Startwise is an SEC-registered Title III Funding Portal offering Reg CF investments available to anyone, and with low minimums. Currently they offer only revenue-share investments, where investors receive a pro-rata share of a fixed percentage of revenue until a pre-determined multiple is reached. Current selection is limited, but simplicity of investment and consumer appeal of offerings may appeal to many novice crowdfunding investors.
- Low minimums, open to non-accredited investors
- Detailed, yet readable investment overviews
- Easy-to-understand revenue-share investments (investors receive a portion of revenue until a pre-set investment multiple is reached)
- Only 2 open investments as of this writing (though platform just launched)
- Potential upside is capped
- Limited upside potential, but indefinite investment horizon (other platforms offering similar revenue share models impose a loan term)
Startwise was founded by two former VC staffers who saw an opening to offer non-equity (but cashflow generating) investments in small to mid-size revenue-generating businesses.
Types of investments Startwise offers
Startwise offers revenue-share investments in active businesses outside the mold of traditional tech-oriented VC targets (for example, pet foods and footwear). Selection is limited, but companies currently raising are generating revenue, and are consumer-oriented brands.
The company detail section is consistent with other Title III Funding Portals, though the Offering Detail section could use some work -- some of the key terms of the revenue share model are only apparent after reviewing the site FAQs, and the Financials sections are a bit sparse compared with other funding portals.
What do you get when investing with Startwise?
Startwise currently offers only debt investments under Reg CF. There is a pre-determined investment multiple (for example, 1.2x), and a pre-determined percentage of revenue. The investor is entitled to a pro-rata share of that revenue percentage until the multiple is reached.
Startwise fee structure
Startwise does not charge investors up front, though they do retain a 2% fee, ostensibly to cover overhead and compliance. They also charge borrowers 8% of the total amount raised.
Potential returns and cashflow
With the Startwise revenue-share model, the borrower pays a predetermined percentage of their revenue each month until a defined multiple of the original investment is reached. For example, 3% of sales (which may fluctuate each month) until investors receive 1.3X their original investment. While other Reg CF platforms offering similar investments (such as NextSeed)impose a time limit on the repayment period (for example, if the target multiple isn't reached within 4 years, the full balance is due), Startwise does not appear to have any time restriction on the revenue share payments.
The revenue share model is clever, and it's obvious why it's appealing to businesses facing unpredictable cash flow. It can be a bit tricky to compare investments apples-to-apples, but as a rule of thumb to get an approximate IRR equivalent, you can take the multiple, raise it to 1 divided by the term in years, and then subtract one. For example, if the multiple is 1.6 and the term is 48 months, 1.6^(1/4) - 1 = 12.5%. (Though note that if the full multiple is paid before the term is over, the effective rate of return would be higher.)
Breadth of offerings on Startwise
Startwise is a new entrant to the Title III Funding Portal landscape, and only has 2 active offerings as of this writing. As for curation, Startwise currently lists a focus on companies that meet the following criteria:
Regulatory framework and due diligence expectations
Startwise 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 investments on Startwise 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).