WhiteClouds, a 3D Fabricator, has been involved with 4 equity crowdfunding campaigns and now has over 1,000 investors as part of our corporate family. We are bombarded with questions about equity crowdfunding and we built this webpage to answer questions and to unravel some of the mysteries about equity crowdfunding.

Disclaimer, because of the success WhiteClouds has experienced in raising funds with crowdfunding, we currently have an active crowdfunding campaign. Whether or not you want to invest in WhiteClouds, we hope you learn from our hands-on experience with this new form of investing and raising funds for startups and early-stage companies.

Historically, private companies could only raise capital from accredited investors (wealthy individuals). In 2012, the JOBS Act was signed into law which allows companies to raise funds from the "crowd" and publicly advertise that they were raising funds. In 2016, Regulation CF (known as SEC Reg CF) of the JOBS Act went into effect, allowing early stage companies to raise money from anyone. Another term used today is called Equity Crowdfunding. These new regulations basically require the following:

• The investment transactions needs to take place online through an SEC-Registered intermediary, either a broker-dealer or a funding portal. The most common online funding portals are SeedInvest, Wefunder, and StartEngine, with many smaller ones.
• Allows the company to raise a maximum of $1,070,000 through crowdfunding in a 12-month period.
• Limits the amount that individual investors can invest across all crowdfunding offerings in a 12-month period.
• Requires the disclosure of the company's information in filings with the SEC commission and to investors and the intermediary facilitating the offering.

With so many online funding portals (platforms) available, which one do you use? As you can see from the companies below, there are a lot of options in the equity crowdfunding arena.

According to Sherwood Neiss at Crowdfund Capital Advisors, "of the nearly 1,000 companies that have registered to raise money online, 50 percent chose to register on either Start Engine or Wefunder".

WhiteClouds has built campaigns on both Start Engine and Wefunder. In the following sections, we have focused our side-by-side comparisons on the two largest crowdfunding campaigns and those that we have hands-on-experience using.

From an investor perspective, this side-by-side comparison chart shows the differences between StartEngine and Wefunder.

Investor Options
Payment Options
Credit Card/Debit Card	✓	✓
ACH (Checking/Savings)	✓	✓
Wire Transfer	✓	✓
BitCoin	✓
Mail Check		✓
Transaction Fees	0%-2.5%	3%
Transaction Minimum	$0	$7
Privacy Settings	0	4
Notification Settings	1	24
Secondary Market Postings	✓
Invest as Companies, Trusts, IRA's	✓	✓
Types of Investors Allowed
Non-Accredited	✓	✓
Accredited	✓	✓
US	✓	✓
Non-US	✓	✓
Investor Contract Types
Stock Equity	✓	✓
SAFE		✓
Convertible Note	✓	✓
Revenue Share	✓	✓
Promissory Note	✓	✓
Tokens	✓
View Investments
Contracts	✓	✓
Annual Reports		✓
Amount Invested	✓	✓
Transaction History	✓	✓
Account Info
Name	✓	✓
Address	✓	✓
Phone	✓	✓
Birth Date		✓
Social Security Number	✓	✓
Net Worth		✓
Annual Income		✓
Accredited Status	✓	✓
Profile Info
Image		✓
Social Links		✓
Biography		✓
Personal Website		✓
Skills		✓
Password	✓	✓
Interests		✓

How is Equity Crowdfunding different from the stock market?

Equity Crowdfunding is for new and early stage companies where no real market exists for their stock - the stock market is for mature companies and allows you to sell and buy stocks whenever you like.

Why should I invest in startups?

Investing in startups is an opportunity to get in on the ground floor of a promising up-and-coming company. Startups are typically risky, but the payoffs can be huge. Sometimes investing in a startup is not about the ROI, but about the product or service the company is offering and your willingness to support the cause.

How do I invest in startups?

