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You've Got Questions, We've Got Answers
Not finding what you need? Contact us, we’d love to help!
Drop us a line!
Investment FAQ’s
What is this type of investing called?
Is this like investing in the stock market?
It’s kind of like “Grownup Kickstarter” where instead of the reward being a product, the reward is potential financial returns.
What's an example of a private company?
Why is this the first time I'm hearing about this?
In 2012, laws changed from “accredited” households to make it easier for them to become aware and gain access. In 2015 & 2016, laws were passed to allow for the entire population to participate, but only 0.2% of the US population has participated via ‘Investment Crowdfunding.’ (For comparison, ~60% of the population invests in the stock market.) Our goal is to educate people about this opportunity, keep money circulating through our community, and provide access to capital for entrepreneurs of all backgrounds and industries.
How does it work?
What's the minimum investment?
In all these offerings new and seasoned Angels (the ‘Crowd’) pool money & learn together along the way.
How do I earn a return?
Historically, those willing to take a bet on several high growth companies may lose on almost every investment except a handful. For example, an Angel Investor may invest in 10 companies. 6 of the companies fail, 1 returns 50% of the investment, and the other 3 companies return 6x, 7x, and 25x the original investment. Generally, high growth investors look to have at least one 100X+ company in their portfolio.
Ex: Uber was valued at $7M in 2010. In 2013, they were valued at $4B (a 571x increase). In 2014, they were valued at $42B (6000x the first valuation). They ‘went public’ in 2019 at an $82B valuation (turning every $1,000 invested at the beginning to an estimated $5,000,000). These results are not typical, but there are many examples of Angels making 100X and even 1,000X+ returns.
Ex: In Amazon’s case, several of the Angels in their private raise invested $50K. Not everyone has $50K to invest. Some do. This is where Investment Crowdfunding is powerful as we shared in “What’s the Minimum Investment?”.
Ex: An investor may get access to invest $1K in a brewery and have the opportunity to be paid $1.5K back over 4 years. However, since the agreement is based on revenue, if the investors and others help the business to double revenue projected, then they could see their payback of $1.5K in 2 years (a 50% return over 2 years).
Ex: In Commercial Real Estate (e.g. multi-family complexes, land, industrial property, retail, etc.) these offerings have historically paid between 12-25% Year over Year if held to a successful liquidity event. The additional benefit of real estate is that often offerings are structured to typically pay between 6-8% Year over Year along the way.
Oh by the way, did we mention private company investors may pay $0 in capital gains tax up to $10M gained? It’s called Qualified Small Business Stock or “QSBS.” There are other tax-preferred vehicles for Angels due to the risk they take on. Guess what, now everyone has the opportunity to take advantage.
The general rule is never to invest more than you’re willing to lose because you can lose your entire investment. Many enjoy investing with others because they learn what they don’t know from those who have done this before. Often there is a ‘Lead investor’ who works more closely with the startup. The lead communicates with other Angels on how they might be able to improve the odds of seeing a return by helping the business with particular requests.
What can I expect from NC Grind?
Syndicate FAQ’s
What is a syndicate?
What are the benefits for investors?
What are the benefits for founders?
What am I committing to when I join a syndicate?
When you see a deal you are interested in, you express interest and enter at least the minimum amount required for the offering. Once the offering thresholds are met, you will be asked to sign all required documentation and transfer your funds to escrow to be invested in the offering LLC. You also agree to pay the syndicate carry on those deals as well as the setup charges of each deal.
You are not required to invest and can stop investing at any time. All of your existing investments remain intact if you stop investing.
What is carry?
In Commercial Real Estate, “Carry” is usually referred to as Sponsor “Promote”. Structured by tiers of payout to investors, it can range from 20% – 60% by tier. In all cases, investors get their original investment back first and usually receive a distribution of cash, referred to as “Hurdle” (i.e. 6-8% of their original investment per year) before “Promote” is triggered. The combination of the Hurdle and Promote are big components of what balance investor and Sponsor interests with an aim to maximize returns for stakeholders.
Do I need to have experience to join a syndicate?
Can only accredited investors participate?
Lastly, all investors in the Syndicate may be presented with the opportunity for helping the Syndicate Management team vet deals and earn Carry in the process.
Who is part of a syndicate?
- A platform – a place to see investment opportunities
- A Manager/Lead – more on this below
- A Fund Advisor who acts as an Investment Advisor to the Special Purpose Vehicle (SPV, aka “fund”) for the Syndicate and,
- The investors
Syndicate Manager
This is an experienced angel investor, an individual with deep startup experience or a syndicate management team that sets up and manages a syndicate, recruits, signs up, and approves angel investors, approves offerings presented to the syndicate, and manages communications with syndicate investors.
Syndicate Lead
This is an experienced angel investor or team that vets startups and works with them to create and present offerings to the syndicate, and manages all offering related communications before and after the offering is funded using the tools provided on Localstake. The Syndicate Lead must be an investor in the deal that is being presented to the syndicate.
Syndicate Investor
Accredited investors that are interested in reviewing and investing in a syndicate’s offerings can sign up to be syndicate investors.
Syndicate Professional Expert
The Syndicate Management Team has the option to designate an individuals they recruit to help the Syndicate and fund to be successful. Examples might be an engineering or marketing specialist who works for a non-competing company but can help vet the startup from a technical or business perspective and share knowledge and advice with the fund. Professional Experts may be hand-picked by Syndicate Managers or request to be part of a Syndicate vetting team.
How do I join a syndicate?
Visit our Access page to see a list of syndicates that have a central focus of North Carolina.
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