shares are represented as an equity percentage throughout FairStreet.com.

You can transfer money through your credit card or through a bank transfer. If you want to use other modes of transfer please email us at info@fairstreet.com and we will see what we can do to help you.

This money goes to a designated bank account and is transferred to the business if the fundraising campaign succeeds or is returned to you if the campaign fails.

If the business is not able to reach its targeted investment, all money is returned to the investors.

You can chose to stay anonymous on FairStreet but your details will be revealed to the business if the fundraising succeeds. This is a legal requirement.

The business will also have the right to return your investment under certain circumstances. For example, if the business believes that you might be a competitor to its business, it might reject your investment.

PREVIEW STAGE

Investors can express their interest in businesses listed in this stage.

We put in a lot of time, effort and money in selecting businesses that are listed in this stage on our platform and thereafter in their promotion. In return, we ask the businesses to sign a six-month “right of first refusal” for any online equity financing offering they might consider in the future.

Expressing your interest in the businesses is an indicator for the Business as well as for FairStreet to gauge the probability of a successful offering by the business.

A Business spends a fair amount of time in launching a fundraising campaign and any investors it might have risk blocking their funds for the duration of the offering.

If you express your interest at this stage, it will help FairStreet and the Business in deciding whether the Business should start an offering or should wait till the time when it is able to get more interest from potential investors. Such a process helps save time and effort of businesses and investors alike.

At this stage, we only do a criminal background check on the promoters / partners of the business.

No, they are not. They might decide to forego or postpone any fundraising plans if they do not get enough “interest” from visitors to the website. Even if they get a good response from potential investors and visitors to FairStreet, they might still decide against doing a fundraising offering at their own discretion.

However, there is a pretty good chance for a business to conduct a fundraising campaign if there is interest from investors. Businesses put a fair amount of time and effort in listing on the platform hence only serious businesses would be listed on the platform.

In this stage you are only indicating interest. You are not committing to investing in the business in the future.

The full force of the SEC mandated anti fraud legislation protects you. You are also protected by the investor’s agreement signed by the issuer.

You will be liable to pay tax on the return on your investment. The actual tax you will need to pay will, of course, depend on your personal financial situation.

Yes, of course. Please use the Messages section on the preview page. If you would like to send a private message please mark the message as private.

LISTING STAGE

Investors can invest in businesses that are in this stage.

We are required by law to verify your accredited investor status before we let you invest through our platform. We, or our partner agencies, may need to ask you for documentation; you will be responsible for the genuineness of the documented that you provide. You will have the right to refuse to provide any documentation but, if that is the case, we may not be able to allow you to proceed with your investment.

From the perspective of your investment in a business, you will only be a shareholder of the business with no liabilities. However, please take a look at the investor agreement offered by the business before investing.

We take payments through WePay – a California based processing company. You can fund through your Visa, Mastercard and Discover cards. You can also pay directly through your US bank account.

A business has the right to return your investment under certain circumstances. For example, if the business believes that you might be a competitor to its business, it might reject your investment.

We do not charge any fee from the investors. The payment processing company (WePay) will charge a transaction fee of 2.9% plus 30 cents per transaction that will be covered by the business.

If the fundraiser is still going on, you can back out till 30 days after transferring your money. You cannot back out after the fundraiser has ended.

You are entitled to the equity as promised and all the benefits that come with it including stockholder’s rights as drawn out in the investor’s agreement for the business that you have invested in.

Yes, it is possible, especially if you invest in a high risk, high potential growth startup. If you want less risky investments please choose an investment in a relatively stable company with a history of stable revenues.

FUNDRAISING SUCCESSFUL

The business has successfully raised the amount it was targeting.

You will receive an electronically generated receipt from the Business owner certifying your investment into the Business. Additionally, you will get a share certificate from the business.

  1. Paperwork in completed.
  2. Monies are transferred to the issuer's account.
  3. Share certificates are issued to the investors.

Most businesses welcome participation by the investors. The degree of influence you can have on business decisions will depend largely on the percentage of equity you have in the business. Some business may be especially interested in mentoring from their investors. If you are interested in those opportunities you may want to look at investing in businesses that have indicated their interest in seeking mentorship.

The businesses will declare where they will use the proceeds. In most cases, you will not have a say in where the business uses your investment.

You will be entitled to pro-rate claim on the assets of the company after paying off any debtors. If there is nothing left over your equity may lose all its value. If you believe you (or your associates) can turn around the business it may be possible to work out an arrangement with the business.

An equity investment can pay off in two ways:

  • Dividend - The business is profitable and chooses to share some of its profits with its shareholders.
  • Capital appreciation - You may get an opportunity to sell your stocks at a higher price than what you purchased them for.

A business is bound by the covenants in the investor’s agreement and cannot legally change the primary business without the consent of the shareholders in most, if not all, cases. We advise you to study the investor’s agreement before completing your investment.

You will not be able to sell your shares for at least one year after you purchase them as they will be "Restricted" (for more details look at http://www.sec.gov/investor/pubs/rule144.htm ).

