What is an online private placement?
An online private placement is a pooling of resources or capital provided by many individuals to fund a specific business.
In April 2012, Congress passed the Jumpstart Our Business Startups (JOBS) Act to reform decades-old legislation that prevented ordinary investors from investing in private companies. The JOBS Act enables small businesses to issue securities, including stock, debt, royalties, and other structures. In addition to enabling investors to capitalize on the company’s financial growth, it also allows private placements to be publicly advertised, which was not permitted prior to this legislation.
With this change, individuals can now invest in start-up companies throughout the capital structure, including equity, debt, and hybrid securities. Rural Growth is an online platform that securely processes transactions between investors and entrepreneurs.
Who can invest?
Current regulation only allows accredited investors to invest in the offerings on the Rural Growth platform. To register as an accredited investor, simply sign up for a Rural Growth account and complete the online self-accreditation questionnaire.
What is an accredited investor?
Under the Securities Act of 1933, a company that offers or sells its securities must register the securities with the SEC or find an exemption from the registration requirements. The Act provides companies with a number of exemptions. For some of the exemptions, such as rules 505 and 506 of Regulation D, a company may sell its securities to what are known as “accredited investors.” The term accredited investor is defined in Rule 501 of Regulation D.
For more information about the SEC’s registration requirements and common exemptions, read our brochure, Small Business & the SEC. For more information about how individuals can be accredited investors, see our Investor Bulletin on accredited investors.
In Rule 501 of Regulation D, federal securities laws define an accredited investor as*:
- A bank, insurance company, registered investment company, business development company, or small business investment company;
- an employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million;
- a charitable organization, corporation, or partnership with assets exceeding $5 million;
- a director, executive officer, or general partner of the company selling the securities;
- a business in which all the equity owners are accredited investors;
- a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person;
- a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or
- a trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.
* from the SEC’s website
How can I verify my accredited status?
To verify your accredited status quickly and securely, visit our affiliate Accredited.AM. The accreditation service is free for investors and can be completed entirely online.
Are there fees for investors?
There are no fees for investors to access the Rural Growth marketplace.
Am I required to make an investment if I register as an investor?
No, you are not required to make an investment on Rural Growth. Registration gives you access to the Rural Growth Marketplace and allows you to browse all of the current investment opportunities.
What types of companies are listed on Rural Growth?
Companies on the Rural Growth platform come from a wide variety of industries. They include start-ups as well as more established companies seeking funds to further their growth. All issuers on the Rural Growth platform must demonstrate a sound business plan and meet eligibility guidelines by fulfilling SEC regulatory requirements. North Capital Private Securities, a registered broker-dealer, conducts extensive due diligence on each offering.
How does Rural Growth select which companies will be listed on the platform?
Most companies are brought to the attention of Rural Growth through our network and partners. We look for companies that have a solid business plan, strong teams and networks, compelling addressable markets, and high traction or growth. Of the companies that have expressed interest in raising funds on Rural Growth, we estimate that less than 3% are selected.
When I invest in a company on Rural Growth, what do I own?
When you invest in a business through the Rural Growth platform, you are buying a private security in that specific company. The details of the private security are explained in the offering documents. Please review the documents carefully to ensure that you understand the terms prior to investing.
What is the process of making an investment?
The investment process may differ slightly for each investor, depending on their personal investing preferences, but it can generally be described as follows:
- Create an account: Investors must first create an account and register on Rural Growth.
- Self-verify accredited status: Investors must verify their accreditation to gain access to the marketplace. You will also receive a phone call from a registered representative of North Capital Private Securities to verify your identity and assess your suitability, as required by FINRA regulations.
- Browse our offerings: Once you have identified a potential investment opportunity, you should review the terms of the offering located in the Documents section of the offering page.
- Invest: Once you are comfortable with the investment terms, you can select “Invest” to initiate the purchase process.
- Fund investment: After selecting to invest in an offering, there are only a few steps left to complete the process:
- Enter your investment amount
- Select your payment method (ACH transfer, wire, or check)
- Verify your identity and accreditation status
- E-sign and execute the required legal agreements sent to your email
Once these steps are completed, your funds will be held in an escrow account until the fundraising is closed. At that point, you will receive confirmation of success and counter-signed legal agreements. In the event of an unsuccessful round, your funds will be returned to you by the escrow agent. You can track the status of your investment(s) from your dashboard anytime.
How are legal documents handled on Rural Growth?
All required documentation is emailed to you using Echosign. Once you have carefully reviewed the documents, you can sign them electronically. You will receive an emailed copy of all signed documents for your records.
How does the investment process work?
When you make your investment, the money is held securely in an independent escrow account. Your investment is not final until the company raises enough money to meet its minimum investment target. Once the target has been met, the money is transferred to the company and you will receive your security. If the minimum is not met, 100% of your investment will be returned directly to you. Neither Rural Growth, nor North Capital Private Securities, will ever receive or hold any investor funds during the process.
Can I invest in a company on Rural Growth if I am located outside the United States (non-U.S. citizen)?
Yes, Rural Growth allows investments from those domiciled outside of the United States, although this requires a few additional steps. If you find a deal you would like to participate in, contact us at help@Rural Growth.com and we will set up a time to discuss the required information.
Is my investment guaranteed once I have made my commitment?
Rural Growth operates on a first-come, first-serve basis. As long as you are an accredited investor with available funds and have placed your commitment before the maximum fundraising amount is met, you may make the purchase. Once the offering has closed, the status of that investment on your portfolio dashboard will change to “complete.”
Is there risk involved when investing in startup companies on Rural Growth?
Investment opportunities, on Rural Growth or through any other platform, are considered high-risk opportunities and could result in a loss. For startups and small businesses, standard risk factors—such as execution and strategy risk—are often magnified at the early stages. In the event that a company goes out of business, your ownership interest could lose all value.
Furthermore, private investments in startup companies are illiquid instruments that typically take five to nine years (if ever) before exit. Most investors choose to protect their investments by practicing portfolio diversification, though there is no guarantee that this strategy will reduce your risk. Investing smaller amounts across a large number of opportunities is a good practice in both the private and public markets, and is a great investor benefit facilitated by the JOBS Act.
Can I re-sell my shares at any time?
No, private investments in startup companies are illiquid instruments. These types of investments are usually held for several years.