Frequently Asked Questions
Want to learn more about crowdfunding? Well, you’ve come to the right place! Here we answer the most common questions people ask on the topic, and explain some of the important rules governing these investments.
Questions about GridShare
What is GridShare?
- GridShare is an online platform that hosts investment opportunities from independent issuers focused on the cleantech and renewable energy industries
- GridShare operates as a funding portal registered with the Securities and Exchange Commission and FINRA
- GridShare does not issue securities; rather, it gives investors access to cleantech and renewable energy investment opportunities.
- GridShare connects investors with opportunities and serves as an independent intermediary facilitating investments
What types of investments are on GridShare?
- Issuers post both equity and debt offerings on GridShare.com.
- Equity Offerings include the sale of shares of stock in a corporation or membership interests in a limited liability company. These securities can be either common shares or preferred shares. For example, a company looking to develop a clean energy technology may sell common shares to finance the development of its technology.
- Debt Offerings include the sale of notes or bonds to finance particular projects or operations. For example, an issuer might sell notes or bonds to finance the development of a solar energy project
What Regulatory Exemptions do Issuers on GridShare use?
- GridShare hosts Crowdfunding Offerings subject to SEC Regulation Crowdfunding. These offerings are limited to $1 million.
How does GridShare make money?
- For Regulation Crowdfunding offerings, the Issuer pays GridShare a percentage of the funds raised and for services provided to the issuer for assistance in preparing the offering materials
- GridShare does not charge a fee for users to register or review offerings hosted on GridShare.com
Who is GridShare?
GridShare is the brainchild of Jack Jacobs, a cleantech lawyer who saw a need for crowdsourced capital for his clients. He’s assisted by Jon Norling, an energy lawyer who assists clients in developing and financing renewable energy projects.
Questions on Regulation Crowdfunding
- What is "Equity Crowdfunding"?
- “Equity” is simply ownership in something. In the financial world, an equity ownership is represented by “securities,” which are financial instruments representing an interest by the investor (also known as the “holder”) in a company or sharing agreement. The company selling securities is called the “Issuer.”
- In the US, securities are regulated by the Securities and Exchange Commission, which has adopted Regulation Crowdfunding pursuant to the Title III of the JOBS (or Jumpstart our Business Startups) Act.
- Unlike “donation crowdfunding,” in which you only receive a reward in exchange for your donation, equity crowdfunding allows investors to receive securities in exchange for an investment.
- Under Regulation Crowdfunding, offerings are limited to $1 million or less of total investment.
- GridShare.com is a registered “funding portal” authorized to operate an online investment platform for Regulation Crowdfunding (a.k.a “Title III”) offerings.
- How Much May I Invest in a Crowdfunded Offering?
- Regulation Crowdfunding limits an individual’s investment in any calendar year as follows:
- For investors with an income or net worth less than $100,000, the investment is limited to the greater of (a) $2,000 or (b) 5% of the investor’s annual income or net worth;
- For investors with an income and net worth equal to or greater than $100,000, the investment is limited to 10% of the lesser of (a) the investor’s annual income or (b) the investor’s net worth, capped at $100,000.
Huh? What does that mean?
- Let’s look at some examples. Say Bob has an annual income of $120,000 and a net worth of $500,000. Each year, Bob can invest $12,000 in crowdfunding offerings, which is 10% of his annual income (which is less than his net worth).
- Here’s another example. Alice makes $75,000 per year and has a net worth of $50,000. Each year, Alice can invest $2,500 in crowdfunding opportunities, which is the greater of $2,000 or $2,500 (5% of her net worth, which is less than her annual income).
- Here’s another one! Charles has an annual income of $50,000 and a net worth of $30,000. Charles can invest $2,000, which is greater than 5% of his net worth ($1,500).
- What types of offerings are on GridShare?
Users will find both equity and debt offerings on GridShare. Let’s start with Equity:
- Equity is a direct ownership in stock of the Issuer (if the Issuer is a limited liability company, the holder owns membership interests).
- Equity is either Preferred or common. Preferred shares have certain superior rights, such as preference in payment of dividends, whereas common shares have no special rights.
- Risks inherent in equity investments include:
- Entire loss of the investment;
- Dilution due to the issuance of additional shares in the future; and
- Restrictions on voting power
What is "dilution"? That sounds bad.
- Dilution occurs when a company issues additional shares to new investors, thereby diluting the ownership interest of the older investors.
- Say, for example, Alan owns 100 shares in company XYZ, which has 1000 shares outstanding, or a 10% interest. If XYZ issues 1,000 more shares, Alan’s percentage ownership drops to 5%.
- Dilution is not all bad, however, as the issuance of additional shares may cause the value of XYZ to increase due to the additional capital investment, which may increase the value of Alan’s original investment.
What is a "debt security" and why should I care?
- Debt securities entitle the holder (i.e., investor or “lender”) to a payment of interest and principal from the Issuer (or “Borrower”).
