Frequently Asked questions
Equity crowdfunding or online investment?
Let’s call it online investment. What Capital Cell offers you is the opportunity to invest in companies just like you would do offline, with the simplicity and comfort of doing it online. The slight twist is that we’re employing Crowdfunding rules:
A company publishes its complete project, business proposal and financial requirements on the platform, along with:
A fundraising target
A timeframe for investment (usually 4-8 weeks)
The platform facilitates payment and issuing contracts to investors.
Individual investments are collected in a secure account until the fundraising target is reached.
If the target is reached, the money is transferred to the company, contracts are validated and investors become shareholders.
If the project fails to raise sufficient funds within the allocated timeframe, investments are cancelled and the money is returned to all investors.
But isn’t crowdfunding used to fund NGOs, cultural, social programmes, things like that?
Yes, that’s how crowdfunding started. But by issuing a shareholder’s agreement or a loan contract in return for the money, it becomes a brand new financial instrument.
This beautifully simple way of allowing investors of any size to take shares or to loan money to non-listed companies moved over 5 billion euros in Europe in 2015. In 2013, the World Bank estimated that it would bring more than 90 billion dollars to companies all over the world by 2025. It actually moved nearly 150 billion in 2015 alone.
So… yes, it started small but in less than five years it has become a major financial instrument – set to overtake VC funding in the Eurozone by 2020.
I have a bit of money I’d like to invest. What does Capital Cell offer?
Capital Cell offers you the possibility of buying shares in specific life sciences companies that are not listed on any stock market. From then on, the value of your investment will go up or down and you will share in the company’s future profits.
It’s up to you to decide which companies you want to invest in, choosing them because you think they look profitable or because you love what they’re trying to do and you want to see it done.
It is a very simple system, allowing you to invest from the comfort of your sofa via a user-friendly, simplified e-commerce interface, with every guarantee of transparency and safety.
How much does it cost?
Capital Cell charges companies a success fee of 7.5% for rounds under 500,000 pounds, 6% for rounds between 500,000 and 1 million and 5% for rounds above one million pounds.
We do not charge fees to investors for using and investing on the platform but we do charge 10% on future profits. That is, in the event that the value of the investment increases and the company secures an exit (trade sale or stock market listing), the investor will receive back the value of their original investment and 90% of any profits over and above this original amount.
Why do you take the money before the project has completed its funding?
Financing a company is a serious undertaking and building a financing round requires that the funds do actually exist. Furthermore, where there is an upper limit on the funds being raised, the company faces turning away potential investors. Therefore, they need to know that the funds pledged are fully committed. That’s why we ask you to be extremely serious about committing to an investment. But the funds will not be transferred to the company until the round is complete.
We want to make sure that a company will actually have the promised funds, as well as protecting the investor by making sure no company will have access to the funds before the financing round is complete and all the legal paperwork has been duly filed.
Is my investment guaranteed?
Investing in non-listed companies is a risk investment and is not guaranteed by any institution, nor by Capital Cell. The return of your investment will be exclusively linked to the success of the company and to the conditions of any Tax deduction scheme such as EIS/SEIS.
Will you only publish high-yield, fast-growing companies?
That’s our objective. We aim to bring you companies whose target is high growth and considerable financial returns. While we use multiple methods to filter the companies we work with, we cannot guarantee the success of any company listed on the platform.
You are only able to make investments through Capital Cell once you are registered as a member and have successfully completed a questionnaire to demonstrate that you have a sophisticated understanding of the risks involved, enabling you to make your own, suitable investment decisions.
Please ensure you have read the full risk warning.
Who can invest?
Any citizen or company from any country not currently considered a tax haven.
How do you guarantee I will make money investing in Capital Cell’s published projects?
The simple answer is “we don’t”.
We carefully filter projects and make sure we only publish viable projects after a serious background check and a positive BioExpert Network review but there’s no way we can guarantee they are going to work. The best-looking business in the world can fail and we can’t really tell how your investment will do.
We will also offer you our BioExperts’s opinions and evaluations of every project. We work with highly respected, experienced business specialists whose advice we take very seriously but please remember that this is nothing more than their opinion – we are not financial advisors!
We do our best to make sure our published projects are safe, viable and potentially profitable but we can’t tell the future.
Do you conduct Due Diligence on the companies you list?
All business plan presentations are reviewed for team experience, Board structure, details of the market and plans for market entry and financial analysis is performed on every single company. We ask for evidence of IP and any relevant advance assurance of tax reliefs. Each company must ensure and confirm that the information supplied is true and accurate. It is essential that we believe that company presentations are fair, clear and not misleading.
Not only do we check all this internally, every project has a lead investor who performs his or her own due diligence and our BioExpert Network Report means relevant experts have given us specific feedback on the technical viability and market applicability of the company and its product.
Capital Cell checks every company in public registries, reviews Articles of Association and cross checks share structure with relevant filings. We also conduct private interviews with every entrepreneur – as a matter of fact, we spend quite a lot of time with them.
There is a limit to what we can check, however, and we encourage investors to both read all the pitch information carefully and to conduct their own due diligence.
What is a “nominee structure”?
When you invest you will be taking shares under a nominee structure, so you will hold a deed of property for a part of the company through a representative.
This means that while the shares will be yours, an appointed representative will be your “voice” within the company and every other investor from the Capital Cell crowdfunding round will also have the same appointed representative. This is necessary so that the company has a single point of communication with all its shareholders, ensuring that they can devote their time to managing the company.
While this simplifies the governance of the company, it does not affect your rights and your share of property in the company at all.
For most companies you will still have voting rights. The nominee administrator will notify you of the need to vote, after which you will be given a reasonable period to return your vote. The nominee administrator will then cast a single vote, in accordance with the majority opinion, according to shareholding. The nominee administrator will only ever reflect the opinions of the underlying shareholders.
