What we do
How we work
Required rate of Return
Careful selection of Companies
Reporting and voting
The process of negotiating an agreement
How does the investment process work?
Registering will allow you to view basic information about investment opportunities and attend Crowdberry events.
Indication of interest
Are you interested in any of the opportunities and would like to know more? You can indicate your interest and level of potential investment without making any commitment. Why is it necessary to first indicate your interest? To comply with local regulations, the investment documentation can only be disclosed to a limited number of parties. Due to this legislation, we need to have a clear overview of the number of interested parties.
Review the detailed documentation and confirm your interest in the investment. You may also cancel your interest at any time, freeing up space for other investors.
Confirmation of Interest
If you wish to maintain your interest in the investment, you should confirm your intention to do so, including the investment amount you are considering. Everything remains non-binding and there is still no commitment on your part. At this point, you will be asked to fill in the data necessary for identity verification and contract preparation.
Signing of the agreement
Following the finalization of the investment documentation, you will be sent instructions by email on how to complete the transaction and the prepared contracts for your review. Only once you sign these documents are officially committed to the investment. The facilitation of the investment process is for free.
Frequently asked questions
About investing with Crowdberry
What investment options does Crowdberry offer?
Crowdberry offers investment in various segments – new and usually highly innovative companies – startups, established small and medium-sized enterprises (SME) with proven business models, and real-estate projects.
When I buy shares in a Target Company, do I own the shares?
Crowdberry facilitates investment through purchasing company shares and occasionally through providing companies with convertible loans, which are subsequently exchanged for shares in a company under predefined conditions.
The acquisition of shares in a company – investment opportunity – is usually achieved through a Special Purpose Vehicle (see below) that pools multiple investors and obtains the purchase of company shares or stocks depending on the legal form of the Target Company (limited liability company, joint-stock company or simplified joint stock company).
The provision of a convertible loan entitles the lender to exchange this loan in the future for shares in a Target Company according to company’s value under predetermined conditions at the time of the investment, therefore, at the time the convertible loan is signed. In principle, the volume of the acquired shares depends on the company’s performance and the achievement of its objectives/milestones – if the company fails to meet its objectives established at the time of signing the investment, the acquired shares will be suitably adjusted.
Currently, Crowdberry facilitates indirect investing through a trading company (simplified joint stock company or limited liability company) created for a single purpose – pooling investors and strengthening their rights in a Target Company which has received an investment. Therefore, you do not invest directly in a Target Company but through a Special Purpose Vehicle in which you acquire shares or stock, and which subsequently invests 100% of the amount in the Target Company. Crowdberry manages this Special Purpose Vehicle for all the investors and follows their instructions and wishes.
How do you select companies for the platform?
a) Each company or investment opportunity is evaluated individually by a professional team of experts from different industries (finance, strategy, marketing, technology, management, global markets). For each individual project evaluation, we also call on our global network of partners and professionals as required. Our team consists of experts with years of experience and professional specialization at an international level.
b) Out of all the companies that either contact us or we reach via our network, we only select the most promising investment opportunities according to various parameters. First, we evaluate the potential of the market which the company plans to operate on. Companies planning to operate on a market with low growth potential will generally not be successful unless they bring a breakthrough innovation. Second, we evaluate company’s product or service and its potential to reach the market. We subsequently focus on the team, organizational structure and other aspects of the business, including a risk analysis related to investment opportunities. In general, we do not cooperate with companies whose business plans have a high level of non-business-related risk, as they may not be suitable for crowdinvesting. Additionally, we do not cooperate with projects in industries involved in pornography, gambling, armaments, cloning and so on.
c) Potential investors receive a Due Diligence document to inform them in a structured manner about the Target Company, its market potential, risks associated with the innovation, applied technology, competition and planned eco-system. The process of Due Diligence offers an objective view of the business potential of the innovation and a cost structure or required investment volume. The parameters of the investment are established in an open dialogue, especially the value of the company and shares of new investors.
How can I verify information provided by a Target Company?
Information that a Target Company publishes on the platform or provides you with via private communication can be divided into two categories:
a) Verifiable claims that describe the present state of the company (factual, legal, etc.) – for example, the company claims to own a specific real-estate asset which it wants to use to achieve its business plan. These claims can be verified in one of the open public databases. If the claim is not trivial information and easily accessible, Crowdberry hires a law firm to perform due diligence and verify the claims of the company.
b) Unreliable claims that are rather a company’s ambitions or plans – for example, the Target Company claims to reach a certain volume of sales over the year. Naturally, all claims concerning the future need to be understood as plans or hypotheses. Crowdberry seeks to guarantee that no Target Company provides any unrealistic claims on the platform. Crowdberry verifies the feasibility of business plans, and while there is no guarantee that companies will be able to fulfil them, there is a real chance that they will do so.
