30 July 2023
In this article you can check that you understand the main technical details concerning the world of equity crowdfunding and that you find on Mamacrowd. This will enable you to approach the entire equity crowdfunding investment process with peace of mind and knowledge.
For each project/campaign presented on the platform we distinguish between:
The minimumtarget is the minimum capital required for the company to get its project off the ground, if this minimum value is not raised the capital raise cannot be perfected, the raise is ineffective and therefore the money raised will be returned to the investors.
Themaximum target is the ideal amount of funding that the company envisioned for itself, and on this basis it built its business plan to its maximum potential. In successful cases where the enterprise obtains financing beyond its maximum target(overfunding), it generally goes on to readjust the business plan so as to take advantage of the entire capital raised. However, the enterprise may decide to put a cap on the raising and not go beyond the maximum goal.
Pre-money valuation: this is the value of the company (startup/SME) in which you invest before raising capital through crowdfunding. This valuation is proposed by the company itself and then examined by the crowdfunding platform e.g. through analysis of similar transactions carried out in the capital market, historical analysis of financial statements (if any), characteristics of the team, tangible and intangible assets present, degree of innovation of the business model, and the business plan i.e. prospective growth estimates.
The pre-money valuation can be broken down into two elements: share capital and share premium. Share capital is the nominal value of the company, i.e., an accounting item that represents the assets that belong to the shareholders. The premium is the difference between the company's valuation and its share capital, this difference can be substantial precisely because it represents the company's growth potential (even for publicly traded companies there is a big difference between share capital and their market value, that is, their capitalization).
The value of the company at the end of capital raising is called the post-money valuation, given by the sum of the pre-money valuation plus the capital raised.
The capital raised also consists of share capital plus a premium. The portion of the capital stock you buy (that is, the percentage portion of the company you will own) is given by the par value of your order divided by the final capital stock. Let's take a numerical example: the company has a pre-money value of €7million and raises capital of €600 thousand, so the post-money value will be €7.6million (pre -money value €7million + capital raised €600 thousand). What is the corporate percentage held by the total investors? The calculation to be done is capital raised €600 thousand divided by post-money value €7.6million, so 7.89%. If an individual invests, for example, €1000.00, to calculate the percentage of capital it acquires the calculation will be: €1000.00 (capital invested) divided by value €7.6million (post-money), and thus 0.013% ownership acquired. Obviously, to know exactly what percentage you acquire of a company with the investment you will have to wait until the equity crowdfunding collection is completed.
The process of raising capital on the crowdfunding platform will have a predefined campaign duration, generally 60 days, which can be shortened or extended depending on the progress of the raising.
Each investor to participate in the campaign cannot deposit less than theminimum order, generally not less than €250 for startups and SMEs and €500-€1000 for real estate projects. The deposit must be collected within 14 days from the date of subscription otherwise it will be rejected and the membership cancelled. In real estate projects, unlike investments in startups or SMEs, there are predetermined returns, often increasing and proportional to the capital invested. In addition, if you invest in real estate proposals first as an early bird, you get a percentage increase in the interest charged.
On Mamacrowd, for some campaigns if the investor joins in the pre-launch phase (called "coming soon," lasting about 15 days) he or she qualifies as an Early Bird investor entitled to advantages over those who invest when the campaign has launched. One advantage is increased equity, i.e., the early bird investor, for the same amount invested, will get a greater percentage of equity than someone who is not an early bird. This means that you are buying a somewhat larger slice of the company for the same amount invested. In addition, there may be other rewards, such as a discount to buy the products/services of the company we are investing in or participation in exclusive company moments.
When investors buy shares in an unlisted company, their name must be written on the commercial register, which is a public document. If they want to sell their share, a notary must be paid to update the business register with the name of the new buyer. This is the dynamics of traditional share registration but it can be avoided by buying the share under Alternative Regime or "Rubrication." This mode puts an intermediate level between the investor and the commercial registry: a Securities Brokerage Company(SIM), which for Mamacrowd is Directa SIM spa. The share is registered in the name of the SIM on the commercial register but then the actual owners are marked in an "address book" kept by the SIM. So whenever you want to sell the share you will only need to update the SIM's address book without the notarial process.
In order to carry out the transaction at no cost, it is necessary for both seller and buyer to have an account opened with Directa Sim, and the account has no annual management costs.
The company shares do not result as assets of the SIM, so even if the SIM goes bankrupt, the investor does not lose his or her investment.
The cost of rubrication for individuals is €15 one-time for activation of the service, €30 for each investment (cost that can be offered by the company itself in which one invests) and then in case of resale of the share there are no costs to be incurred.
Following the investment, communication becomes between investors and the company itself. The shareholder will receive all necessary information directly from the company, through,dedicated newsletters or participation in meetings. However, the Mamacrowd platform remains available to investors for communications and any needs in this regard.
Or discover all the lessons from the "Ultimate Guide to Investing in Equity Crowdfunding".
Warnings pursuant to Article 19(2)
crowdfunding services provided by Mamacrowd are not covered by the Deposit Guarantee Scheme established in accordance with Directive 2014/49/EU*; securities and instruments eligible for crowdfunding purposes that can be acquired through this crowdfunding platform are not covered by the Investor Compensation Scheme established in accordance with Directive 97/9/EC**.
* Directive 2014/49/EU of the European Parliament and of the Council on Deposit Guarantee Schemes.
** Directive 97/9/EC of the European Parliament and of the Council on investor-compensation schemes.
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