Frequently Asked Questions

InfraShares

What is InfraShares?

InfraShares is a startup investing platform providing its members access to vetted investment opportunities related to Smart Cities technologies, Infrastructure assets, and Renewable Energy projects.

How does it work?

For Investors:

  • View and gain access to investment opportunities
  • Review companies’ offering materials
  • Make an investment online

For Companies:

  • Simplify and speed up your fundraising process
  • Access a network of investors focused on Smart Cities technologies, Infrastructure assets, and Renewable Energy projects.
  • Streamline investor pitches, execution of legal documents, and processing of investments

How does InfraShares protect my information?

Your trust in us and the security of your information is core to our business and a top priority at InfraShares.

We adhere to best practices such as browser encryption, store all of our data on servers in secure facilities, and implement systematic processes and procedures for securing and storing data. Communication on the platform is encrypted via SSL during transit and bank level encryption is utilized for sensitive information. We limit access to your personal and financial information to only those employees with authorized access.

For more information on how we collect and protect your personal information, please see our Privacy Policy here.

For Investors

Who can be an investor? Can I invest on InfraShares?

Everyone can sign up on InfraShares. In order to determine which companies you are legally able to invest in, we need to know whether you are an Accredited Investor or a Non-Accredited Investor.

What is an Accredited Investor?

An “Accredited Investor” is defined by the Securities and Exchange Commission as someone who meets at least one of the following requirements:

  • Has an individual net worth, or joint net worth with your spouse exceeding $1 million (excluding the value of one’s primary residence)
  • Has an income exceeding $200,000 in each of the past 2 years and expects the same this year
  • Has an income (with your spouse) exceeding $300,000 in each of the past 2 years and expects the same this year
  • Invests on behalf of a VC firm or other registered investment company
  • Invests on behalf of a business with $5 million in assets and which was not formed for the specific purpose of acquiring the securities offered
  • Any entity in which all of the equity owners are Accredited Investors

What is a Non-Accredited Investor?

A “Non-Accredited Investor” is any individual or entity that does not meet the definition of an Accredited Investor.

Both Accredited and Non-Accredited Investors can make investments on InfraShares depending on the offering type.

How does the investment process work? How do I transfer funds for an investment?

The investment process may be slightly different for each investor, depending on their personal investing preferences, but it can generally be described as follows:

  1. Investors must first create an account and complete the necessary verifications.
  2. Once you identify a potential investment opportunity, you should review the terms of the offering (this information can be found in the respective company’s profile page and data room); you will have an opportunity to review the investment documents again during the funding process.
  3. Once you are comfortable with the investment terms, you can invest by clicking on the Invest button located on the company profile page or the browse company page.
  4. Follow the steps to complete your investment

Once you confirm your investment, the funds will be transferred to an escrow account for holding until the fundraising is closed.

Once the fundraising round closes, you will receive confirmation of success and acceptance of your subscription. In the case of an unsuccessful round or a canceled investment by yourself, the proposed transaction will be cancelled and the escrow agent will return the funds from the escrow back into your bank account.

What do I need to know about early-stage investing? Are these investments risky?

Companies on InfraShares are high risk opportunities and may not retain their value. Investing in startups and small businesses is inherently risky and standard company risk factors such as execution and strategy risk are often magnified at the early stages of a company. 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 up to five and seven years (if ever) before an exit via acquisition, IPO, etc.

While there are no guarantees that this strategy will reduce your risk, most investors choose to mitigate risk by practicing portfolio diversification. Investing smaller amounts across a large number of opportunities is a good practice in the private markets just as it is in the public markets.

How does a convertible note work?

A convertible promissory note is a hybrid debt instrument that is often used for angel investing. Convertible notes typically convert into equity of the issuing company if the company reaches certain milestones, such as completing a Series A round.

Key Terms:

  • Conversion Discount: Grants initial investors the right to convert the amount of the loan, plus interest, at a reduced price (discount %) to the purchase price paid by the next round’s investors.
  • Interest Rate – Interest accrues and the total amount of interest is added to the loan amount and converted into shares of preferred stock upon the closing of the next round
  • Valuation Cap – Ceiling on the valuation determining the conversion price of the note. For example, if the cap is $5 million, and the next qualified equity round values the company at $10 million, then the note will be converted at a $5 million valuation (effectively a 50% discount).
  • Term – Maturity date by which the company must trigger conversion by completing a subsequent round unless investors elect to extend the note term, receive payment, or convert to equity.

When will I get my investment back?

The companies listed on InfraShares are privately held companies, and their shares are not traded on a public stock exchange. As a result, the shares cannot be easily traded or sold. As an investor in a private company, you typically receive a return on your investment under the following two scenarios:

  • The company gets acquired by another company.
  • The company goes public (undergoes an initial public offering on the NASDAQ, NYSE, or another exchange).