How can I verify information provided by Crowdberry?
You can verify the information provided by Crowdberry in open databases and registers. We recommend each investor hire a professional advisor. In case of any doubts, we recommend investors cooperate with external tax, legal or financial advisors. Any claims concerning the future that Crowdberry verifies on the basis of previous achievements, good market practices and our team’s professional experience will be understood as intentions only and objectives without any guarantees.
What guarantees do I have?
a) Similar to the vast majority of equity investments (investments in the equity of trading companies – in exchange for shares in a company), investors are given no guarantees that the investment will increase its value. Investors must consider that every business comes with either higher or lower risk levels which can be reduced by reasonable actions but never eliminated. Crowdberry seeks to reduce the risk of an investment failure by selecting appropriate investment opportunities with good market potential, good products or services and an experienced team. However, the risk of failure is still prevalent.
b) Target companies typically provide certain standard guarantees concerning their operation until they receive the investment, for example, guarantees to fulfil tax obligations, statutory obligations or other facts that may affect the value of the Target Company.
Is registration on the platform binding?
Registration itself does not bind you to any investment, but it provides you with access to information about investment opportunities. You also get access to the Crowdberry investment community, and when you subscribe to our newsletter, you can find out about the events you can attend as a registered user.
However, registration binds every investor to agree to the Terms and Conditions of use of the Crowdberry service, including the obligation of confidentiality of the information provided on the platform, as the investment opportunities presented on the platform contain confidential information about the business plans of target companies. By registering on the platform, investors also acknowledge that if a campaign is successful, investors do not pay Crowdberry any fees – fees associated with a successful campaign, including consultancy fees, are fully covered by the companies. Finally, if investors get a positive return on their investment, Crowdberry will charge 12% of the investors’ net return (after deducting their original investment) for managing the Special Purpose Vehicle (SPV) – (see Why does Crowdberry use a Special Purpose Vehicle (SPV) for investors?)
As a registered user, you also agree to use the platform solely for a standard investment purpose, meaning that you are not permitted to use the information provided on the platform for anything other than investment purposes. As a platform provider, we reserve the exclusive right to decide whether the user is misusing the platform or any information it provides for a non-legitimate purpose.
You can cancel your registration and Crowdberry account at any time; in such case, we delete your personal information from our platform. Please, be aware that the confidentiality obligation remains effective after cancelling your registration. You can find details in Terms and conditions of the Crowdberry’s service.
How can I find out about news on the platform or Crowdberry events?
Could you please send me instructions for investing with Crowdberry?
The first step is registering on the platform
Investing via the platform is only possible after registration. Registering lets you access more detailed information about investment opportunities (strictly selected to the platform) and events which we organise for investors and companies. If you decide to invest, you will get transaction support (we cooperate with well-known law firms) and post-transaction support (following cooperation with the company, investment conditions audit, etc.)
List of investment opportunities
The next step is to review the list of investment opportunities and choose the ones that suit you – consider a company’s business, successes, etc. but also its risk-return profile (investors expect higher returns from startups but also a higher level of risk, and lower returns from real-estate projects with a lower level of risk, but they often pay dividends yearly).
Investors should consider portfolio diversification mentioned in the question How can I minimize my risk if startups and investing are risky in general and offer no guarantees? A standard campaign runs for 3–6 months.
If you are interested in a project – non-binding indication of investment
You can indicate your interest in a company by clicking “I’m interested” to get access to all investment documents – you can find information about the company (business plan, strategy, risks, market research, etc.) and the legal conditions of the investment. An indication of interest in an investment opportunity is non-binding, and you can withdraw at any time without penalty. If you want to invest after reading the investment documentation, you confirm your indication on the platform (still a non-binding step). The Crowdberry team will send you a legal documentation model and instructions on the subsequent process. You are invited to discuss any details with our team throughout the whole process.
Along with the legal documentation model, Crowdberry will send you an online link to a form to fill in additional necessary personal information to process the investment as required by applicable law (concerning registration in the commercial register, contract, etc.). After receiving your personal data, we send you the complete contractual documentation. Once you sign this documentation, you commit to providing the investment, generally within 5 days of the date of signature. The documentation contains detailed instructions for the following steps.