It is really simple - only a few steps:

1. Go to an approved (by the SEC and FINRA) equity crowdfunding site, such as StartEngine or Wefunder.
2. Review the company before you invest
3. Select "Invest"
4. Create an account
5. Approve the money transaction

When should I expect updates from the company I just invested in?

This varies a lot. Some companies do a great job of keeping their investors updated on a quarterly basis. A few are at the opposite extreme, only updating the investors with the required SEC annual report.

What happens to my money once I invest?

Once the crowdfunding campaign ends (or in the case of a rolling close) and the minimum investment amount is reached, the company will then use your investment as presented in the "use of proceeds"-typically this is used to help grow the company.

How long will it be before I see a return on my investment?

This really depends on the type of investment. If it is associated with stock or a convertible note, you are most likely waiting until an exit event happens - either the company goes public or is acquired by another company (which is the most likely). If the investment is a revenue share, you may see a return much faster depending on future revenue.

What is an accredited investor?

The simple answer is that accredited investors are wealthy individuals, typically making over $200,000 per year ($300,000 if joint with spouse) or have over $1 Million in assets less their home.

How much am I allowed to invest?

This can be a bit complicated based on the investment offering (Reg CF, Reg A+, or Reg D offerings), but these are the general rules: Everyone can invest at least $2,200. If either your income or net worth is below $107,000 you may legally invest a maximum of 5% of the lowest number. If both your income and net worth is above $107,000, you may legally invest a maximum of 10% of the lowest number. No one may invest more than $107,000. Accredited investors are subject to the same investment restrictions. For regulation A+ offerings, unaccredited investors can only invest up to 10% of their income or net worth per year, whichever is greater. For regulation D offerings, only accredited investors may invest and they have no upper investment limits. The advantage of using an appproved crowdfunding website is that they make it pretty easy to know how much you can or can't invest.

From a founder or startup company, this side-by-side comparison chart shows the differences between StartEngine and Wefunder.

Founder Options
Lifetime Campaigns	150	233
Current Campaigns (Dec 2018)	75	79
Capital Raised for Companies	$60M	$75M
Average Raise	$174K	$313K
Success Rate	70%	63%
User Base/Investors	160,000	197,354
Days to Take Campaign Live	107 Days	67 Days
Fees
Basic Profile Creation	Free	Free
Premium Profile Creation	$10,000	Free
Success Fees
US ACH and Wire Payments	6%	7.5%
International ACH and Wire Payment	8%	7.5%
US Credit Card Payments	10%	7.5%
International Credit Card Payments	12%	7.5%
US BTC Payments	8%	7.5%
International BTC Payments	10%	7.5%
Equity/Warrants Fee	None	None
Bad Actor Checks	$85 Each	None
Credit Card ChargeBacks	$25	None
Amendments to Campaign
Extending End Date	$1,000	None
Extending Maximum Amt from $107K	$1,000	None
Material Changes	$1,000	None
Updates to Campaign Post Launch	$1,000	None
Escrow Acct Hold Back	6%	None
Annual Investor Fees	$5 Each	None
Dedicated Hours from Legal/CPA	$150 HR	None
Prime Trust Escrow Mgmt Fee	0.5% up $4,000	None
Open Escrow at Start of Offering	$500	None
SEC Filing Fees	None	None
Minimum Raise Before Listing Appears	$45,000	$0
Minimum Raise Before Mktg Promotions	$45,000	$20,000
Features
Perks allowed	✓	✓
Fundraising Exemptions Offered
Reg CF	✓	✓
Reg A+	✓	✓
Reg D 506(B)		✓
Reg D 506(C)	✓	✓
Investor Contract Types
Stock Equity	✓	✓
SAFE		✓
Convertible Note	✓	✓
Revenue Share	✓	✓
Promissory Note	✓	✓
Tokens	✓
Types of Investors Allowed
Non-Accredited	✓	✓
Accredited	✓	✓
US	✓	✓
Non-US	✓	✓
Start Date	2011	2011
Headquarters	California	California

Why should I raise funds in a crowdfunding environment?

