Frequently asked questions
What are the campaigner benefits of crowdfunding compared to other financing alternatives?
Equity crowdfunding engages several investors offering ownership of shares, funding is available for expanding and developing your business. One main difference compared to traditional investing is that everyone can become an investor. For example, the enterprise can invite existing clients or fans as future investors. There is one more additional advantage for an entrepreneur who applies financing through crowdfunding - investors bring in valuable knowledge, contacts that may turn to be the most beneficial business opportunity. You can find dedicated advisors, evangelists and even potential board members amongst investors. Through public platform, investors can invest into companies with a great potential and as such diversify risks.
What kind of entreprises could use the Fundwise platform?
Fundwise is perfect for Estonian companies who design products, technology, computer games, IT products, energy or green technology solutions or plan the entrance to international markets.
Fundwise is open to all enterprises who are registered as private limited companies (OÜ) in Estonia and are engaged in profitable and legitimate business activities.
Energy associations are a good example of crowdfunding. These are associations, based either on the same location or other common interests, the main aim is to produce and distribute electricity and heat via local network. Energy associations help communities to become energy independent, maintain controlled energy prices, increase availability of energy and use environmentally safer energy sources. Read more at energiayhistud.ee.
Are Fundwise crowdfunding options open for companies registered overseas?
Currently, Fundwise is open for all companies, registered in Estonia as private limited companies (OÜ). In case of consortiums, it is essential that the company, registered in Estonia, is the owner of strategic assets that company uses for its activities. In case you are an Estonian e-resident, you can establish your company here: http://www.rik.ee/en/company-registration-portal/e-residency
Estonian e-residency can be applied here: https://e-estonia.com/e-residents/apply/
How can I start a campaign on the Fundwise platform?
Write to us about your start-up/company expressing your wish to apply for crowdfunding, firstname.lastname@example.org and we will get in touch with possibilities for co-operation and ideas how to contribute to the success of your company.
What should I do before launching the campaign?
Fundwise recommends that an entrepreneur who is considering equity crowdfunding carefully weighs what is the aim and function of funds to be raised as well as what can be accomplished with the funding. You also need to draft the business plan and the cash flow prognosis.
It is equally important to assess the composition of your team and in case you lack certain competencies (e.g. marketing staff), then find a solution to the problem before launching a campaign or alternatively offer a solution how to solve the issue after the campaign.
Before launching the campaign, it is important to prepare the marketing and communication plan to be able to attract attention to your campaign from the very beginning. Equity crowdfunding can be seen as a public marketing campaign for creating the image of your company and reaching wider audience with your products or services. Revise all your marketing activities carefully, appoint responsible team members, fix deadlines and start implementing the plan. Thorough action plan and its persistent implementation is an important pre-condition to engage investors and find new customers and partners, in other words essential to the success of your company.
Ensure that all trademarks, domains, designs, databases, clientlists, presentations, prototypes etc. belong to the company who is seeking funds through crowdfunding. In case of doubt, clarify the issue and include the assets in your company books.
Fundwise suggests that you carefully consider your offers to the investors- most of them want to earn profits from their investment. So, describe the benefits for the investor in terms of time and amount, when and how much they will earn profits. Be clear and realistic in your description. Consider also, what else may motivate an investor to invest into your company, in addition to the profit.
For example, the benefits and promises can include distribution of profits, options to exit the investment e.g. when reaching a certain turnover, the promise to re-purchase shares, payment of dividends upon certain turnover, a plan to include additional investments, merger or buying options etc. You can also agree in the shareholders’ agreement that the shares are repurchased on a certain date and with agreed margin. The more concrete you are in your promises, the more attractive the campaign is for investors.
In addition there are some requirements for launching a campaign:
- Your company must be a private limited company (OÜ) registered in Estonia.
- The statutes of the company should include the subscription right of the shareholders, shareholders’ right to vote electronically, par and premium value for share capital increase. We also recommend including restrictions to pawn the shares in the statutes.
- The company’s share capital is fully deposited.
- The shares of the company are registered at Estonian Central Register of securities. See also: ECSD webpage
- You have opened an escrow account for the campaign period according to special terms in the account agreement, in Swedbank (Fundwise provides necessary bank contacts).