What happens if the indicated amount exceeds the target amount?
Investors may withdraw their investment (or not invest) at any time until the transaction contracts are signed, even though the platform indicates a certain total amount from investors. This is why we allow indications over the target amount. Also, sometimes professional investors join the investment and their investment does not necessarily immediately display on the Crowdberry platform. For some investments, especially those which can flexibly scale up their business plan, overfunding beyond 100% of the original target amount is permitted.
How is a contract closed?
When you register on the platform and choose a company to invest in, you can indicate your interest to make investment documents available to you. This investment documentation must be carefully read. It contains detailed information about the company and its plans, business plan, investment risks and possible (expected) return. If you want to invest after reading this documentation, you confirm your indication to invest on the platform. When we start the closing process of the investment opportunity, the responsible Crowdberry Manager will contact you with a contract proposal. For each investment opportunity, there is a specific legal contractual documentation that must be signed. You will also receive instructions for subsequent steps (some signatures must be verified by a notary, Municipality or Register Office or similar place such as Czech point).
Investment documentation about the contractual relationship between Crowdberry, the Special Purpose Vehicle and the Investor is generic and used for all investment opportunities as a standard version apart from some provisions which are tailor-made for each particular investment opportunity and the Terms sheet, which is the conditions concerning funding of the Target Company. The Terms sheet is always customised to each particular investment opportunity, but generally contains very similar provisions about protecting investors and investment drawdown conditions.
When do I have to transfer funds?
Invested funds must be transferred within 5 days of signing the investment contract.
What happens if the target amount of an investment is not reached?
If the minimum target amount of an investment opportunity is not reached, the investment will not be realised. The investment process starts by indicating an investment interest. When indications reach the target amount, the process of closing the investment begins. Investors confirm their indications, sign required binding documents and transfer the funds. If the target amount is not reached, all funds are returned to the investor and the investment is not realised. All costs associated with returning the investments are covered by Crowdberry.
What if I miss an investment opportunity deadline?
If you miss a certain investment opportunity deadline, contact the Crowdberry Manager who is responsible for the opportunity and has up-to-date information. Some investment opportunities permit further investment if the campaign closes at 80% of the target amount (up to 100% of target amount).
What average returns can investors expect?
a) Each potential return has a certain level of risk according to the nature of the investment. The higher the projected return under a business plan, the higher the level of risk associated with that investment.
b) The average returns which companies state in their business plans are highly dependent on the market segment and their choice of business models. Crowdberry helps companies formulate realistic expectations about their market potential, cost structure, potential risks, competition, etc.
c) The average returns common in less risky segments (mostly real-estate projects, small and medium-sized enterprises) are based on long-term market monitoring and real verifiable data from companies operating on the same markets. Expecting market returns is realistic if the company performs at market average.
d) In the case of startups, the projected return is based on a comparison between similar startups that were later sold or other forms of returns they achieved (e.g., paid out profit share).
e) No companies should promise or guarantee a return to investors – business is an inherently risky activity and therefore no absolute guarantees can possibly be given.
What is the difference between expected and required return?
When assessing and selecting the investment opportunities in each segment (startup, SME, real-estate) and from each Target Company, Crowdberry requires a certain level of return proportional to the risk-profile of the investment. This is called the required rate of return. Expected rate of return is therefore the return a company – an investment opportunity – expects under its business plan. Crowdberry solely selects investment opportunities which have an expected return close to or equal to the required return for each segment individually. The required return range for each investment opportunity can be found on the platform www.crowdberry.eu.
Why do expected returns for each investment opportunity differ?
a) Firstly, expected revenues depend on the investment segment in which the investment is applied. Startups and new and often highly innovative companies usually operate on the market with a high level of risk that their business operations will not meet expected outcomes or not accomplish their business plan objectives at all. Each investor should therefore stipulate a relatively high return due to the level of risk, i.e., a higher return than in segments with a lower risk of loss or investment depreciation.
b) Investment segments with a relatively lower risk level are traditionally real-estate projects that include investments in tangible assets. Small and medium-sized enterprises with a proven business history also carry a relatively lower risk. Their history permits the assumption of being able to cope with multiple risks of failure. A lower expected return is therefore typically expected in these investment segments.
What do expected returns depend on?