This gives the founders an opportunity to attract investors that are your friends, family, and customers through an approved crowdfunding platform. Think of your most loyal customers as investors in your company.

What is the maximum amount I can raise?

With Reg CF - Regulation Crowdfunding, you can raise up to $1,070,000 per 12-month period. There are ongoing discussions that this amount may be increased in the future. With a Regulation D offering, you can raise an unlimited amount from accredited investors. A Regulation A+ offering can raise up to $50 million per year. A high percentage of offerings on the major crowdfunding platforms are Reg CF and it is a small percentage of companies that actually reach the maximum of $1,070,000 (WhiteClouds was one of those few).

How many investors can I have?

In theory, this is unlimited, but at certain numbers the SEC requires different reporting requirements. As per the SEC, "SEC Section 12(g) registration is required if an issuer has on the last day of its fiscal year, total assets greater than $25 million and the class of equity securities is held by more than 2,000 persons, or 500 persons who are not accredited investors. In that circumstance, an issuer is granted a two-year transition period before it is required to register its class of securities pursuant to Section 12(g), so long as it timely files all of the annual reports required by Regulation Crowdfunding during such period." Depending on the crowdfunding platform you use, the type of security you are offering, and the contractual aspects of the offering, there are different ways of dealing with many shareholders on your cap table. This can be as simple as using a contract that proxies all voting power to a lead investor and the CEO. StartEngine and Wefunder both have solutions for dealing with large numbers of shareholders. Voting Rights thresholds can also be defined (for example, a minimum of $25,000 investment) before an investor has any voting rights.

What kind of financial reports do I need?

You must disclose up to two years of financials in GAAP format (Generally Accepted Accounting Principles). If you are raising less than $107,000, you must provide GAAP financials with an explanations of taxes. If you are raising more than $107,000 you will need "reviewed" financials from an independent accounting organization. Certain equity crowdfunding portals required "audited" financials. Most of the portals have relationships with accounting firms that can prepare "reviewed" financials for much less than you might normally find, sometimes for as little as a few thousand dollars.

Can I publically promote my crowdfunding campaign?

If you are using Reg CF, Reg D Rule 506(c), or Reg A+, you can promote your fundraising (with a few caveats). See Section 4 on the SEC's website for more details: https://www.sec.gov/info/smallbus/secg/rccomplianceguide-051316.htm. You are not allowed to advertise if you use Reg D, Rule 506(b). You can't begin any promotions until your Form C is filed with the SEC, but once this is done, you can advertise with any method you choose such as, emails, Facebook and other social platforms, traditional advertising, and word of mouth. You must include a link to your campaign in any advertisements.

Two popular Regulation CF crowdfunding investment vehicles are SAFE's and Convertible Notes. The most popular investment vehicle on Wefunder is a SAFE. Convertible Notes are the most popular on StartEngine. Here is an overview of both.

SAFE's

SAFE stands for a "simple agreement for future equity". The SAFE was first created in 2013 by Carolynn Levy, an attorney for Y Combinator. It grants an investor the right to obtain equity at a future date if the startup sells shares in a future financing round. It was created as a simple replacement for convertible notes. Where convertible notes are a debt instrument, SAFE's are not, but they do allow a startup company to accomplish the same general goals as a convertible note.

SAFE's work if you believe that the startup can raise financing in the future from professional investors. One of the primary benefits of the SAFE is that it delays the difficult task of figuring out how much a startup is worth (some call this "kicking the can down the road").

