Raising capital for a startup can be a time consuming but important process. MicroVentures may be able to help your startup complete the fundraising process from due diligence to final wire. In this blog, learn more about the fundraising process at MicroVentures.

Raising Capital with MicroVentures

When a startup is raising capital with MicroVentures, the process looks a little different depending on which exemption is being used to raise funds. The following is a generalized summary of the fundraising process for a startup raising through Regulation D vs a Regulation Crowdfunding on MicroVentures.

Stages of the Raise

Before the raise ever starts, the startup submits an application for funding to the MicroVentures team to review. The startup submits their pitch deck, business model, previous raise terms, use of funds, and financial statements such as monthly profit & loss, balance sheet, cash flow, burn rate, and cash on hand.

Investment Committee

Once the startup application has been submitted, the information is reviewed by MicroVentures’ Investment Committee. This team assesses how well the investment opportunity will be received by MicroVentures investors and if MicroVentures is able to provide value to the startup, in addition to many other factors. The Investment Committee can take around one week to complete no matter which exemption is planned. The MicroVentures team will be in touch as to whether or not the raise will proceed. If there appears to be a fit, terms will be negotiated and the raise process officially begins.

Engagement Agreement

Once fit has been established between MicroVentures and the startup, a formal engagement agreement is signed to define the relationship and clearly spell out information such as raise terms, compensation, timelines, and other factors.

Due Diligence

After the engagement agreement has been signed, the startup begins working with a member of MicroVentures’ due diligence team to prepare everything for the investment opportunity to go live on the MicroVentures platform. This is where the process can begin to differ depending on the exemption.

Regulation D

If a startup is raising under Regulation D a data room is created to share confidential documents and other items. Materials a startup may provide during due diligence includes information needed to run background checks for officers, directors, and 20%+ owners, monthly financials, financial projections, and a detailed current cap table.

Once these items have been compiled, the due diligence team member will create a Company Summary, Offering Statement, and all necessary regulatory paperwork. These materials are then reviewed by various departments for accuracy, relevancy, grammar and formatting, and compliance. After all necessary documentation has been received, reviewed, finalized, and submitted, the investment opportunity goes live on the MicroVentures platform.

Regulation Crowdfunding

When a startup is raising under Regulation Crowdfunding, the startup will need to complete either a financial review or a financial audit depending on the amount of money they are hoping to raise. It is important to start this process quickly to mitigate potential delays.

Similar information is needed for Regulation Crowdfunding as Regulation D and the review process is the same for accuracy, relevancy, grammar and formatting, and compliance. Towards the end of this process, the startup will be connected with a member of MicroVentures’ marketing team to discuss general solicitation and how they will be able to publicly market their investment opportunity.

Fundraising

Once the investment opportunity is live on MicroVentures, Regulation Crowdfunding offerings typically raise for 12+ weeks while Regulation D offerings are typically live for four to six weeks. At this point, Regulation Crowdfunding offerings are able to be publicly marketed.

Regulation Crowdfunding offerings may be able to withdraw funds early from their campaign at pre-set thresholds, called an Interim close.

Closing and Wiring Funds

During an interim close, if one is conducted for Regulation Crowdfunding, and at the conclusion of the campaign, funds raised up to this point will be finalized. For an interim close, investors will be required to reconfirm their investment. Once funds have been confirmed and finalized, fees will be calculated and withdrawn, funds will be wired, and any other closing information sent to the startup along with contact and investment information for their new investors.

What MicroVentures Typically Looks For

When MicroVentures is considering which startups to accept for investment, there are a few things we typically review.

Innovation

The first thing we look at is if the startup has a unique or a new idea. We typically want to see a breakthrough technology or an innovative spin on old technology.

Market Traction

The next thing we look for is market traction. We typically want to see a startup that has existing customers, notable partnerships, revenue milestones, or other metrics that could define success.

Founding Team

Finally, we look at the founding team. We like to see a founder with industry experience and the technical know-how to grow a startup.

This is not a comprehensive list of the areas the MicroVentures team reviews, many other factors are also considered before accepting a startup for investment.

Frequently Asked Questions

The following are some common questions we get about fundraising with MicroVentures:

1. When does the money from investors actually distribute to my business?

3-5 business days, once all investor funds are received

2. How long will an investor be required to hold my shares?

The requirement is one year based on SEC regulations.

3. Who determines the value of outstanding shares?

MicroVentures and the business will work together to determine the value of outstanding shares.

4. How do I request additional funding for my business if needed?

We are happy to consider assisting in additional funding rounds. All you have to do is contact us.

5. What does it cost to raise capital?

Overall, costs will vary depending on the type of raise, how much you want to raise, and how you decide to promote your raise (if permissible). For information about costs associated with our Regulation D 506(b) and 506(c), contact us at help@microventures.com.

For Regulation Crowdfunding, estimated upfront costs can include:

Outside financial review/audit (if required): $3,000-$5,000
If you’re located, or sell 50% or more of your securities, in a state that requires notice filings, you may be required to pay an associated fee. A few states are $1,000+, but most fall between $100 and $500.

Optional additional costs:

Legal review: $1,500
Outside marketing: costs will vary
Video production (optional, but highly recommended): costs will vary

Closing Costs:

5% commission
2% of securities raised in the offering
Escrow fee: $1,000 or 35 basis points of the total amount raised, whichever is greater

6. Does MicroVentures help raise money for international companies?

Yes. However, in order to offer securities under Reg CF, a company must be organized under the laws of a state or territory of the United States.

Final Thoughts

From start to finish, raising capital with MicroVentures is a fairly straightforward process. In order to avoid any delays in the process, it is important to have as many materials prepared up front as possible and be highly responsive.

Are you ready to raise capital for your startup? Apply today to start raising capital with MicroVentures!

APPLY TO RAISE CAPITAL

Want to learn more about raising money for your startup? Check out the following MicroVentures blogs to learn more:

*****

The information presented here is for general informational purposes only and is not intended to be, nor should it be construed or used as, comprehensive offering documentation for any security, investment, tax or legal advice, a recommendation, or an offer to sell, or a solicitation of an offer to buy, an interest, directly or indirectly, in any company. Investing in both early-stage and later-stage companies carries a high degree of risk. A loss of an investor’s entire investment is possible, and no profit may be realized. Investors should be aware that these types of investments are illiquid and should anticipate holding until an exit occurs.

MicroVentures Blog