Returns depend on various factors, typically mostly on the risk level, the investment segment, market potential and so on. The expected return itself can be understood from two angles:
a) The Target Company – an investment opportunity – has a certain business plan under which it expects to achieve a certain success on the market and thus a certain return. This is a hypothetical return based on the assumption that the company can achieve its business objectives according to the plan. The Target Company can either outperform and achieve higher returns, achieve only a part of expected returns, or completely fail the plan and go bankrupt.
b) From the second point of view, expected returns can be understood as the standard returns the investor should expect from a certain market segment, i.e., returns ordinarily earned by other commercial companies in a given segment over a longer period of time. The expected return is thus a standard which a business should aspire to achieve or outperform, but with realistic assumptions and a standard level of risk.
How will I receive a return on my investment?
Crowdberry will pay returns to you and other investors in a standard and tax-optimized process. Expected returns will mostly be paid in the following cases:
Total sale of a Target Company’s Shares
The Special Purpose Vehicle, together with other shareholders and founders of the Target Company, sells its shares in the Target Company, which are subsequently bought by a strategic buyer, investor or potentially by a competition.
Partial sale of the Target Company’s shares
The Special Purpose Vehicle sells part or all of its shares in the Target Company, for example, if a third-party investor offers to buy the shares or a buyback of shares by a Target Company is offered.
Pay-out of the profit shares/dividends from the Target Company to the Special Purpose Vehicle
The Special Purpose Vehicle will in all cases pay you and the other investors proceeds in a standard and tax-optimized process. There are several possible scenarios, but essentially the most likely is a dividend payment following the transfer of proceeds from the Target Company to the Special Purpose Vehicle. If the Special Purpose Vehicle holds at least a 10% share in the Target Company for a minimum of 24 months, proceeds will not be taxed at the level of Special Purpose Vehicle, but by investors themselves. Investing through a Special Purpose Vehicle therefore means, if all the above-mentioned conditions are met, potential tax savings at the current rate of 21% of proceeds achieved by the Special Purpose Vehicle, which is subsequently paid to investors.
The dividend is then taxed at 7% withholding tax (for an investor – a natural person). An investor – a legal person – taxes its revenues by itself.
Do you charge a registration fee?
No, Crowdberry does not charge any entry or exit fees associated with the registration on the platform – use of the platform is free of charge. Crowdberry earns its revenue from consultancy services and successful campaigns as a percentage of the raised capital and the successful appreciation of an investor’s investment.
Are there any other fees?
Crowdberry charges fees to companies, not investors. In the event that investors receive a positive return on their investment, Crowdberry will charge a fee for the investment management to the investment management company – a special purpose vehicle (see question “Why does Crowdberry use a special purpose vehicle for investors?” and more below) – in the amount ranging between 12% and 18% of the investors’ net return (i.e. after deducting their original investment), depending on the specific investment opportunity. Crowdberry manages the investment of the special purpose vehicle at its own expense and is motivated by a positive financial return for investors, thus sharing some of the risk with them. As a part of the administration, it not only performs formal acts in relation to the special purpose vehicle, but also represents the investors in the target company’s corporate bodies.
Crowdberry manages investments through special purpose vehicles and is entitled, for the provision of the special purpose vehicle management services, to an annual fee of 0.5% of the total amount of the investment made in the target company by all investors during the period of the provision of investment management services, up to a maximum of 5 years from the date of signing the investment documents with the target company. The remuneration for the management of the investment through the special purpose vehicle covers the usual costs such as:
- the costs of keeping the accounts of the special purpose vehicle;
- the costs of holding ordinary general meetings of the special purpose vehicle and per rollam decisions;
- the costs of maintaining the list of shareholders in the relevant central depository;
- the costs of providing quarterly information to investors on the status of the investment according to standards agreed at target company level;
- the costs of an auditor's verification of the special purpose vehicle's financial statements (if such verification is required under applicable law);
- the cost of maintaining a business bank account of the special purpose vehicle; and
- the cost of liquidating the special purpose vehicle in the event of the investment being lost.
The costs of the special purpose vehicle management services after the 5-year period shall be borne by Crowdberry.
Are there any risks associated with investing?
Yes, of course. Each investment carries certain risks. Investing, however, not only with Crowdberry’s support, is a risk for any investor and includes the risk of liquidity/ illiquidity, the risk of failure to pay out dividends/shares in profits, loss of investment, and investment dilution. Investing should only be done as part of an investor’s diversified investment portfolio. The Crowdberry service is intended for investors knowledgeable enough to recognise, understand and assess these risks and make investment decisions knowingly and freely according to their knowledge, experience and financial capacity and do so on their own responsibility and at their own risk. A detailed description of the risks involved is provided in the Disclaimer on the Crowberry website – please read this document and consult with professional advisers if required.