The number of shares you recieve from your investment is calculated at the next priced financing round when professional investors or venture capital firms set the price for preferred stock. The most important term associated with a SAFE is the "Valuation Cap". Quite often the SAFE converts into shares at a lower price than the new veture captialists paid, since you invested earlier and took more risk. The Valuation Cap is important because it specifies the maximum price you will pay for the future stock. A simple example is with a Valuation Cap of $10 Million and the company raises funds in a future round at a $20 Million pre-money valuation. The amount of stock you will receive will be based off of the initial $10 Million number. In the opposite example where the future value of the stock is determined to be worth $5 Million, that will be the price that determines the number of shares you will recieve. A SAFE is not a loan. It does not accrue interest and does not have a maturity date. This makes it a much more economical approach to finance an early stage company.

CONVERTIBLE NOTES

A convertible note is an unsecured loan that converts to stock at some point in the future, usually 1-3 years later. This allows for a delay in establishing a valuation until later rounds of funding or some milestone. If there is not an additional round of funding, the note becomes due at the maturity date. Convertible notes are rarely repaid in cash and instead the outstanding balance of the loan is automatically converted to equity at a pre-set target price. The amount of equity that a note converts into depends on the price of the next funding round and two components specified in the note, Discount Rate and Valuation Cap.

Discount Rate: The discount rate establishes how much you will be compensated for the additional risk you take on by investing in a company before the next round of investors. For example, if you invest using a note with a 15% discount rate, and the Series A round investors invest at a price of $1/share, your note will convert into equity at $0.85/share and you will receive 18% more shares for the same price.

Valuation Cap: The valuation cap is another way to reward early stage investors for taking on additional risk. The valuation cap sets the maximum price that your loan will convert into equity. To translate that into a share price, you divide the valuation cap by the series A valuation. For example, you invest in a startup using a note with a $10 million cap. If the series A investors decide that the company is worth $20 million dollars and pay $1/share, your note will convert into equity as if the price had actually been $10 million. By dividing $20 million by 10 million we get an effective price of $0.50/share. That means that you will get twice as many shares as the series A investors for the same price.

Convertible notes typically convert using the Valuation Cap OR the Discount Rate, whichever gives the investor a better price at conversion time. Convertible notes usually carry an interest rate. This interest is paid in additional shares when the convertible note converts and not in cash.

There are a lot of finance and investment related websites. There are a handful of sites that focus on the startup/early-stage marketplace.

Crowdability http://www.crowdability.com/

Matthew Milner and Wayne Mulligan founded Crowdability in 2014 and they are located in New York. Crowdability is the source for date, research, and education on the emerging equity crowdfunding industry with their goal of becoming the "Morningstar of equity crowdfunding". Crowdability believes that equity crowdfunding - where many investors contribute small amounts of capital to get new businesses off the ground - has the power to drive entrepreneurship, tranform communites, and generate wealth. Disclaimer: Matthew Milner has invested into WhiteClouds through our Wefunder crowdfunding campaign.

CrowdFundInsider https://www.crowdfundinsider.com/

Andrew Dix and Kristin Voinovich founded CrowdFundInsider in 2012. They are located in Ohio. CrowdFundInsider is a news and information website covering the emerging global industry of disruptive finance including crowdfunding, Blockchain, peer-to-peer/marketplace lending, and other forms of Fintech. The site provides extensive coverage and industry leading perspectives from a team of staff writers and industry expert contributors from around the world.

Crowditz https://www.crowditz.com/

Crowditz was founded by Alan Philips, Howard Schneider, and Jon Finegold in 2017 and located in Boston. Crowditz was founded to provide investors with one location to identify and learn about deals on the Reg CF Platforms. Believing that crowdfunding will be the next significant captial market, Crowditz will lead the way in providing content and tools to select and manage cross platform investments. On November 28, 2018 Crowditz was acquired by KingsCrowd. Disclaimer: Whiteclouds recieved a "Deal Recommendation" from Crowditz: https://www.crowditz.com/2018/08/whiteclouds-on-wefunder/

