Investors + Owners
How does it work?
Once you've created a reservation in a company, you will be directed to our invest flow where you can verify your accreditation status, sign deal documents and receive wire instructions. Once the company has reached its fundraising goal and we've verified each investor's accreditation status, we will close the round and you will receive executed deal documents.
Who can invest?
The Securities and Exchange Commission regulations currently require that all investors in the types of deals that Alphaworks promotes be U.S. Accredited Investors - the full SEC definition can be found here.
For most individuals, an accredited investor is defined by the SEC to be a person who has an individual net worth, or joint net worth with the person’s spouse, exceeding $1 million, excluding the value of the primary residence. A person is also considered accredited if his or her income exceeds $200,000 in each of the two most recent years or joint income with a spouse that exceeds $300,000 for those years, as well as a reasonable expectation of the same income level in the current year.
Alphaworks does not currently accept investments from international investors. For our purposes we define any individuals or entities without an American Tax ID number as "international".
Can I invest through an LLC or trust?
Alphaworks currently accepts investments from both individuals and entities (LLCs/LPs and trusts). Entities must prove accreditation by different standards- check those out here.
I've invested in private companies before, why do I have to accredit now?
Prior to the JOBS Act and the introduction of general solicitation, companies seeking private investment were only required to have a "reasonable belief" that their investors accredited, typically relying on an attestation from the investor to verify accreditation. Once the JOBS Act was enacted, any company seeking public investment needed to adhere to a higher standard of accreditation, taking "reasonable steps" (see SEC guidelines here to verify the accreditation status of all investors. To satisfy these requirements and protect both our users and the companies working with us, Alphaworks partners with SecondMarket, a registered broker-dealer, to review and verify the accreditation status of all our investors.
How long is my accreditation status valid?
Accreditation can last anywhere from 3 months to 1 year depending on what type of documents are submitted to verify accreditation. Individuals or entities qualifying using the asset test of using the 3rd party verification form to verify accreditation will have a valid status for up to 3 months. Individuals qualifying under the income standard that submit relevant tax documents will have a valid accreditation status for one year.
Why do I have to submit a credit report?
If using the net worth standard to verify accreditation, individuals may be asked to submit a credit check. Alphaworks needs to ensure that investors have no debts other than primary mortgages that would lower their asset worth below $1 million.
What is the minimum amount I can invest?
The minimum investment size is determined by each company on Alphaworks. It often ranges from $1,000 per investment to $5,000 per investment.
When do investments close?
The investment closing process begins once the company’s fundraising goals have been met. The entire process typically lasts 1-2 months
What will I own?
Investors participating in an Alphaworks round will buy stock in a special purpose vehicle (SPV), an LLC, created by Alphaworks for the sole purpose in investing in a specific company. When you invest on Alphaworks you will hold shares in the LLC and not directly in the specific company itself. Alphaworks will be the manager of the LLC, and will hold the voting and other rights of the LLC. Please review the deal documents for specifics around the investment into the SPV.
Is there a fee to invest on Alphaworks?
There is currently no transaction fee to an investor when participating on Alphaworks. However, there typically is a carried interest charge that is calculated at the time when the investment is redeemed.
What else should I know about investing on the platform?
Investing in early-stage private companies is about as risky as investing gets. You should expect most companies to fail, in which case investors will lose all of their invested capital. Do not invest any money you cannot comfortably afford to lose.
What types of companies raise capital on Alphaworks?
The Alphaworks vision is to provide private companies an opportunity to raise money from a large and diversified community of investors. Currently, Alphaworks is working with companies with a Sponsor and who have identified passionate users and/or partners who would be interested in investing along with traditional venture capitalists.
How are investments executed?
Currently, one of the investors in a round will act as a sponsor on Alphaworks, and the company will carve out an allocation to be funded through Alphaworks. After the company closes it’s round, Alphaworks will coordinate a second close, which is lead by the sponsor. This second close will be with a similar security, and one shareholder - a new Alphaworks LLC.
What does it cost to raise funds on Alphaworks?
Currently, there are no fees for investors or companies that utilize the Alphaworks platform. However, there typically is a carried interest charge that is calculated at the time when the investment is redeemed.
How much involvement will my investors have post close?
All of the voting and information rights are retained by the Manager of the Fund, Alphaworks Inc. However, we strongly encourage founders and CEOs to keep Alphaworks investors up to date the same way they would inform their institutional investors. Alphaworks investors can become very strong advocates and evangelists for your products and its beneficial both for you and them to form a strong relationship.
Can I control who invests in my round?
Yes. Although we like to keep investment opportunities open to our community we do grant companies ultimate decision over who can invest.
What does it mean to be a Sponsor on Alphaworks?
All investment opportunities on Alphaworks are hand picked by one of our top-notch sponsors. Sponsors will lead investment opportunities for companies fundraising on Alphaworks. This often means helping to market the investment opportunity, setting investment terms, and charging a carry to manage the SPV. As lead investor you will have full access to the Alphaworks toolset so that you can organize opportunities and build community on your site in a brand consistent manner.
What is a K-1?
The K-1 is a tax form issued for an investment in a partnership, in this case an Alphaworks Round. The partnership uses the K-1 to report your share of the partnership's income, deductions and credits. It is prepared individually for each partner, rather than being a financial summary for the entire partnership.
Will I receive a K-1 from Alphaworks?
If you invested in an Alphaworks Round in 2014 you will receive a K-1 for that investment.
What do I do with a K-1?
We recommend that you provide the K-1 to your accountant. You can also find detailed instructions from the IRS here.
How do I get the K-1?
It will be available in your profile dropdown menu under the "All Investments" tab.