How can I minimize my risk if startups and investing are risky in general and offer no guarantees?
The basic means to minimize risk is based on diversifying the investor’s portfolio. Portfolio diversification means allocating the total amount the investor intends to invest in a number of asset classes which include relatively low-risk (with a low return potential) assets such as real-estate, MFIs with a moderate risk profile, medium-risk assets such as small and medium-sized enterprises, and high-risk (with a high return potential) assets such as startups.
Consequently, the investor should invest only a minor part of the total amount in the high-risk class of assets, usually up to 10% of the total investment portfolio. Finally, within each assets class, e.g. startups, investors should allocate the total amount across multiple companies. This limits the investor’s potential loss if a certain company fails. Also, if certain selected companies are successful, this success compensates the possible losses from other selected unsuccessful companies.
What are the risks if the business plan objectives are not accomplished?
a) Each investment carries certain risks because it is associated with an entrepreneurial risk. At the same time, an investment in equity and trading companies is riskier than other types of investment (e.g., loans) since in the event of bankruptcy, equity investors are repaid only after all the company’s creditors have been paid.
b) Any investments (especially those in equity) therefore carry the risk of absolute loss of the invested amount – companies might simply not be able to fulfil their business objectives, which might result in a lack of equity to satisfy shareholders if the company becomes bankrupt.
c) Our role as consultants to companies is to cooperate solely with businesses whose market potential and social benefits are to a certain extent verifiable and realistic. At the same time, we strive to help companies reduce or minimize their entrepreneurial risks with relevant consulting, marketing support and sharing networks. The risk of loss though, can never be excluded.
What influences the feasibility of a Target Company’s business plans?
Many factors influence the feasibility of a company’s business plan, some which are beyond the Target Company’s, Crowdberry’s or the investor’s control – for example, a decline in performance of the economy, new market regulations, or unforeseeable circumstances of force majeure. In addition, most startups will depend on the ability to get further development funding in subsequent investment rounds. Startups generally tend to require more investment rounds to gradually develop and strengthen various aspects of their business.
What happens if an investment fails?
There is a risk that the Target Company will not be able to accomplish its business objectives and fail to efficiently run its business operations. Termination of the company may arise in two possible scenarios: (a) The Target Company has a deficit net worth, meaning its liabilities exceed its value of assets. (b) The Target Company’s assets exceed its liabilities, but the General Meeting decides to terminate it.
a) If Target Company has a deficit net worth, a bankruptcy procedure takes place provided that the Target Company has sufficient assets to cover at least the bankruptcy procedure costs. In this scenario, investors are unlikely to be returned any part of their investment. In an extreme scenario, if the Target Company does not have sufficient assets to even cover the bankruptcy costs, the bankruptcy procedure will be terminated. In this case, the Special Purpose Vehicle must write off the loss and investors will remain shareholders in an empty Special Purpose Vehicle which Crowdberry will liquidate at its expense. In this negative scenario, investors lose up to 100% of their investment.
b) If the Target Company’s value of assets exceeds its liabilities, a bankruptcy procedure is followed by liquidation of the Target Company. Any potential liquidation surplus after all the company’s creditors have been paid is divided between shareholders/partners in the Target Company, and therefore Special Purpose Vehicle receives its share.
Can I sell my shares at any time?
If the investor decides to transfer their shares in a Special Purpose Vehicle (SPV), they can do so provided that they find a buyer. In this case, the transfer of shares in the SPV requires the consent of the SPV’s General Meeting. You and other investors have pre-emptive rights to the other investors’ shares in the SPV. The owners of the Target Company also have pre-emptive rights to these shares and to any of the Target Company’s shares that the SPV is selling. These rights are provided for by the statutes of the SPV. Hence, consider that the transfer of SPV shares is restricted by this consent.
However, if you want to transfer your shares to a relative (family member) or a related person (your company), you can also do so at the General Meeting of the SPV, which can give you the necessary consent. This kind of transfer can only be executed once a year.
In general, each person investing in startups or small and medium-sized enterprises whose shares are not admitted to trading on a regulated market must consider that liquidity, i.e., the ability to cash in the investment in a short time without any loss in its value, is very limited. Therefore, all investments made via Crowdberry are highly illiquid. This means that it is unlikely an investor can sell their shares to such companies until the company is bought by another company or is quoted. Even in the case of successful companies – startups – it may take years before they are quoted or bought by another company and the investment appreciates.