You can get a return on your investment if:

  1. Buy Back: The company you invested in buys back its shares, possibly at a premium;
  2. Trade Acquisition: Another organization, possibly a competitor or a larger corporation buys out the business and offers to buy your shares;
  3. Financial Acquisition: An investment fund like a PE/VC fund or even an individual investor buys out the business.

FairStreet has plans to offer a secondary market in the future but a lot depends on SEC’s rulemaking. If that comes online, you will have the option to resell your shares online as well.

Companies typically pay dividends when they have been profitable for a while and have run out of sufficient growth opportunities to invest their profits. Since the companies on this platform are raising money and need funds for growth it is not likely that they will pay out dividends in the immediate future.

That being said, an issuer may promise a dividend payout to its shareholders in the offering documents; in which case they will be bound to pay the dividends.

We take all possible care in choosing the business and conducting due diligence. However we concede that there may be a chance that a business may indulge in fraudulent practices at some point in its existence.

You are free to take any legal action available to you by law against such businesses. Keep in mind that any fraud is a crime and the federal and state authorities will also take action against such businesses if bought to their notice.

We encourage every business that raises funds on our platform to keep the investors updated periodically. At the very least, we encourage businesses to share their annual financial reports with the investors.

You will also be able to look at your investments and updates posted by the business in your FairStreet login.

We encourage every business that conducts fundraising on our platform to provide periodic updates. Please look at the investor rights and terms issued by the business while investing to check the kind of rights you will have and the information that the business is promising to share with its investors.

In most cases, you will not have a say in the running of the business. However, some businesses might decide to involve you in their business too. This is solely at their discretion. Please look at the investor terms document while investing to determine what kind of participation you may or may not have in the running of the business.

You will have to transfer the money when you commit to the investment. It will sit in an account while the fundraising campaign is on. If successful, the monies will be transferred to the business. If not, the monies will be returned to you.

Your certificate will be mailed to you within 30 days after the successful completion of the campaign.

FUNDRAISING UNSUCCESSFUL

The business was unsuccessful in raising the amount it was targeting.

We will help you talk directly to the business.

PRE-REGISTRATION STAGE

If you are considering registering as a business on FairStreet.

Broadly, all equity funding platforms are similar in that they facilitate exchange of money from investors and equity / shares from businesses. However, there are subtle differences in the process adopted by all platforms to facilitate such an exchange.

At this stage we are extremely keen on handholding the businesses we feature on our website. We believe that as the equity crowdfunding industry is in its infancy, participants need more instructions and coaching to help them leverage the opportunity in the best possible manner.
Going forward we are working on the implementation of a due-diligence process that will change the way businesses and investors think about due-diligence in the crowdfunding investment industry.

Moreover, unlike most platforms, all offerings on FairStreet go through a brief stage where they are not open to investment. At this stage, we only seek investor interest. This serves two purposes. One, everyone gets a sense of the probability of success of any fundraising offering by the business. Second, if there are any hidden skeletons in the closet of these businesses, they are likely become public because investors will be able to post comments on the businesses listed.

Your success is our success. All our promotion and media coverage focuses on the businesses listed on our website. We will try to get you as much as exposure as we can. This not only helps at the fundraising stage but also in your business itself.
Besides, we are very selective of the businesses that go on our platform. If you qualify to go live on our website, it sends a message to potential investors that we have looked at your business and, in our opinion, your business is trustworthy and might have exciting growth prospects.

We do not charge any fees for your listing on your website. If your fundraising offering is successful, we will charge a small percentage of the investments made to your Business.

Depending on the size and stage of your business you may have multiple fundraising options- from raising money from friends and relatives to listing on public markets. You could also look at small business loans and other lines of credit.

We recommend raising funds from our platform if you are beyond the stage of proof of concept but do not have sufficient size and scale to do an IPO. Compared to a loan, you get funds without having to pay any interest or pay the amount back in any fixed interval but in return the investors get a share in the upside of your business.

For a more detailed discussion look at our blog post.

We charge businesses a fixed percentage of the funds raised.

As much as you are comfortable with – typical values are between 5% and 25%. It will depend on how much money you wish to raise and the value of your business.

Valuing a business is a vast and complicated field. It is said to be as much of an art as a science. We recommend you research various ways of valuing a business including income based, asset based and market based approaches. The particular approach to use depends on the stage and nature of the business. Where possible, it might make sense to use multiple approaches and then decide on a value taking into account all valuations and the ever important "gut feeling".

If you are doing this for the first time it may be prudent to engage the services of an independent agency that specializes in valuing businesses such to yours.

You may find this article interesting.

You are choosing to make some information about your business publicly available by listing in on FairStreet.com. We cannot guarantee the confidentiality of publicly available data. However you can choose to divulge some details only to the confirmed investors and instruct them to not reveal certain "classified" information in the investor’s agreement that they will sign.

Businesses that will not be allowed are the ones:

  • Promoting any bias on the basis of gender, age, sex, race, sexual orientation and religion are strictly barred.
  • Promoting pornography, weapons, drugs, alcohol and cigarettes.
  • Promoted by people with a criminal record.
  • Promoting any kind of intolerance (as considered by FairStreet in its sole discretion).
  • Promoting Lottery or Gambling.

