- Venture
Fundopolis Review -- invest in startups and real estate
Fundopolis is an investment crowdfunding platform using Reg CF to offer investments in startups and small businesses to anyone, and with relatively low minimums (usually $500). Selection is limited, but some investments offer a novel revenue share that may appeal to investors looking for cash flow.
Overview
This Fundopolis Review will help you learn more about Fundopolis's investment offerings, including how the alternative investments on Fundopolis are structured, and what your potential returns might be. You can read more about the criteria we use to review investment platforms here.
Fundopolis is a Massachusetts-based Title III Funding Portal registered with the SEC and governed by FINRA. In addition to Reg CF investments (which are open to all investors), Fundopolis also offers investments under Reg D, which are open only to accredited investors.
Types of investments Fundopolis offers
Fundopolis offers investments in startups and growth-stage companies, as well as local “main street” businesses like breweries. Fundopolis also offers various real estate investments to accredited investors. Earlier-stage startups are generally riskier, though may offer the potential for a greater return in the long run (that is, if they return anything at all).
What do you get when investing with Fundopolis?
The specific security type varies by offering, and Fundopolis says that the securities available are Equity, Debt, Revenue Share, and Convertible Notes.
Under the revenue share model, the investor receives a pre-defined percentage of the monthly revenue (8% in one recent example) until a pre-determined multiple of their original investment is reached (for example, 1.5X). If the multiple is not reached by the end of the loan term, the full amount is due to the investors.
How does Fundopolis make money?
Fundopolis charges investors 2% of the amount invested (with a minimum of $3.50 and a maximum of $75). The investor fee is refunded (less a $2 fee) if you withdraw your investment.
For Reg CF investments, Fundopolis also charges the issuer 6% of the total amount raised, along with additional up-front fees (up to $2000).
Potential returns and cashflow
With common stock investments, there are typically no dividend payments or distributions, and except under very limited circumstances, the investment must be held for at least 12 months, with minimal expectation of any market after that. Most startup investments lose some or all of their value.
The revenue share model is clever, and is similar to some of the investments on fellow Reg CF portal NextSeed, and it’s obvious why it’s appealing to businesses facing unpredictable cash flow. As a quick rule of thumb to get an approximate IRR equivalent, you you can take the multiple (for example 2X), raise it to 1 divided by the term in years, and then subtract one. For example, if the business pays the full 2X over 4 years, the equivalent IRR is 2^(1/4) - 1 = 18.9%. If it takes 6 years to pay, the return drops to 12%, and if it’s 8 years the return is 9%.
Terms for Debt and Convertible Notes vary by offering.
Breadth of offerings on Fundopolis
As of this writing, Fundopolis lists just 3 active offerings (though 2 of the 3 show $0 invested to date), and only one is a Reg CF offering open t all investors.
Regulatory framework
Fundopolis is an SEC registered Title III Funding Portal, which means they are subject to a range of rules and obligations around investor education and due diligence. All companies offering Reg CF investments on Fundopolis will have been through background checks of key officers and owners, and there are clear links provided to the relevant SEC filings made by the offering company. Prospective investors also have access to online forums to talk with other investors, and an online channel for asking questions of the company raising funds (and viewing answers of prior questions from others).
This review was first published on 09 November 2021.
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