While the liquidity of shares in the small and medium-sized enterprise segment and real estate projects is higher compared to startups, it is nevertheless also significantly limited. This limitation results mostly from the economic nature of these investments and the limited capacity of Slovak capital markets.
Do I have a right to shares buyback?
With most investment opportunities, you do not have the right to shares buyback by the founders or Crowdberry. The right to the shares buyback is very rarely applied in the case of small and medium-sized enterprises or in real estate projects, in which case, the information will be explicitly stated in the information given about the investment opportunity.
Is there a secondary market for these shares?
There is a secondary market for shares in small and medium-sized enterprises, real estate investment opportunities and startups, but it is rather small. Crowdberry will gladly provide you with the contact information of prospective buyers from its professional investor database. At the same time, we do not assume that an individual sale of shares should be the main means of getting a return on your investment. If you intend to individually sell your shares in a Company, consider that the investments via Crowdberry assume the following main methods of return on investment:
a) For real-estate projects, the main source of return on an investment is assumed to come from profit distribution (dividends). Another option is to sell the investment opportunity to professional investors (funds, etc.).
b) For established and scaling small and medium-sized enterprises, we expect returns mainly from profit distribution (dividends) or eventually from buyback of shares by founders. A company or a project can also be sold to a professional investor – investment fund – or a private investor.
c) For startups, the main source of revenue is expected to come from the sale of shares of all investors in the Target Company to a professional investor – fund, a competition, or another company which consolidates synergic business activities.
In each of these cases, it is generally assumed that the majority or all of the shares of the given company will be sold together – it is not expected that an investor would be interested in selling their shares individually. If they want to sell their shares individually, the restrictions described above apply – see Can I sell my shares at any time?
In this case, you must consider that in Slovakia and so far also in the Czech Republic, the secondary market for small volumes of shares in small and medium-sized enterprises and real estate projects is very limited and the secondary market for shares in startups is even more restricted. This means that it is unlikely an investor will be able to sell their shares in these companies until the time the company is bought by another company or is quoted. Even in the case of a successful company – startup, it may take years before it is quoted or bought by another company and the investment appreciates. Unfortunately, the existence of the secondary market cannot be relied on for startup shares – the secondary purchase of startup shares is always the investor’s purely individual investment decision.
While the liquidity of shares in the segment of small and medium-sized enterprises and real-estate projects is higher compared to startups, it is nevertheless significantly restricted. It is impossible to predict how easy or difficult it will be to find a buyer for your shares.
Crowdberry does not offer shares admitted to trading on regulated markets (such as shares traded on a stock exchange) and does not organize such a market – all investment transactions are settled as private investments.
Investment structure – more about Crowdberry special purpose vehicles (SPV)
Why does Crowdberry use a Special Purpose Vehicle for investors?
Investing in target companies with Crowdberry is achieved via a Special Purpose Vehicle (SPV). First, the investor becomes a shareholder in a Special Purpose Vehicle, together with all other investors. This Special Purpose Vehicle then becomes a shareholder in the Target Company.
The Special Purpose Vehicle has the form of a simplified joint stock company in Slovakia or a limited liability company in the Czech Republic. It is a tool which allows investors to participate in the ownership of a Target Company. The Target Company is a company seeking investment to accomplish its investment plan objectives. The special purpose vehicle pools all investors such as you into a single entity to simplify management of the investors’ investments while also strengthening their rights in promoting the common interest of investors in a Target Company. We use the Special Purpose Vehicle in order to simplify the investment process so that dozens of investors are not required be present in the same place and at the same time at the notary office.
Crowdberry sets up a Special Purpose Vehicle to reduce administrative processes associated with forming the company, registering shares and other acts that typically take several weeks to months. As a result, the Special Purpose Vehicle is already set up at the time of the investment.
When the special purpose vehicle is formed, Crowdberry is its 100% owner. Crowdberry then transfers full ownership to investors according to the volume of their investment. The Special Purpose Vehicle subsequently invests full investment in the Target Company in exchange for participation in equity (stocks, business share).
Is the Special Purpose Vehicle an investment fund? Is the Special Purpose Vehicle regulated by Slovak Act no. 203/2011 Z. z. on Collective Investing or Czech Act no. 256/2004 Coll. on Capital Market Undertaking?