Please do not take this as a precise and binding explanation of how Shares work. For more information please check relevant legal texts, get advice from a lawyer or just get in touch and we’ll be happy to talk about it.
How are shares bought and sold?
Shares you receive are yours to freely buy and sell, as long as you abide by preferred buying rights and any limitations which are specified in the Investor Agreement, as well as Companies Law in general.
As for the value of your shares, since they will not be indexed or publicly floated, their value will be whatever someone pays you for them when you sell them.
Besides the standard buying and selling regulations, there are a few clauses governing the future transmission of shares. The most usual and important are:
- Drag-along clause: the company can force investors to sell their shares if (1) there is an offer to purchase 100% of the company’s stock and (2) a minimum agreed price is offered.
- Tag-along clause: if one of the founding shareholders receives an offer to sell his or her shares, small investors can ask for their shares to be included in the transaction or to veto it.
Please check the particular set of conditions in the documentation for each investment proposal.
Can the company buy my shares even if I don’t want to sell?
In some cases there will be clauses such as the Drag-Along Right that may force you to sell your shares in particular circumstances – always with the guarantee of a minimum return. They are generally associated with the company being sold for a profit.
Please do check the particulars of the project you’re investing in; this will be specified in the Investor’s Agreement.
Can I get my money back after I invest?
You can, up to 7 days after your investment. Just ask for your investment to be cancelled and your money will be returned to you, no questions asked. After the 7 day period you will have to negotiate with the company to see if they can release you from your agreement.
And of course, if you ever consider that the entrepreneurs are defaulting you somehow, or that the project is not developing in line with the information they gave you, you may have the right to be compensated for your investment – but that would most likely mean legal action.
Can the company just raise salaries to make sure they never turn a profit?
The company’s Board of Directors has a legal obligation to oversee the company’s management, in order to promote success and the interests of shareholders. This includes setting, or recommending salaries at appropriate levels.
Can I invest any amount of money?
What happens to my money if the company goes under?
If a company fails, any remaining assets will be distributed to creditors and shareholders according to priority. But it is very unlikely that you would receive back your original investment or any profit.
However, if your investment is made under the EIS or SEIS tax relief scheme, you may be eligible for some loss relief.
I’d like to publish a project. How does that work?
Essentially there are 3 things we need before we study a project:
- You should have or be in the process of creating a company
- You should have a business plan of some sort
- You should know your financial needs
And we will take care of the rest. We’ll guide you through every step of the process and make sure you publish a project only if you have a chance of success.
Who can publish a project?
Any company incorporated in the European Union.
But my idea will be stolen if I publish it on the Internet!
If you have adequately protected your Intellectual Property and if you’ve put any work behind your company, then you’re way ahead of anyone else – they don’t have your experience or know-how and that’s what counts.
Anyway, you’re free to publish as little or as much information as you want. You should disclose enough to encourage people to invest money, so don’t be shy with the main facts. You probably don’t need to publish detailed plans for your invention but don’t keep too much to yourself either.
Can I publish a project here and keep looking for money elsewhere?
Let’s be clear: you have to. Capital Cell – or any other investment site – does not make money magically appear. It’s a tool to super-amplify and simplify your fundraising efforts. Go looking for money wherever it can be found and use this website to maximize your efforts.
How long does it take to raise capital?
If your campaign is successful, you’ll have your money within 3-4 months.
Do I need a Lead Investor before I publish my round?
It is essential that you have one, yes, to be listed as a live campaign. This is essential for many reasons, including:
- generating trust with other investors
- guaranteeing that your Valuation has been negotiated
- starting with some money
Capital Cell can help you find a Lead Investor if you do not have one. We will list you on the website as a DISCOVER company, where you’ll sit in pre-campaign. This will allow you to grow interest in your campaign and exposure, while we help introduce you to specialised life sciences investors across Europe. Remember you will still need to negotiate with and convince your lead investor yourself. When you have a suitable level of commitment in your campaign, it will progress to INVEST stage.
Can I publish a non-profit project?
Not here. We specialise in projects that plan to return to their investors more money than they put in.
If you’re looking for non-profit crowdfunding, there are many sites who will do it a lot better than us. You can ask us if you want, it’s a friendly industry and we know & respect all our competitors.
Will I forever be stuck with hundreds of small shareholders?
Investments at Capital Cell are made under a nominee structure, which means your smaller shareholders will just appear under one name, with one vote. This means that large numbers of crowd investors will not have a negative impact on the governance of your business.
What’s a buyback clause?
If you feel like it, you can include a buyback clause, allowing small investors to get their money back in the future.
That is amazingly risky for your company, so make sure you only do that one if your particular case is very, very particular.
Besides showing my project in the website, does Capital Cell do anything else to attract investors?
We will actively communicate your project to professional investors, business angels and equity funds and we will assist you in advertising your investment opportunity.
We can also help you in finding alternative financing sources, such as public investment, strategic alliances and so on. If we can, we will connect you with anyone we think may be interested in collaborating with you at any level.
But the success of your round also depends on you. Capital Cell offers a huge amount of support as part of our fee but from experience we know that the most successful campaigns are the ones that devote time and energy to closing their campaign successfully. If you don’t have the time or know-how, we also offer an expert marketing service, which can be added on a success-fee basis. If you’re interested in this option, contact us and we’ll be happy to talk you through it.
Will investors contact me directly?
Absolutely. You can publish any contact information you want and we encourage investor engagement and free communication. It’s your project and you’re your best salesperson.
It’s up to you to get back to your potential investors with any information, follow-up actions or advertising techniques you want.
Can I set different terms for different investors?
This is not recommended; valuation and rights should be equal for all investors in the same round.