•  Venture

Title3Funds Review -- Startup investing for everyone

Title3Funds is an investment crowdfunding platform using Reg CF to offer investments in startups and small businesses to anyone, and with relatively low minimums (as low as $50). Selection is limited, but spans a range of industries.

Title3Funds

  • Founded: 2019
  • Investment Types: Venture
  • Minimum Investment: $50
  • Open to all investors
 Pros
  • Low investment minimums
  • Open to all investors
  • Emphasis on investment curation and vetting
  • Detailed investor presentations accessible without creating an account
 Cons
  • High-risk, low liquidity
  • Relatively low number of active investments
  • Short track record

Overview

This Title3Funds Review will help you learn more about Title3Funds's investment offerings, including how the alternative investments on Title3Funds are structured, and what your potential returns might be. You can read more about the criteria we use to review investment platforms here.

Title3Funds is owned and operated by Fundivations, Inc., a Title III Funding Portal (Reg CF) registered with the SEC and governed by FINRA. While some investment crowdfunding sites take an open marketplace philosophy to their offerings, Title3Funds states that its offerings are “highly curated and thoroughly vetted.”

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Types of investments Title3Funds offers

Title3Funds offers equity and convertible note 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). At the time of this writing, Title3Funds listed seven (7) available offerings in a wide range of sectors, from banking, to life sciences research, to hemp production and sales.

What do you get when investing with Title3Funds?

With Reg CF investments, individual investors receive a security directly from the company. Title3Funds companies issue common stock or convertible notes. The specific security an investor receives depends on the specific investment. At the time of this writing, five of seven companies raising on Title3Funds offered common stock; and two of seven companies offered convertible notes.

How does Title3Funds make money?

Title3Funds does not charge fees to investors. They collect a success fee of up to 7% of the amount raised from the offering company, in the form of cash and/or equity. According to their website, they might earn additional fees from offering companies: “We may be providing premium services for issuers such as consulting services, due diligence materials and other support features.”

Potential returns and cashflow

Investments on Title3Funds are high-risk investments in startups and growth companies. Investors will not receive any payments during the course of the investments. Except under very limited circumstances, Reg CF investments must be held for at least 12 months, with minimal expectation of any secondary market for the investment after that. Investments in convertible notes may be considered slightly less risky than common stock, as when the maturity date is reached, the investor can elect to get repaid under the note (principal and interest) or convert the note to equity. Still, there is a high likelihood that startup debts will not be repaid. Most startup investments lose some or all of their value. While some investors achieve excellent returns from startup investing, that is a rare outcome and requires substantial diversification over time combined with very careful investment selection.

Breadth of offerings on Title3Funds

Title3Funds has a limited number of investment offerings at the time of this writing. Unlike other platforms that function more like open marketplaces, Title3Funds takes a curatorial approach to company selection, though they do not specify their selection philosophy or vetting process. (They also require a $100,000 minimum raise on the platform.) Title3Funds does not limit offerings to a specific sector, though. At the time of this writing, financial services, life sciences, and semiconductor industries were among those represented on the platform.

Regulatory framework and due diligence expectations

Title3Funds is owned and operated by Fundivations, Inc., a Title III Funding Portal (Reg CF) registered with the SEC and governed by FINRA. Among other requirements, funding portals must perform investor education and fraud prevention duties.

This review was first published on 08 December 2021.


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