- You have made the nessary decision to engage investors and increase the share capital.
- All required information and materials are uploaded on the campaign site.
What is the percentage of shares You recommend to offer, for investors?
Every entrepreneur is free to make that decision. We recommend, also, to discuss the matter with your legal advisor. While crowdfunding, the percentage usually is between 5-20%.
How can I calculate the value of my company?
Mainly it is you who decides upon the value of your company but we recommend that you investigate different evaluation methods and consult other enterprises and experts. There are different factors influencing the value of a company- economic situation, market potential, working team, competition, fixed assets, contract security and terms etc.
Your potential investors are very interested in the value of your company and this constitutes an important aspect while making the investment decision. Therefore be sure to add the explanation of calculating the value of your company to your campaign introduction (e.g. Promises for the investor and/or Business Plan). We also recommend to read the blog entry on the topic.
Why must the share capital be deposited?
The company starting the campaign has to deposit the share capital, so that it can be increased and new shares can be emitted to new investors.
How to engage as many investors as possible?
To reach as many equity crowdfunding investors as possibile you should bring the minimum investment amount also as low as possible. Since the lowest investment, in case of OÜ, can be the market value of a full share then taking into consideration the fixed valution the minimum investment could still be too high.
In case the company has excess assets on equity account (reserv, profit, premium par) that can be used to increase the share capital by bonus issue. Such an increase of share capital enables to lower the minimum investment amount and make the investment more suitable for potential investors.
Why do I need to increase the share capital of my company and not alternatively sell the shares?
Equity crowdfunding investors wish to invest into your enterprise and not to buy your share of the company.
Why should pre-emption rights be fixed in the statutes?
Pre-emption rights allow shareholders to control the acquisition of shares by third parties.
Why it is necessary to fix the e-voting in the statutes?
As some investors may come from other areas where the company is situated it may be complicated for them to vote on shareholders’ meeting, therefore we recommend such, a more convenient, option for them to be fixed.
Why should the premium par value be fixed in the statutes?
As the increase of share capital is not carried out in nominal value, premium par value must be fixed in the statutes. Premium par value is the amount paid by the investor, exceeding the nominal value of the share.
Why should shares be registered in Estonian Central Register of Securities (ECSD)
Fundwise recommends the shares to be registered in ECSD so that all investor transactions and procedures could be convenient and exit costs kept reasonable. Also, ECSD enables the procedures and shareholders list be more transparent and easily accessible. You can find out more about registration of shares at ECSD HERE, you need securities account of all shareholders. After registration of shares the company has certain obligations to ECSD, find out more here:
Why does my company need a special account at Swedbank?
During equity crowdfunding campaign all investments are deposited to your company’s special account. This is special because nobody can use these funds before the campaign has ended, hence protecting the investments until the investors get their shares. Fundwise has the right to transfer the funds back to the investors, in case the campaign fails, or to your company in case of a successful campaign.
Is it possible to alter/change videos or other campaign elements during the campaign period?
Taking into consideration that these are the elements of the whole campaign, based on what the investors make their decisions, it is not possible to alter parts of campaign/campaign elements during the campaign period.
How to manage a great number of shareholders?
Investors- both private persons and companies- who invest during the equity crowdfunding campaign will become shareholders of your company provided you do not exclude them from the investor list, after the campaign. You can control the number of investors, establishing the minimum investment sum per investor in a way that enables you to keep the number of potential investors either low or high. Here you should bear in mind that the higher is the minimum investment per investor, the more complicated is to reach your campaign goal.
All shareholders must be treated equally under equal circumstances according to business legislation but in reality everything depends on your share and responsive rights (either you can make decisions or veto them alone). Mostly, you need ½ votes of shareholders in a meeting to pass the decision, provided that the quorum is assembled. Certain decisions (e.g. changing the statutes) need a bigger number of votes, mostly 2/3 of all shareholder votes present in a meeting. Small shareholders have the right to be informed by the board about the company activities as well as get access to the company documentation. At the same time the company can refuse to provide certain information or present documents, in case there is a reason to believe that this might seriously damage company’s interests.