PREVIEW STAGE

Businesses are listed in this stage before fundraising to gauge investor interest.

We put in a lot of time, effort and money in selecting businesses that are listed in this stage on our platform and thereafter in their promotion. In return, we ask you to sign a six-month “right of first refusal” for any online equity financing offering they might consider in the future. We are fairly confident that you will like our services so much that you will stay with us!

  1. Legal Name of Business (including DBA),
  2. Entity Type (C Corporation, LLC, LLP, General Partnership, Proprietorship),
  3. Year of Incorporation,
  4. Principal Place of Business (address) and Contact Information,
  5. Name and address of Partners / Owners,
  6. Title in the organization (Executive Officer / Director / Promoter),
  7. Industry,
  8. Revenue Range,
  9. A brief summary of services / products (200 words),
  10. A write-up on the Business (500 words) that includes,
    1. How it started
    2. Future plans
  11. Equity offering size being contemplated ($ amount) and equity offered (percentage),
  12. Would the business pay dividends if profitable,
  13. Photographs of owners / partners with a brief bio for each.
  14. An optional video on the business, if available.

LISTING STAGE

Businesses in this stage can start receiving investment.

At the moment, there are no minimum and maximum amounts. Once the next phase of JOBS Act comes into effect, there will be restrictions on the maximum amount of funds that can be raised by a business.

  1. Legal Name of Business (including DBA),
  2. Entity Type (C Corporation, LLC, LLP, General Partnership, Proprietorship),
  3. Year of Incorporation,
  4. Principal Place of Business (address) and Contact Information,
  5. Name and address of Partners / Owners,
  6. Title in the organization (Executive Officer / Director / Promoter),
  7. Industry,
  8. Revenue Range,
  9. A brief summary of services / products (200 words),
  10. A write-up on the Business (500 words) that includes,
    1. How it started
    2. Future plans
  11. Equity offering size being contemplated ($ amount) and equity offered (percentage),
  12. Would the business pay dividends if profitable,
  13. Photographs of owners / partners with a brief bio for each.
  14. An optional video on the business, if available.

Besides these documents, the principal officer of the company will have to sign a listing agreement for FairStreet and agree to FairStreet’s terms and conditions.

There are no defined timelines for the duration of a fundraiser. Ideally, the fundraiser should be for 45 to 90 days.

Our fee will vary from case to case. In general, the fees would be approximately 5% of the funds raised. Additionally, there will be charges levied by the payment processing company that are equal to 2.9% of the amount plus 30 cents.

You are expected to provide true and genuine documentation, honor the promises made in the offering documents and respect the stockholder’s agreement in letter and spirit.

It depends on your business. We recommend offering rewards if you can think of some rewards related to your business. Rewards that are not related to your business may not be very helpful.

If you have a consumer business where the product is not too expensive we suggest offering all your investors some products is a good way to thank them for the support they have shown their business. It also helps build your brand if investors like your product and recommend it to their friends.

You will need financials, not necessarily audited though.

We can help you with some templates and guide you to our partners who can assist you further for a fee.

Yes, you do unless you give up majority stake (more than 50%) in the equity offer.

You have nothing to fear if you have been honest and upfront about the risks involved and have not made any fraudulent claims. Your investors will have pro-rata claim to the assets of your organization after paying off any debtors.

You can do another private offering on FairStreet or another platform. You can also do a public offering on any public stock exchange. You will need to honor the terms and conditions set out in the investor’s agreement that you signed for this offering.

Documents needed:

  1. Certificate and Articles of Incorporation,
  2. Investor Rights Agreement detailing the rights that the investors will have in your company.

FUNDRAISING SUCCESSFUL

The business has successfully raised the amount it was targeting.

You will need to send share certificates and signed stockholder’s agreements.

Besides sending the documents to the investors you will need to file a Form D with the SEC.

We will assist you with the paperwork but we will need your full co-operation since it can be an involved process.

They will be deducted from the funds raised.

Formally you have to honor the terms and conditions spelled out in the investor’s agreement. And, informally you have to work your behind off so that they get a good return on their investment!

You can contact your existing investors individually or collectively through the "My Investors" section on the FairStreet website. Apart from that we will make their contact information available to you and you can send them any updates through any other channel of your choice.

Yes, you can make an offer to buy back the equity but they are not bound to agree to your offer and can choose to sell it elsewhere to make a better profit.

No, you have to honor the reasons that you had stated when you pitched the campaign.

Some investors especially those with experience funding or running businesses similar to yours may be able to spend some time mentoring your business. Please include the fact that you welcome mentoring in your pitch and it may help attract the right kind of investors to your business.

FUNDRAISING UNSUCCESSFUL

The business was unsuccessful in raising the amount it was targeting.

In most cases the monies will be refunded to the investors. However under some special circumstances you may be allowed to extend the funding duration but only after giving the existing investors the chance to back out.

Typically no. The reason is that you may not be able to honor the commitments made to investors if you do not reach your funding target.