Republic Investor FAQs
Congrats on becoming an investor on Republic! You’re probably wondering what to expect next. Look no further! This guide should shed some light on how things will work from here on out.
How easily can I sell the securities I acquire under Reg CF?
You’re allowed to sell your stake in a crowdfunding investment starting one year after your investment is provided to you, and earlier under some circumstances under federal law.
However, there’s no guarantee that someone will be willing to buy it at that point. You must also ensure compliance with any applicable state or foreign law.
How do I get a return on my investment?
When you invest on Republic, you receive a Crowd SAFE, which gives you a financial interest in the company you invested in. You can make money if that company “exits,” meaning it is acquired or goes public at a higher price than you paid for it. There is also the risk that you could also lose your entire investment if the company you invested in fails.
Read more in our Blog about how to start investing.
What do I get when I invest?
You get a Crowd SAFE, which is a security that gives you a financial interest in the company you invested in. Some campaigns also offer perks (e.g. a pre-order of their product) for particular investment amounts.
If I receive a Crowd SAFE, is my investment an equity interest?
Crowd Safes (SAFEs) are not common stock. Common stock represents an ownership stake in a company and entitles you to certain rights under state corporate law and federal securities law. A SAFE, on the other hand, is an agreement to provide you a future equity stake based on the amount you invested if—and only if—a triggering event occurs. SAFEs do not represent a current equity stake in the company in which you are investing. Instead, the terms of the SAFE have to be met in order for you to receive your equity stake.
Read more at: investor.gov
What voting rights do I get when I invest?
If a company fundraises on Republic via Crowd SAFE or convertible note, unless and until the Crowd SAFE or the note is converted into an equity stake, you will have no information or voting right as an investor in the company.
If and when you receive voting shares in a company, your voting rights will likely be diluted when the company raises additional funds.
Many companies on Republic raise using instruments that can never grant voting rights, such as the Token DPA, Crowd SDA and Crowd TPA. Read more about each instrument and the Form C of each company you are interested in investing in.
How can I communicate with the start up I invested in?
The rule states that all communications relating to your crowdfunding investment must be in writing, through Republic.
After you invest in the company, the founders can message you via a private message, but these communications can not contain any material information about the company that's not included on the public campaign page.
All communications containing or requesting new material information about the company or its business must be public and visible to all prospective investors.
On Republic, public communications can happen on the discussion section of each campaign or in the comments to the company's public updates.
What are the startup’s ongoing obligations towards me as an investor?
Companies that have successfully raised on Republic are required to publish an annual update on their website 120 days after the end of their next fiscal year.
After the first annual company update, many companies will not be legally required to continue providing annual updates, others will not have to provide annual company updates after two or three years, therefore investors may not have access to current financial statements as they hold their investment.
Please note, that Republic can not be held responsible if the company fails to publish an annual report.
Separately, we encourage companies to post regular investor updates on Republic, but they are not required to do so by law.
Do Crowd SAFE holders get a K-1 at the end of the tax year?
No. Crowd SAFE holders have no right to the income of the company while they hold the Crowd SAFE. Therefore there is no K-1 or tax documentation due to Crowd SAFE holders unless and until they are converted to another instrument.
How are my investments taxed?
The following information is based on our understanding of how some investors will be taxed on commonly used investment instruments. Each company hosted on Republic prepares its own security instrument for fundraising. We do not provide any guidance as to how such instruments may be taxed generally or how a specific investor purchasing these instruments would be taxed, and encourage you to discuss any tax questions with your tax, legal, accounting, and other financial advisers. The great majority of investments in seed-stage and early-stage companies result in complete losses for the investor, so tax losses may be expected on your investment.
SAFE investments: Crowd SAFE investments grant the holder a contingent right to receive stock or cash at a later period of time. Generally, these investments do not generate a taxable event until some type of liquidity event (e.g. when the issuer engages in an initial public offering or is acquired). Crowd SAFE instruments typically do not afford an investor the right to receive K-1s or similar tax documents. Token DPA investments: The Token DPA is a debt-like instrument which affords the investor the right to a future cash payment or tokens. If the investor receives cash with interest, tax will be due on the interest gained. If the investor receives tokens, tax guidance is unclear as to whether there is a taxable event. You may have to pay tax on the value gained then or pay tax when you sell or trade the tokens. Token DPA instruments typically do not afford an investor the right to receive K-1s or similar tax documents.