In those instances, you receive your pro-rata share of the distributions that occur. It can take 5-7 years (or longer) to see a distribution, as it takes years to build companies. In many cases, there will not be any distribution as a result of business failure.

InfraShares does not make investment recommendations, and no communication, through this website or in any other medium should be construed as a recommendation for any security offered on or off this investment platform. Investments in private placements and start-up investments in particular are speculative and involve a high degree of risk, and those investors who cannot afford to lose their entire investment should not invest in start-ups. Companies seeking startup investments tend to be in earlier stages of development, and their business model, products and services may not yet be fully developed, operational or tested in the public marketplace. There is no guarantee that the stated valuation and other terms are accurate or in agreement with the market or industry valuations. Additionally, investors may receive restricted stock that may be subject to holding period requirements. The most sensible investment strategy for start-up investing may include a balanced portfolio of different start-ups. Start-ups should only be part of your overall investment portfolio. Investments in startups are highly illiquid and those investors who cannot hold an investment for the long term (at least 5-7 years) should not invest.

How much can I invest on InfraShares? Is there a minimum? Is there a maximum?

Investors may be subject to regulatory limitations on how much they can invest based on their income or net worth. The minimum amount you can invest in a company will depend on the specifics of a given company’s raise.

What are the tax implications of an equity crowdfunding investment?

We cannot give tax advice, and we encourage you to talk with your accountant or tax advisor before making an investment.

I'm not in the U.S. can I invest on InfraShares?

We generally accept all investments, though you may be restricted from investing in certain circumstances depending on the jurisdiction in which you live in and its local laws.

How do I contact the company for diligence and general communication?

To learn more about a company, you can review the offering materials on the company’s profile page and data room. Depending on the offering type you can also either message the company directly or post questions to the company and general investment community on an open forum to facilitate investor communication and discussion.

Will I receive project updates after I invest?

Because there may not be any relationship between InfraShares and the issuer after the offering is completed, you may or may not receive updates from the project issuer on the status and progress of the project or company. If you do receive updates, you will be notified directly of these updates, and they may be viewed on the project/company itself under the update section.

What does InfraShares consider when conduct due diligence on potential investment opportunities?

We only choose opportunities that pass our thorough screening process. Once we determine the Shared Value of a project, it must pass our 15 Point Risk Evaluation test to be considered.

Shared Value

Does the investment generate lasting economic, social and environmental benefits by supporting the delivery or operation of public infrastructure?

If yes, then…

Risk Evaluation Test

Compliance Risks

  • Legal – Does the startup/project meet the legal criteria for a regulated crowdfunding offering?
  • Fraud |  Is there any reasonable basis for believing that the issuer or the offering presents the potential for fraud or otherwise raises concerns about investor protection?
  • Management |  A background and securities enforcement regulatory history check on each officer, director, and person holding more than 20 percent of the outstanding equity.
  • Fact Checking – Is the information presented in the pitch true? Can we verify key facts, contracts, and investments.

Financial Risks

  • Liquidity |  Does the offeror certify that they have enough post-closing liquidity (from the offering and any additional sources) to sustain operations for a specified number of months or a period of time which is clearly identified until the next planned funding round or, if a development project, to complete the proposed phase of the project?
  • Financing | How will changes and volatility in the credit and equity markets impact financing efforts and the capital structures of underlying infrastructure investments?
  • Leverage | Infrastructure investments may utilize significant leverage which may increase financial and refinancing risks.
  • Valuation | Investments and partnerships will be assessed to determine if appropriate and reasonable valuation procedures and methodologies are utilized by managers.  Has the issuer provided a reasonable analysis of their valuation when applicable?

Execution Risks

  • Traction – Has there been measurable progress, growth, and social proof? Is the company backed by other notable investors?
  • Team – Does this founder have the skills and vision to succeed? Beyond the founders, does the team have the right people in the appropriate roles—including experienced advisors?
  • Business Model |  Is the business proposal commercially reasonable?  Is there a clear and reasonable explanation of the exit strategy?
  • Technology | Is the investment based on un-proven technology and what is the risk associated with new technologies proposed? Do they have any projects completed or are  these their first projects? Any proof of concept?
  • Market | The infrastructure market is a developing market globally and investment opportunities may be impacted by market supply and demand.
  • Political & Headline Risk | Infrastructure investments may involve political activities and may introduce headline risk to investors.
  • Regulatory | Changes in regulatory mandates may impact investment returns and strategies.

Final Decision

After completing our due diligence, we will decide whether to offer the company the opportunity to raise on InfraShares.

Once the proper documentation is prepared, the offering will go live on InfraShares, where we will continue to monitor the campaign and help educate and inform investors.