The Special Purpose Vehicle does not meet the conceptual features of an investment fund regulated by law on collective investing. The special purpose vehicle is a legal entity created solely for the purpose of simplifying management of the relationship between investors and the target company and pooling investors to strengthen their position in the Target Company. It is not for diversifying portfolios, minimizing risk or achieving an investment strategy. The special purpose vehicle is always created to invest in one Target Company. For these reasons, the Special Purpose Vehicle is not a fund according to the legal definition on collective investing, which does not apply to its operation and management. The special purpose vehicle is regulated by the Commercial Code in Slovakia and the Civil Code in the Czech Republic.
Why is the Special Purpose Vehicle incorporated as a simplified joint stock company in Slovakia and as a limited liability company in the Czech Republic?
In Slovakia, the legal form of the Special Purpose Vehicle (SPV) is a simplified joint stock company (SJSC), which is a new trading company in Slovak law effective from 1.1.2017. SJSC was created with the purpose of simplifying flexible investment in business ideas. SJSC is not capital-intensive (low starting capital required) and is relatively flexible considering internal structures and allows an appropriate relationship structure to be established between investors.
In the Czech Republic, Crowdberry uses a standard limited liability company (LLC) to pool investors because Czech law allows a similar structure and has similar advantages to the Slovak SJSC. After the new Civil Code and Law on Commercial Corporations entered into force, legislation regulating LLCs was modified, and due to the currently greater contractual freedom, these companies can be well adapted to individual requirements. The special purpose vehicle, either as an SJSC or LLC, has been designed to better serve its purpose to pool investors while providing adequate protection for all investors’ rights.
What bodies does a Special Purpose Vehicle have?
A Special Purpose Vehicle (SPV), either as an SJSC or LLC, has the following bodies:
The General Meeting consists of the SPV’s shareholders in the case of an SJSC, or partners in case of an LLC, meaning you and the other investors. The General Meeting is a sovereign body and decides on most matters via an absolute majority of votes of the present shareholders/partners, while the power of votes of shareholders/partners is directly dependent on the volume of their investment. Therefore, they are proportionally represented. Essential decisions require a 2/3 majority of votes of all shareholders/partners. The General Meeting must be held at least once a year and can be also performed via an online vote. For further information on the functioning of the General Meeting, see the Special Purpose Vehicle Statutes – Annex 1 to the Share Transfer Agreement.
The Board of Directors is the SPV’s statutory body in an SJSC legal form and acts on its behalf. In the case of an LLC, the statutory body acting on behalf of the LLC is the Executive. The function of The Board of Directors, or more precisely, of the Executive is usually performed by a person nominated by Crowdberry.
What about the liabilities and costs of a Special Purpose Vehicle?
A special purpose vehicle is responsible for violating its obligations to the extent of the value of its assets. The shareholders are not responsible for the liabilities of a Special Purpose Vehicle to third parties. A Special Purpose Vehicle will not generate any costs related to its business operations, including salaries, rent, levies, etc. A Special Purpose Vehicle will only generate lawful costs and those minimal costs which are directly related to keeping or appreciating its assets (shares in a Target Company).
The usual costs associated with operating a Special Purpose Vehicle are covered (directly) by Crowdberry. The usual costs include those costs associated with bookkeeping, statutory registration of shareholders, formation and termination of the Special Purpose Vehicle.
However, the Special Purpose Vehicle does not have any other revenue (such as potential revenue from appreciating investments), therefore a situation may arise when investors must contribute to operating a Special Purpose Vehicle in the event of unexpected costs. The decision whether to contribute to the operation of a Special Purpose Vehicle in the event of unexpected costs requires the majority consent of investors in the Special Purpose Vehicle. For more information about expenses, please see the Mandate (between the Special Purpose Vehicle and Crowdberry). If you are interested in a particular investment opportunity, we can provide you with this document prior to your decision to invest.
At the same time, contributions to unexpected costs of the Special Purpose Vehicle will be divided proportionally between investors according to the volume of their investment. Exceptional and unexpected costs may include, for example, a new tax imposed on a trading companies and the adoption of a new registration obligation, but it may also include the costs of legal services if a suit is filed against the Special Purpose Vehicle. Many of these expenses are relatively low for the entire group of investors compared to each investor individually because of economies of scale (e.g., legal costs). These are only few and unlikely scenarios, though they may arise. If they arise, an investor holding 1% of a Special Purpose Vehicle will contribute 1% of these expenses.
How is a Special Purpose Vehicle managed?
