Founder FAQ on raising a Crowd SAFE round
Fools.com helps founders raise a friends, family, and fools round on a Crowd SAFE.
Why would I raise on Fools before YC or a seed?
Dilution is the price of the round. You sell a few percent of the company at a post-money cap. The capital arrives before institutions are ready to invest. You also get proof. A funded round is something you can point to in a YC reapplication or a seed pitch. If the traction it pays for supports a higher price in your next round, you may sell less of your company overall. Fools does not promise that outcome.
Does a Fools round change a later YC deal?
YC's standard deal is built to sit alongside existing SAFEs. Its $125k SAFE converts into a fixed 7% after other SAFEs convert. Your Fools round dilutes your share. It does not dilute YC's 7%. Your investors' Crowd SAFEs stay outstanding and convert at a priced round or acquisition under their terms. YC's $375k MFN SAFE can take the terms of a lower-cap SAFE issued after its MFN start date. A Fools round that closes before that date stays outside the window. YC decides how it weighs a prior crowdfunded round in admissions.
How do Crowd SAFE terms affect a later YC deal?
The founder sets the post-money valuation cap. A cap above where your next round prices turns that round into a down round. A discount, an MFN, or pro rata rights can each change what YC's MFN SAFE converts at. Your Crowd SAFE template and your counsel confirm the cap type and conversion terms.
Who can invest in a Fools round?
Accredited and non-accredited investors can invest in a Reg CF round. Non-accredited investors have a limit across all Reg CF offerings in 12 months. If either their annual income or net worth is under $124,000, the limit is the greater of $2,500 or 5% of the greater of the two. If both are at least $124,000, the limit is 10% of the greater of the two, up to $124,000. Accredited investors have no limit. A company can raise up to $5M under Reg CF in 12 months. Fools sets no round cap.
How do Fools investors appear on my cap table?
On Fools, investors are pooled. They stay off your working cap table until a conversion event. They hold no voting rights. Know your template's terms before you talk to priced-round investors.
What do I owe my investors after the round?
Reg CF requires an annual report on Form C-AR, filed with the SEC and posted on your website within 120 days of your fiscal year end. You can stop once you meet a termination test. One test is filing at least one annual report since your most recent Reg CF sale and having fewer than 300 holders of record.
How long does a Fools round take?
Plan on about 60 days. In the first 30 days you set terms, launch the round, and invite potential investors. Their pledges before your Form C are nonbinding. Your company files its Form C before investors commit. Your round closes by day 60. You set your own deadline.
What financial statements does a Fools round need?
The amount raised in 12 months sets the financial-statement tier. For $124,000 or less, the principal executive officer certifies the financial statements. The officer also certifies the company's total income, taxable income, and total tax from its federal income tax return. Above $124,000 and up to $618,000, an independent accountant reviews the statements. Above $618,000 they are audited. A company raising under Regulation Crowdfunding for the first time can use reviewed statements up to $1,235,000. If reviewed or audited statements already exist, the company provides those. 17 CFR 227.201(t) sets the tiers.
This page is not legal or investment advice. Talk to a securities lawyer before you raise.