- Debt can be secured or unsecured:
- With secured debt, lenders have a lien (also known as a “security interest”) on certain discrete assets, such as a solar project or a company’s stock; in the event of default, lenders can foreclose on those assets supporting the debt.
- With unsecured debt, lenders DO NOT have a security interest in any assets; their only recourse is to sue the Borrower.
- Debt can be "non-recourse":
- In the event of default, the lender cannot sue the Borrower; rather, the lender will have the assets as collateral.
- Non-recourse debt is typically used for loans financing specific projects.
What are the risks of equity and debt?
- Equity risks include dilution, lack of successful operations (thus no profit), no dividend payment, and total loss of investment.
- Debt risks include failure to pay interest or repay the investment, insolvency of the Borrower, or failure of the business operations (and thus revenue) supporting the loan payments.
Sounds awful. Why would I sign up for that?
- With equity investments, there’s a chance that the company has a product that will take off, and your ownership share may be worth more than what you originally invested.
- With debt, you may receive regular payments of interest and principal, or in the case of bonds, you may receive an interest-only payment for a specified term and then potentially get your original investment back.
What information will the Issuer provide to help me make a decision?
- Every Issuer using Regulation Crowdfunding is required to file a Form-C with the SEC, which is required to contain various disclosures, including:
- Name and legal status of the Issuer;
- Names of owners, directors and officers of the Issuer;
- A description of the business and intended use of the offering proceeds;
- Number of employees;
- Factors that make an investment in the Issuer speculative or risky and risks associated with the securities;
- The target offering amount, offering deadline, and whether the Issuer will accept commitments in excess of the target amount;
- A description of the investment process;
- A description of the present ownership and capital structure of the Issuer;
- GridShare’s compensation;
- Debt held by the Issuer;
- Other capital raising efforts conducted by the Issuer in the past three years;
- Amounts that went to the principals of the issuer from capital raising efforts;
- Financial statements; and
- A discussion of the Issuer’s financial condition.
Following completion of an offering, will there be any ongoing relationship between GridShare and the issuer?
- While GridShare may hold securities of an Issuer, there is no on-going relationship between GridShare and the Issuer, and any contact between investors and the Issuer would take place directly between the parties without any involvement by GridShare.
- What is the Process for making an investment on GridShare?
There is an eight-step process for making a Regulation Crowdfunding investment on GridShare.com, as follows:
- Users browse offerings.
- When a user finds one s/he likes, the user will review the information about the issuer and download the relevant information to learn more about the opportunity.
- Once a user has done her/his homework and has decided to make an investment, the user will click the “Invest Now” button and be directed to a third-party escrow company that will hold investor’s funds in escrow until the offering deadline. An Issuer may cancel its offering, and will return investor funds held in escrow back to the investors.
- The offering must be up a minimum of 21-days before it can close.
- If, by the offering deadline, the Issuer meets its target funding amount, the offering will close and investor funds will be released to the Issuer.
- If, by the offering deadline, the Issuer has not met its target funding amount, the offering will be cancelled and the investors’ funds will be returned.
- Investors can cancel their investment up to 48-hours prior to the offering deadline.
- If the Issuer makes any material changes to the offering, it must notify investors and have them reconfirm or cancel their investments.
- Reselling Purchased Securities
If I purchase shares, notes or bonds on GridShare.com, can I sell these to someone else?
- You may not sell your securities for a one-year period starting on the date that they are issued to you.
- There are a few exceptions, as follows:
- You can sell them back to the issuer;
- You can sell them to an “accredited investor,” i.e., someone whose net-worth is in excess of $1 million and income levels in excess of $200k per year;
- You can sell them if the Issuer goes public; or
- You can sell them to a family member or transfer them to a family trust.
How can I sell them to someone else?
- It is important to note that it may be difficult to sell your securities to someone else because there is no secondary market for crowdfunded securities and there may not be such a market.
- Information to be Provided by Issuers
If I invest, what information can I expect from the Issuer?
- Issuers are required to file and post annual reports on their website which include financial statements certified by a principal of the Issuer.
- The Annual Report needs to include much of the disclosure information contained in the Issuer’s Form-C.
- The Issuer is no longer required to post Annual Reports if:
- It has filed at least one annual has fewer than 300 holders of record;
- It has posted annual reports for the past 3 years and has assets less than $10 million;
- It, or another party, has repurchased all of the crowdfunded shares; or
- The Issuer liquidates its assets in accordance with state law.
- Issuers may agree to make additional corporate information available to holders.
- Know what you’re doing
Anything else I need to know?
- Yes. You need to consider if the investment is appropriate in your situation. For example, can you afford to lose the money you’d invest in the Offering? Do you need securities that generate regular income rather than shares in a venture company that might pay a return someday?
- Don’t rely only on statements made by the Issuer. Do research so that you can make an informed decision.
- Investing is a big decision. We encourage you to talk to investment professionals to determine what type of investment works best for you.