Small shareholders, presenting at least 1/10 of the share capital, can demand special auditing of financial situation and management of the company. Required auditor can be appointed based on the shareholders’ decision. In case small shareholders present at least 1/10 of the share capital they have the right to demand a special control procedure and to appoint the controlling entity/person also by the decision of the shareholders.
Taking into consideration the big number of shareholders it is surely worth while paying attention to the requirements and procedures, deriving from the business legislation, how to assemble the shareholders’ meeting, make decision and take minutes of the meeting. Law firms and NASDAQ can surely assist here. Ask a price offer also from our partners, law firms: NJORD, Deloitte and GLIMSTEDT.
We also recommend to keep your communication open and transparent. Keep your investors updated regularily (once in a quarter), already in the beginning of your investor relations inform them how, when and in what form investors will receive the information about the company development (e.g. via newsletter, social media closed group or some other web-based solution).
Shareholder meetings must take place at least once a year to confirm the annual report, such a regularity may be insufficient. Therefore we recommend that you conduct a little survey, immediately after the campaign, to find out how often and through what channels your investors want to receive information about selected topics. Try to find a suitable solution to all investors, of course in the limits of your capacity.
Why is a shareholder agreement needed and what points should it involve?
It is wise to be clear, already in the very beginning, how your common future will look like. Therefore we recommend to conclude a shareholder agreement with all potential shareholders already during the campaign. Taking into consideration the number of shareholders, agreeing on terms and signing the agreement could be more complicated, as different investors have different background, experience and expectations.
The shareholder agreement can regulate the duties and additional rights, that are not regulated by the law. In that agreement you can fix limitations to financial obligations, business activity, alienation, board responsibilty, competention etc.
We provide an example of an shareholder agreement, which can be modified to a suitable document, according to your company’s needs.
What to consider about the existing investors?
In case you have a history of engaging investments and you have investors in your shareholder list as well as shareholder agreements, clarify how the shareholder agreement regulates inviting new investments. There might be some requirements, pre-conditions or limitations to that or earlier investors might have some special rights or clauses protecting their investment (e.g. antidilution protection), also there could be veto clauses on involving new investments (prior consent needed or a shareholder right to veto the decision on the share capital increase).
We recommend to discuss the equity crowdfunding issue with your existing investors or at least inform them about it. In addition we recommend that you check your shareholder agreement clauses if the agreement can be made public during the campaign or if it can be shared with potential investors. In case this is forbidden or the existing investors do not agree to that you should draft a new agreement for new investors or conclude a confidentiality agreement with potential investors who wish to learn more about agreement terms.
In case the earlier investors have an antidilution protection, you should carefully consider, prior to launching the campaign, how to protect their rights and what you need to do for that.
How to protect trade secrets during the crowdfunding campaign and after that?
We recommend to reveal your trade secrets as much as possible and as much as necessary during your campaign and after. Try to demonstrate your competitive edge as profoundly as you can, without revealing the most sensitive details of your trade (use generalization, measuring indicators, statistics, financial indicators etc.). In case you need to reveal your trade secrets to your investors, conclude a relevant confidentiality agreement to minimize the risks.
How long should the campaign last?
In general, Fundwise offers a campaign period of 30-45 days. It is important to note that this period does not include the preliminary project feedback, that is a free service for every campaign owner.
Is it possible to prolong the campaign?
As a rule, we do not forsee such an option, but in rare cases this is possible. The company can launch several crowdfunding campaigns during 12 months, according to company’s needs, provided that the total amount of crowdfunded investments remains below 2,5 million euros.
What happens when the minimum investment amount is/is not reached?
In case the target is not reached, the funds are returned to the investors. In case the minimum investment is reached, it is recommended to wait until the end of the campaign and increase your promotion efforts to reach the maximum amount. If your do not reach the maximum, the company receives the minimum amount or the total amount that increases the minimum.
Is it possible to raise more funding that the maximum limit set with the campaign?
It is not possible to raise above the maximum limit. Therefore we recommend to thoroughly calculate your needs because you cannot change the maximum investment limit during the campaign.
How much does it cost to start a campaign at Fundwise platform?
Please see our price list for pricing and service fees.
Before you start creating your campaign contact us via email@example.com, so we can discuss our cooperation.