- Venture Capital
Society3 is introducing a major change in the way investors can exit their startup investment. Conventional investment contracts have been structured in a way that an investor basically stood with an investment for 7 to 10 or even more years. We know from past experience that no investor is investing in startups just to sell their investment a few month later. On the other side have no liquidity when needed prevents most investors to invest in the first time. Exit Anytime is a model that is designed to overcome that barrier.
Changing the Contractual Framework
Society3 is providing both, the contractual framework and the platform for investors to exit if necessary. The new S3-SPA (Stock Purchase Agreement) provides the contractual basis for Exit Anytime. There is no ‘First Rights Of Refusal’ anymore and you can sell at will from that point of view. In order to protect the startup from gamblers and to comply with current SEC rules, investors will need to hold their investment for twelve month before able to sell it. Thereafter you are free to divest.
Providing a Market Place
Now – selling remains still difficult if you don’t know who might be interested in purchasing your shares. In addition to the new contractual framework, we provide a market place where investors can find other investors and buy or sell those shares. There maybe certain requirements i.e. reports to be filed on a state by state base and conducting a trade with rule 144 in mind â€“ but at least now there is a much easier way to get out of a startup and also the ability to find a buyer. To the contrary, more conservative investors who decide to wait until a startup demonstrated their ability to grow and make the investment work, may want to invest later on and don’t mind paying a premium for the wait. For those investors the market place is a welcome option to maintain their investment strategy.
How it works:
- As a holder of securities you can simply register into a list where you can offer some or all of your shares.
- The platform ensures that only securities that passed the hold period can be offered.
- The list is only accessible to investors who could have invested in the securities at offering times
- The buyer gets full access to all documents and reports that have been available to the current holder
- If the buyer agrees to the offer, both buyer and seller negotiate the deal individually under the rules of the country and state they are registered in and by consulting their respective lawyer and finance consultant to complete the transaction.
- FundersMart neither takes a commission nor is in anyway involved in the transaction
- Assuming you missed an investment opportunity and want to buy some shares from others
- You register your interest in the market place by stating how many shares at what price you are interested to buy
- As current holder of securities may watch the list, you may get a response from somebody ready to sell
- You will enter into the same stock purchase agreement and agree with the requested initial hold period
- If the seller agrees to the offer, both buyer and seller negotiate the deal individually under the rules of the country and state they are registered in and by consulting their respective lawyer and finance consultant to complete the transaction.
- FundersMart neither takes a commission nor is in anyway involved in the transaction in this case as well.
Economic & Social Impact
Significantly raise the number of professional startup investors – bringing the necessary capital to help the increasing number of innovators grow. With the new level of liquidity, we are still ways away from a liquidity level of a regulated market like from a stock exchange, but that is neither necessary nor the vision to fulfill our objectives. The objective and the impact of FundersMart is to attract the 90% accredited investors who conduct an investment strategy that simply discourages them to invest in startups. With the initial wait time of twelve month we completely avoid day trader and gambler – but attract investors who decided that a 7 to 10 year wait for one of the highest risk classes of all is rightfully just not acceptable.
Furthermore – as the investment rules are loosening up and more and more non-accredited investors can invest in those high risk classes, we feel there is a need to allow average Joe to find an exit if there life style, employment or financial structure in general is changing. While we do want everybody participate in an potentially amazing gain from early startup investments, we cannot assume that everybody has the financial bandwidth to hold a portfolio of securities and eventually have one or two winners. We have to provide ways to provide an exit strategy if push comes to shove for those investors.
Society3 provides frequent webinars where investors can join from pretty much anywhere in the world and learn more about the new Exit Anytime model and investing in startups in general. Please note that we do not provide any Legal or Tax advice. We highly recommend that investors consult with their trusted advisers, lawyer and CPA before investing in startups and also getting their opinion on the new Exit Anytime model.