A new way to invest in early-stage companies
After you invest
Netcapital has entered into an exciting new partnership with Rialto Markets LLC (Rialto), a FINRA registered broker-dealer that operates an alternative trading system (ATS). We believe this will open broader markets to people who have invested via the Netcapital Funding Portal.
All orders for secondary transfers will be effected through Rialto going forward. While this transition is being built out, secondary transfer features will be temporarily unavailable. We are hopeful that this will enable access to a larger number of retail, strategic, institutional and financial investors, enriching Netcapital, in partnership with Rialto, as a platform for all.
Thank you for your patience during this exciting period.
When you invest on Netcapital, you receive either Common Stock (if you invest in a Corporation) or Membership Units (if you invest in an LLC).
All shares purchased through Netcapital are recorded electronically and therefore you will not receive paper stock certificates when the deal closes. You will receive an electronic receipt from Netcapital and the number of shares you own will be accessible via the investor dashboard in your Netcapital account. This "book-entry" method of recording your ownership is how most stocks are issued today and it means that you don’t get a physical stock certificate; instead, shares are held via electronic record by the issuing company’s transfer agent. The benefits of electronic book-entry is to minimize the costs and problems of lost or missing certificates, which can be difficult for investors and companies alike to manage.
Your shares can be viewed on your Netcapital dashboard.
There is the possibility that your ownership percentage may be diluted, and your voting power may be diminished overtime as the company you invest in continues to grow and raises additional capital by selling shares to other investors.
Growing startups often conduct multiple stages of capital raises, all the way to a possible IPO. For each stage, the company issues additional stock to the new investors.
When a startup is struggling, it may pursue the option of going bankrupt or raising more money in a "down round", which means the value of the company decreased since the last capital raising stage. This is an adverse outcome for both the founders and past investors as dilution occurs much more dramatically in this instance. However, this result may be preferable to the startup going bankrupt and its investors losing everything.
Companies that raise money under Section 4(a)(6) are required by the SEC to file an annual report on their financial condition, unless certain conditions are met. Companies may, at their discretion, send investor updates through the Netcapital system at any time. There are no SEC financial disclosure, or ongoing disclosure or filing requirements for 506(c) offerings.
Because shares in companies on our platform are not traded, it can be difficult to monitor a change in price unless there is another investment round or an exit (meaning the company is sold or goes public). In both of those circumstances, the Issuer is required to disclose this information in an annual report. Netcapital does not provide statements in the interim.
After the offering, can I contact the entrepreneur?
Netcapital will manage investor-relations communication between investors and companies after closing. It may be difficult to get the attention of founders and CEOs as their focus will be on running their businesses.