How do we spot a good opportunity?

Team expertise

We have deep knowledge and roots in the infrastructure development industry and the contech startup ecosystem.  Our team’s educational background features some of the world’s best schools, including Stanford, Berkeley, CalPoly and Virginia Tech,  and others.

Trusted referrals

Much of our deal flow comes recommended by our vast network of partners: venture funds, accelerators, incubators, advisors, angel investors and founders networks.

Partners

InfraShares is an investor in each startup on our platform—we stand behind our companies and consider them partners. We rep them post-fundraise and help with follow-on rounds.

General considerations

  • Notwithstanding the foregoing, these investments are illiquid, risky and speculative and you may lose your entire investment. Additionally, the foregoing process does NOT guarantee that any company will be successful or that you will receive a positive return on your investment.
  • The foregoing summarizes our standard process. However, each diligence review is tailored to the nature of the company, so the aforementioned process is not the exact process for every issuer.
  • Completing the vetting process does NOT guarantee that the company has no outstanding issues or that problems will not arise in the future.
  • While the foregoing process is designed to identify material issues, there is no guarantee that there will not be errors, omissions, or oversights in the due diligence process or in the work of third-party vendors utilized by InfraShares and InfraShares.
  • Each investor must conduct their own independent review of documentation and perform their own independent due diligence and should ask for any further information required to make an investment decision.

For Offerors

How can I raise capital on InfraShares?

Founding team members are required to create a personal account on InfraShares. Once you are signed up and logged in, you can apply to raise from our network of investors at https://invest.infrashares.com/en/projects/preproject. If your company is a fit, a member of our Team will reach out to initiate our due diligence process.

How long does it take to raise money?

It depends on the company and not all companies succeed in raising capital using this approach. The time it takes to complete a successful financing can vary widely, but companies should expect that it will take a minimum of 90 days to complete.

When do companies receive investments?

In order to protect investors, companies are required to reach a minimum funding target to have a successful fundraise. Therefore, investments are not finalized until the company raises enough money to meet its funding target and completes all other closing conditions (together, the “closing conditions”). When investments are initiated through the InfraShares platform, the subscription proceeds are held securely in an independent escrow account. Once all the closing conditions have been met, the money is released to the company and investors will receive the applicable securities. If all the closing condition are not met, subscription amounts are returned to investors by the escrow agent.

What happens if my round is oversubscribed?

In the event that investor commitments meet or exceed the InfraShares allocation in the round, other investors will still be able to commit capital to your round. However, you have discretion whether to allow oversubscriptions.

Will my profile be viewable prior to receiving approval to publish?

No, your company’s profile will not be viewable until you have been approved by our Investment Committee, you have completed the Onboarding process, and your company’s profile has been approved by our Principals.

Will my company's information remain confidential?

Information on your company overview pages is available to the public. By design, we encourage social and public consumption of your company’s public content. However, as former investors and entrepreneurs ourselves, we understand the importance of securing sensitive information, so we provide companies with a secure, permission-based, access-controlled system to securely share sensitive content with potential investors for companies raising capital either under 506(b) or 506(c) of Regulation D.

How is the valuation of my fundraising round determined?

A company includes the desired terms of their offering as part of their application to InfraShares. Our internal Investment Committee will review this information and provide feedback to the company, accepting or proposing different terms for the raise.

Alternatively, the company may have pre-existing offline investor traction. The terms established with offline investors, who are often professional angels or venture capitalists, may serve as the basis of the valuation and terms offered to online investors on InfraShares.

What does it cost to be on InfraShares?

InfraShares will pay certain upfront costs related to escrow, operational, due diligence, and legal fees (reimbursed at closing). We only make money if your fundraise is successful:

  • $0 retainer
  • 6% placement fee on funds raised through InfraShares ($37,500 assuming $500,000 raised).
  • 2% equity fee (on the same terms as the round) on funds raised through InfraShares ($25,000 assuming $500,000 raised).

How can I communicate with investors on InfraShares?

Under 506(c), Reg A+, and Reg CF, general solicitation is allowed and is a great way to convert customers into investors in your company. There are a number of tools built into the InfraShares platform that will allow you to connect and communicate with potential investors and upon launching, a member of the InfraShares investment team will opportunistically attempt to provide warm introductions to value-add investors.

Does my company have to be incorporated in a specific state or with a particular structure?

We work with companies of multiple structures (C-corporations and LLCs for companies incorporated in the U.S.A.) and they can be organized in any state. However, we only work with companies organized in the U.S.A. and Canada currently for offerings under Regulation A and companies organized in the U.S.A. for side-by-side offerings (Regulation D + Regulation CF). Companies looking to raise under Regulation D only may be organized outside of the U.S.A.