Early Investing https://earlyinvesting.com/

Early Investing was founded by editors, Adam Sharp and Andrew Gordon, in 2014. They are located in Baltimore. They have built a large following over the years with 40,000 subscribers and 140,000 readers. Originally the company was focused on private startup research and recommendations and more recently has put more attention on cryptocurrencies. They provide commentary on current events and advice on what to look for in promising startups and their founders. Disclaimer: Early Investing has invested into WhiteClouds as part of their portfolio: https://earlyinvesting.com/new-recommendation-whiteclouds/

KingsCrowd https://kingscrowd.com/

KingsCrowd is a new company founded by Cris Lustrino focusing on research and news in the equity crowdfunding space. They are located in Boston. KingsCrowd was founded with the vision that everyone should have access to institutional grade research and analytics tools that enable informed startup investment decisions, regardless of investment experience. KingsCrowd's solution: Though the proposition of being able to invest in startups is immensely exciting, it can also be overwhelming and challenging to navigate. We are here to help make this asset class, that most of us have never invested in, accessible. Through education, research, analytics, and recommendations, we can empower everyone to invest in starups like a pro! KingsCrowd recently aquired Crowditz. Disclaimer: KingsCrowd featured WhiteClouds in an interview with Chris Lustrino: https://kingscrowd.com/a/95/founder-profile-with-whiteclouds-founder-amp-ceo-jerry-ropelato

WhiteClouds is an on-demand 3D fabrication company. We have built a "cloud ecosystem" for businesses to enable customized and personalized 3D Printing of products. Our customers include over 70 Fortune 1000 companies: https://www.whiteclouds.com/customers.html. WhiteClouds' 3D Printing software platform enables businesses to produce customized products for their customers like: a model brain-with-tumor based on a patient's personnal MRI, a veterinary model used in pre-surgical planning for a dog with angular limb deformity, or a custome figurine for a super fan. By coupling our cloud-based software platform with our full color 3D printing facility, the options are limitless-that's why we are attracting some of the largest brands in the world.

WhiteClouds has an active equity fundraising campaign on Wefunder:

Crowdfunding began its roots back in the 1700's in the form of low-income loans and today there are many portals and platforms that focus entirely on Equity Crowdfunding.

1700's Irish Loan Fund gives loans to low-income families - founded by Jonathan Swift. The "crowd" came from wealthy individuals.

1790's Mozart offered manuscripts to people who donated for funding his concert.

1800's Over 300 program in Ireland give out small sums for short period of time.

1852 Credit Unions are created by Hermann Schulze-Delitzsch. The "crowd" was the members.

1884 The New York World newspaper raised $101K from 160K people for the base of the Statue of Liberty.

1976 Dr. Mohammad Yunus launches a program in Bangladesh to provide baking opportunities to low income residents.

1983 Yunus' original fund transforms to Grameen Bank with 8 million borrowers today.

1997 US tour of the British rock band Marillion is funded by their US fan base.

2001 ArtistShare is the first crowdfunding site for music with the first project being Maria Schneider's jazz album "Concert in a Garden".

2005 KIVA creates microlending to provide small loans to entrepreneurs in poor areas around the world.

2006 Prosper becomes the first peer-to-peer lending marketplace in the US.

2006 Michael Sullivan is credited with coining the term "Crowdfunding".

2008 Indiegogo enables people to donate funds easily by removing the middleman.

2009 Kickstarter creates a funding platform for creative projects in return for rewards.

2010 GoFundMe becomes the pioneer in donation-based crowdfunding.

2011 Wefunder launches a crowd investing platform for capital raising services.

2011 StartEngine launces an equity crowdfunding platform using both accredited and unaccredited investors.

2012 Congress enacts JOBS Act.

2012 Fundable becomes first equity crowdfunding platform to launch in conjunction with the JOBS Act.

2012 CircleUp launces investment marketplace for early-stage consumer companies.

2017 Equity Crowdfunding raises $2.5 Billion worldwide.

2017 North American Crowdfunding: platforms - 375, raised - $17.2 Billion