Razitall is a Title III Funding Portal registered with the SEC and governed by FINRA. They have adopted an interesting terminology for the Reg CF process, labeling investments as “bids”. Notably they offer some unique investment types: royalties, pre-sales, and ventures (not an investment but simply a product pre-order). Another distinguishing feature is that Razitall displays current “bidders” profiles for each investment (investors have the option to keep their identity private).
Types of investments Razitall offers
Razitall offers investments in startups and growth-stage companies. 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). In addition to equity, Razitall offers some unusual investment types: royalties, ventures, and presales (presales not actually being an investment, but a product pre-order). Investments are in early stage, entrepreneur-led companies including some that may not even be incorporated yet.
What do you get when investing with Razitall?
In case of equity, the investor receives Contract and Future Equity Stake (CAFES), which represent a future equity investment in the entrepreneur’s business. These are denominated in units, with each unit being worth $1. Under this structure, the entrepreneur issues equity to its investors in the future, if and when there is a triggering event. These triggering events are defined by the entrepreneur as part of the pitch, and may include: an equity financing, a merger or acquisition, an IPO, the completion of the project identified in the pitch, or achievement of a specific revenue level.
In case of a royalty, you receive participation in a Royalty Contract, giving you the right to a pre-determined amount of dollars for each item sold, for the life of that item.
In the case of a pre-sale, you simply receive the item that you have purchased when it is ready.
In the case of a “venture,” you receive participation in a Venture Contract, giving you the right to part of the profit of a specific project when that project has been completed and sold.
How does Razitall make money?
The entrepreneur raising funds is charged 5% of the amount raised as a funding portal fee, as well as a fee for the third-party payment processor that processes investors’ payments, of approximately 3.5-4%. There do not appear to be any investor fees.
Potential returns and cashflow
Investments on Razitall are high-risk investments in startups and growth companies. In most cases there are no interest or dividend payments, and except under very limited circumstances, the investment must be held for at least 12 months, with minimal expectation of any market after that period. Most startup investments lose some or all of their value.
In the case of equity investments, returns are paid when the business has an IPO or is acquired. It is up to the entrepreneur to decide whether to issue dividends. The system processes bids for participation in the offering. There’s an initial minimum bid, which increases once 2,000 bids are reached, or decreases if some investors bid more than the minimum, ostensibly in order to make the investment more accessible.
In the case of royalty investments, returns are paid on a quarterly basis according to the level of sales. These returns are paid for the life of the product or service on which they are based.
Breadth of offerings on Razitall
As of writing, there are 14 investments available, all of which are equity investment types except for one “venture”. These opportunities include a co-living community, an electric bicycle company, an educational documentary (the venture opportunity), agricultural drones, and a couple of technology apps. With no curation or due diligence of these early-stage offerings, many seem to be low quality, and to have unrealistic valuations. There is no track record of investments available for examination. Investment opportunities seem to, based on current offerings as of writing, attract little attention from investors. All current offerings have raised less than $1,000, with the exception of a beer company, which has raised about $3K. This is not much considering that the beer company has been offered on the platform for just over a year, having been granted various fundraising extensions. None of these current offerings has raised more than 2% of its goal.
Regulatory framework and due diligence expectations
Razitall 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. Razitall is not a registered broker-dealer. All companies offering investments on CrowdSourceFunded will have been a minimum of background checks of key officers and owners. 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).