Before you back: the basics
Know the risks
You'll probably never see this money again. Most startups don't make it, and a Crowd SAFE only pays if the company later raises a priced round or is acquired. Back people because you believe in them.
Five statements
Fools.com - Raise your friends, family, and fools round. Before a first commitment, you acknowledge five statements, one checkbox each. All five are required. Later commitments ask you to confirm them again in one line.
- I understand I will probably lose all of this money.
- I understand a Crowd SAFE pays only if the company later raises a priced round or is acquired, and it may never do either.
- I understand I cannot sell or transfer this for 12 months, and there may never be a buyer after that.
- I understand I can cancel until 48 hours before the close, and not after.
- I understand Fools does not review, rank or endorse this company, and nothing here is advice.
What a Crowd SAFE is
A Crowd SAFE is not stock. It is an agreement that converts into stock only if the company later raises a priced round, or pays out if the company is acquired. If neither happens it may be worth nothing. There is no interest, no repayment date and no vote. What a Crowd SAFE is, in full, including a conversion calculator.
You cannot sell it for 12 months
You generally cannot sell or transfer a Crowd SAFE for 12 months after you receive it, except back to the company, to a person who meets the SEC's accredited test, to family, or in an offering registered with the SEC. After 12 months the restriction lifts, and there may still be no buyer.
You can cancel until 48 hours before the close
Every commitment can be cancelled up to 48 hours before the round's close. After that it is final. The date and time of that cutoff are shown on the raise page, on every step of backing, and in your portfolio. If the founder changes the terms, you are told and must reconfirm.
Your limit
Federal crowdfunding rules cap what you can put into all Regulation Crowdfunding offerings, on Fools or anywhere else, in any 12-month period.
If either your annual income or your net worth is under $124,000, your limit is 5% of whichever is greater, and never less than $2,500. If both are at or above $124,000, your limit is 10% of whichever is greater, capped at $124,000. Your home is not counted in net worth. We ask for the two numbers for one reason: to state your limit in one sentence before you choose an amount.
All or nothing
Every round sets a target and a deadline. Commitments sit in escrow with the licensed portal's bank until the deadline. If the target is met, the money moves to the company and the Crowd SAFE is issued. If it is not met, every commitment is returned. Fools never holds funds.
Fools does not review, rank or endorse
Nothing on Fools is advice. The screening room orders pitches only by what you choose: newest, closing soonest, alphabetical. Federal crowdfunding rules do not allow a default rank, and we agree with them. What you see is the founder's own pitch and the offering statement the company files with the SEC.