Let’s compare costs to FundersClub.com, a leading system that syndicates early-stage start-ups. FundersClub takes 10% of the amount funded and puts it aside for formation and ongoing management of the syndicate LLC. If they raise $500,000 for the syndicate, $450,000 goes to the company and $50,000 is put aside for fund administration costs.
With CannaFundr.com syndicates managed by CFC, the cost to set up the fund is fixed at $2,000, so the company would receive $498,000. The issuer receives more capital, and the investors receive more equity without dilution of their initial investment—definitely a winning combination!
Each year, the issuing company pays a guaranteed minimum dividend (or royalty), to the syndicate, of $2,000, or a percentage of fund revenues (whichever is greater), enough to cover all the services needed to administrate the syndicate. CFC has a minimum charge of $2,000 to make sure the syndicate LLC is registered properly and provides ongoing shareholder management services to the syndicate LLC and their shareholders, including, but not limited to, annual federal tax filings and appropriate K-1 for the limited partners.
CFC does not take carried interest, which increases the overall value for the syndicate lead and the investors in the syndicate LLC.
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.
Your company must be a US-based corporation and have a syndicate lead that is an approved CannaFundr marketing partner.
Sometimes other entity types can also be syndicated. Contact firstname.lastname@example.org to discuss any exceptions.