Other instrument types such as the Crowd SDA and Crowd TPA will be taxed based on facts and circumstances unique to each instrument. You should consult with the issuing company and your tax advisor.
Generally, Republic will not provide tax documents.
When will my investment be finalized and what does that mean?
When you invest in a company on Republic, whether your investment will actually happen depends on whether the startup's campaign on Republic succeeds. For the campaign to be considered successful, the startup needs to
1. raise their minimum funding goal before deadline and
2. not withdraw their campaign for any other reason (legally, they can cancel their round any time during the campaign).
After the campaign successfully ends, the finalization process begins. It involves filing the paperwork, chasing outstanding investor payments, doing the accounting, and dispersing funds to the company from the escrow. Depending on the size of the round, this can take weeks and, sometimes, months. When every investor and their payment is accounted for, the round is closed and Crowd SAFEs are generated, signed, and sent to the investors.
When you receive your signed Crowd SAFE, your investment is considered finalized.
What is a request for identity verification and why am I receiving it?
You may receive a prompt as you login to your Republic account, or through email, to verify your identity in order to complete your investment or when investing, your social security number (SSN) may be requested. You may be flagged to verify your identity at the time of your first investment, or after a later investment made on the platform.
Why do I need to provide my SSN or provide documents to confirm my identity?
When you invest, Republic uses third party service providers to validate your identity and confirm you are not prevented from investing due to federal prohibitions on your activities. We ask that you provide an I.D. to confirm your identity. Many people have names shared by others, therefore we need an ID and other identifying information to make sure you are well, you! We take this step to protect you from identity theft and to ensure if you purchase securities, they are in the name of the right persons, it is standard for all investment programs.
1. What do I need to do if prompted? You will be asked to submit an image of your identification document, which will be reviewed to ensure it is legitimate and has not been altered or manipulated. You can always check to see if we need your ID by going to https://republic.co/investor/verify.
2. How do I know this is secure? Your identification documents will be securely transferred to our partner for verification, Republic does not retain copies of documents you submit.
What is the purpose of a transfer agent?
Transfer Agents maintain a company’s records of ownership (i.e. who owns the securities the company has issued). Transfer Agents were created by federal law to ensure a licensed third party would facilitate the issuance, exchange, cancellation and payments related to securities issued by a company. In short, the purpose of a Transfer Agent is to track each investor’s investment to facilitate the delivery of information, the exercise of voting rights (if they exist), the deliver of dividends (if holders are entitled to them) and the conversion or exchange of the security in the event of a liquidity event such as a change of control, merger or initial public offering.
Transfer Agents participate in permissible transfers of outstanding securities, and when applicable, proxy voting, dividend/interest payments, further share issuance, transfers, lost shareholder searches, and much more.
Soon after the deal you have invested in closes, the issuing company should communicate with you regarding where the official records of your Security will be held. Please follow the instructions to create your account at the Transfer Agent, so your security is documented properly. Examples of Transfer Agents are, but not limited to, Carta, KoreConx, Vstock, ComputerShare and Securitize.
Record keeping of your private investments is not centralized, and you may have to track your position in private companies across many Transfer Agents and where applicable, a Custodial Account. We’d recommend that you take careful notes on all accounts where the records of your private securities are held, so at any moment of time you can check.
How do I track my investment?
After you have made an investment commitment and the investment is "finalized", your historical position will be viewable on your Portfolio. Your Portfolio is a static page and will not be updated unless the company you invested in provides an update to Republic.
Otherwise, the best way to track your investment is to wait for updates from the company you invested in. As private securities are, by their nature, not liquid, there will rarely be a trading market or public price for the security you purchased. Most private investors estimate the value of their holdings by monitoring the valuation of the company they invested in at subsequent fundraising rounds. Additionally, to help you monitor your investment value, most portfolio companies will provide updates of their progress and will also publish updated financials about a year after their original campaign.
Any other questions? Let email@example.com know and check out our full Investor FAQ on Republic.co