Each year the royalty payments will be disbursed to the members of the LLC based upon their prorated ownership after administration costs are deducted.
When an exit opportunity arises, the lead will advise the fund when to sell the syndicates’ shares. If there are any profits, they are then distributed to the syndicate investors.
In the case of an exit, CrowdFundConnect will only receive a percentage of fees for their administration services only after the investors have recouped their initial investment.
For example, if the company IPOs, the lead will decide when to sell the shares. If the company is sold for cash, CrowdFundConnect (CFC) would distribute any profits to the syndicate investors. If the initial amount invested by investors was $1 million, and the total distribution was $2 million, CFC would only receive a percentage for administration on $1 million ($2 million total less the original investment amount of $1 million). CFC would handle all administrative functions for closing including escrow services, preparation of tax forms, creation of closing statements and distribution of capital.
There are many other situations that are not considered here—in any case, the Canna Champion / fund lead advises the fund when to sell.
The syndicate fund, like all investors, is bound by restrictions with the company and can only sell shares in certain situations.
Overall, the information that syndicate investors receive will not be as detailed as direct investors. On the other hand, most companies will not accept small direct investments.
CrowdFundConnect on behalf of our Canna Champion / lead will distribute the following documents to backers when they invest in a syndicated deal:
– Documents related to the fund’s formation such as its operating agreement and subscription agreement.
– General terms of the investment, but only if the company permits. At times, templates of deal documents signed by the fund are also made available to investors.
– Qualitative updates on the company status, if available. This is high-level information similar to what VCs provide to their LPs. For example, it may include information about the company’s status with customers or financing. It will generally not include any figures.
– Any information investors need for their taxes (like K-1s) is distributed annually.
Under current U.S. law, the answer is yes. Please check the laws in your country.
Having a Tax Identification Number (TIN) is helpful but not required. Investors outside (or inside) the U.S. should also get good tax advice when investing in startups.
You’ll become a member of a new LLC formed specifically to invest in a company for each syndicated deal in which you invest.
Most of our deals are “wonderful” – because they will receive annual royalty payments.
Be sure to consult your own tax attorney for advice related to your particular situation.
– Investors get to pick specific portfolio companies to invest in (through the syndicate).
– VC funds often require much higher minimum investment amount.
– Our Canna Champions / leads typically personally invest a larger percentage of the funds and make a larger personal commitment to the issuing company than GPs from venture funds.
You will sign documents to invest in a fund that is managed by an approved Canna Champion / lead investor. The fund’s sole purpose is to invest in a particular company. The fund then invests in the startup and the marketing partner lead signs the company’s financing documents after they negotiate final deal terms.
Investors who are accepted into the deal will receive an invitation to electronically sign documents and provide their investor information along with information on how to send a wire, a check or ACH capital to the fund. Funds are held in escrow (an attorney’s trust account) with PNC bank in a sweep account for maximum protection.