FAQ For Investors
Currently only accredited investors can access offerings on TradeWinds platform and make investments. However, in 2014, Title III of the JOBS Act is expected to kick in and permit equity crowdfunding with non-accredited investors. At that point, entrepreneurs will be able to raise capital on TradeWinds platform from non-accredited investors (the 98% of America that cannot currently invest in private businesses) as well.
The companies listed on TradeWinds platform are typically privately held companies, and their shares are not traded on a public stock exchange. As a result, the shares cannot be easily traded or sold. As an investor in a private company, you typically receive a return on your investment under the following two scenarios:
1. The company gets acquired by another company.
2. The company goes public (undergoes an initial public offering on the NASDAQ, NYSE, or another exchange).
In those instances, you receive your pro-rata share of the distributions that occur. It can take 3-9 years (or longer) to see a distribution, as it takes years to build companies. In many cases, there will not be any distribution as a result of business failure.
Neither TradeWinds Financial Group nor LightPath Capital, Inc. make investment recommendations and no communication, through this website or in any other medium should be construed as a recommendation for any security offered on or off this investment platform. This website is intended solely for accredited investors. Investments in private placements and start-up investments in particular are speculative and involve a high degree of risk and those investors who cannot afford to lose their entire investment should not invest in start-ups. Companies seeking start-up investments tend to be in earlier stages of development and their business model, products and services may not yet be fully developed, operational or tested in the public marketplace. There is no guarantee that the stated valuation and other terms are accurate or in agreement with the market or industry valuations. Additionally, investors may receive restricted stock that may be subject to holding period requirements. The most sensible investment strategy for start-up investing may include a balanced portfolio of different start-ups. Start-ups should only be part of your overall investment portfolio. Investments in start-ups are highly illiquid and those investors who cannot hold an investment for the long term (at least 5-7 years) should not invest.
Investments are only available to accredited investors at this time. In order to view and invest in any of the companies listed on the site, each user must identify specific information about themselves and specify which of the accredited investor requirements he/she meets. When making an investment, each investor must again represent and warrant that they are an accredited investor. “Accredited investor” is defined by the Securities and Exchange Commission in Rule 506a of the Securities Act of 1933 to include someone who meets one of the following requirements:
1. Have individual net worth, or joint net worth with your spouse exceeding $1 million
2. Have income exceeding $200,000 in each of the past 2 years and expect the same this year
3. Have income (with your spouse) exceeding $300,000 in each of the past 2 years and expect the same this year
4. Invest on behalf of a VC firm or other registered investment company
5. Invest on behalf of a business with $5 million in assets or in which all the equity owners are accredited
1. Companies on TradeWinds platform can be considered high risk opportunities and may not retain their value. Investing in start-ups and small businesses is inherently risky, and standard company risk factors such as execution and strategy risk are often magnified at the early stages of a company. In the event that a company goes out of business, your ownership interest could lose all value. Furthermore, private investments in start-up companies usually illiquid investments that typically take up to five to nine years (if ever) before exit.
2. While there are no guarantees that this strategy will reduce your risk, most investors choose to mitigate risk by practicing portfolio diversification. Investing smaller amounts across a large number of opportunities is a good practice in the private markets just as it is in the public markets and is a great investor benefit facilitated by the JOBS Act.
3. For additional information on risk regarding early-stage investing, please visit our General Risk Factors.
Yes, please email us at firstname.lastname@example.org. We can help setup and initiate the account verification process to allow investments to be executed on your account.
The investment process may be slightly different for each investor, depending on their personal investing preferences, but it can generally be described as follows:
1. Investors must first create an account and register as an accredited investor.
2. Once your accreditation status is verified, you will gain access to the open investments page.
3. If you identify a potential investment opportunity, you should review the terms of the offering and all the marketing collateral that has been provided; you will have an opportunity to review the investment documents again during the funding process.
4. Once you are comfortable with the investment terms, you can invest by clicking on the Invest button located on the company profile page or the browse company page. Your assigned Registered Representative will be in contact with you to help facilitate an offline transaction between you and the company you wish to make an investment in. During this funding process, you will be asked to:
• Enter your investment amount
• Verify your identity and accreditation status
• Execute the required legal agreements
• Enter the account information of your funding account (checking or savings)
• Once the fundraising round closes, you will receive confirmation of success and counter-signed legal agreements. In the case of an unsuccessful round or a canceled investment by yourself, the proposed transaction will be cancelled.
A convertible promissory note is a hybrid debt instrument that is often used for angel investing. Convertible notes typically convert into equity of the issuing company if the company reaches certain milestones, such as completing a Series A round.
If you have any questions about how convertible notes work, please contact us nd we can explain this more in detail.
The identities of the founding team members are all verified through a third party service and we mandate that each company provide their articles of incorporation (or similar documentation) for your review. Each investor, however, is ultimately responsible for conducting due diligence independently and should only make investments which fall in their comfort zone.
We encourage investors to ask diligence questions on the moderated discussion board so that the company and other investors on TradeWinds platform can leverage community content. In the event that investors wish to have an individual or private conversation with the founders of the company, they may directly message the company by visiting the company’s profile page. Through the events page, investors may also participate in live video diligence sessions with the company as well as stay up to date with product demos, conference calls, or other events scheduled by the company.
As companies have limited human resources and time, we ask that potential investors thoroughly browse through the company’s profile and discussion board prior to asking their diligence questions so that companies can focus on building their business. We ask and require that companies provide extensive information and build out complete profiles to front-load the fundraising time commitment.
No, unlike other portals which take up to 20% of the upside of an investment for themselves (a “carried interest”) in addition to expense fees, TradeWinds charges absolutely no fees to investors. If you invest $10,000, you will receive $10,000 in securities. Companies raising capital pay a contingent placement fee to LightPath.