EarlyShares – Crowdfunding Experience Beyond Its 2011 Beginning
For those who like a crowdfunding platform with a can-do attitude, Miami-based EarlyShares may be top choice in the niche of equity and rewards crowdfunding. EarlyShares bridges the gap between two groups (companies and accredited investors) who wish to use alternative means of gaining more than stock market increases or paltry bank interest. However, there are still many rules to follow (especially since EarlyShares has so many third-party partners), so it may be worthwhile for new investors to go through the learning modules and tools available on EarlyShare University.
There are detailed qualification rules on EarlyShares equity crowdfunding platform. An accredited investor must have made an annual $200,000 or more within the last few years (or $300,000 along with a spouse), or have a net worth of $1 million – including the primary residence. Also, depending on the plan, contributions are generally held to a set limit (between $1,000 to $15,000), though contributors can make donations of up to $2,000 to separate companies. Funds get processed through a third-party financial institution (separate from EarlyShares), which isn’t named on the crowdfunding website.
Companies looking for crowdfunding opportunities must be based within the United States, though it’s not necessary for startup companies to show revenue flow. Company requirements follow a 14-point verification process that may take between two to four weeks, including these steps: financial projections, an experienced management team, and a demonstrated market that needs the product or service. If the fundraising goal for the company isn’t reached within the deadline (30 to 60 days), investor money is sent back and EarlyShares doesn’t take a commission percentage.
There are four different types of available crowdfunding campaign plans, each with its own fee structure: direct investments, early funds, rewards campaigns, and combination campaigns. Though EarlyShares is not a registered Broker-Dealer, direct investments of equity offerings are made possible through its partner, National Securities Corporation, who takes an unspecified commission based on the amount raised. EarlyFunds is a way for high-end LLCs to offer equity and get direct funds in return. An EarlyFund is limited to a pool of 99 investors, who pay a one-time administrative fee (between 2% to 8%) based on the fund type and amount; the company pays a flat fee for due diligence, whether or not the target is reached. If an EarlyShares fund is taken over (via IPO) or liquidated, there may be a 10% to 20% fee taken by the subsidiary company (EarlyShares Management), after investors are paid back. Rewards and combination campaigns are less complicated because they have less to do with gaining equity, and more to do with reward structures, though EarlyShares will charge the company between 5% to 8% of the total funds raised – and the company must be an exclusive partner.
The 8-person executive team, who provides customer service, are an impressive lot. Co-Founder Stephen Temes, is the managing director for both a hedge fund and a VC fund, while CEO Joanna Schwartz was able to drive a lending company from $0 to an annual $1 billion. The advisory board is hardly less impressive, including a successful real estate investor with $3 billion in facilitation experience (Marc Brutten) and a legal advisor with years of wealth planning experience at Wells Fargo Private Bank (Reneé Caputi).