A Special Purpose Vehicle, either as an SJSC in Slovakia or an LLC in the Czech Republic, is designed to require as little activity from you as possible during its lifetime. Management and compliance with the statutory requirements of Special Purpose Vehicles will be performed by Crowdberry under the Mandate. You and other investors will be represented in the Target Company’s bodies (General Meeting, Board of Directors) by a person nominated by Crowdberry, who will also handle reporting for the investment. In the event of key decisions by a target company, the nominated person will request consent from the investors.
What rights as an investor do I have in relation to a Special Purpose Vehicle?
Investors have following rights in relation to a Special Purpose Vehicle and its Board of Directors:
a) The right to request information and explanations regarding matters related to the company.
b) The right to vote at the General Meeting, including changing Board members (Crowdberry).
c) The right to a share in the profits and any liquidation surplus in the event of liquidation.
What rights as an investor do I have in relation to a Target Company?
Investors have following rights in relation to a Target Company via the Special Purpose Vehicle (more detailed information can be found in the document Target Company Funding Terms):
a) The Special Purpose Vehicle acts as a significant shareholder/partner in the Target Company. As a rule, it is a major investor with veto rights on essential decisions related to protecting the provided funding. The consent of Special Purpose Vehicle is, as a rule, required for merger, division or reorganization of the Target Company, dissolution, liquidation or restructuring of the Target Company, distribution of dividends/profit share of the Target Company, change of the Memorandum and Articles of Association of the Target Company, increase in the Target Company’s capital, appointment/election of members of the statutory, executive and supervisory bodies of the target company and other significant decisions.
b) Funding is generally provided in multiple tranches, with additional tranches provided only after the company meets specific pre-agreed milestones.
c) The Special Purpose Vehicle (co-)nominates the target company’s supervisory/management board members, with Crowdberry representatives performing this function, unless Investors in the Special Purpose Vehicle decide otherwise. The supervisory/management board at the Target Company’s level has significant controlling rights in relation to the Target Company’s executive management beyond the standard requirements of Commercial Code.
d) The special purpose vehicle, as well as other shareholders/partners in the Target Company, have other shareholder rights, such as pre-emption rights to purchase another shareholder/partner’s shares in the SPV, preferential rights to new capital contribution in the Target Company, the right to join the transfer of shares or request the transfer of shares from other shareholders/partners in the Target Company if an offer to purchase the Target Company’s shares is available.
e) The Special Purpose Vehicle has the right to receive regular information and reports beyond the standard requirements of the Commercial Code.
What happens to a Special Purpose Vehicle after its objective is accomplished?
If all the Target Company shares or assets are sold, the Special Purpose Vehicle enters a standard and tax-optimized process of liquidation and you and other Investors will be paid out the revenue surplus which has not yet been paid out in any previous process.
How can a company apply?
We are very strict when it comes to selecting companies that we introduce to our investors on the platform. We aim to maximize an investor’s chances to appreciate their investment with an acceptable level of risk. First, we need to acquaint ourselves with the company to verify whether it might be attractive to our investors, but also whether the investment with Crowdberry is the right choice for a company. We need as much information as possible – from a basic introduction and explanation of a company’s core business to why it believes in its future success. We need to know your objectives and vision, including commercial goals such as turnover and profit, which investments will help you reach, as well as non-commercial goals and how you plan to expand on current or foreign markets, whether you plan to expand the range of your products, manufacturing, distribution channels, etc. We need to know what investment you need, what you want to use it for, where it should take you, what you expect from it, etc.
If you provide us with your materials via e-mail at firstname.lastname@example.org or upload it on the platform after registration, we will carefully evaluate it, and if the company meets our basic criteria (it has a growth potential, a high-quality team, brings a breakthrough innovation to the market, etc.), in most cases we meet with the company and consult for further details. If we jointly decide to introduce the company on our platform, we begin the process of preparation of the investment structure, the investment documents, the presentations for the investors, etc.
Which companies are eligible for investment with Crowdberry’s support?
Crowdberry specialises in investing in startups which already have their first paying customers, a developed organisational infrastructure and have typically been operating for at least one to two years. Crowdberry also invests in established small and medium-sized enterprises with a turnover of at least EUR 0.5 million and a positive operating profit, and real-estate projects with a significant asset value. Based on our internal policy, Crowdberry excludes any support to companies operating in industries such as pornography, gambling, armaments, cloning, etc.
Crowdberry honours business ethics standards and builds its business on a culture of transparency, non-discrimination, open communication, confidentiality, integrity and professionalism. We cooperate with companies that also honour these principles and do not approve of corrupt behaviour and bribery or agreements which restrict competition.
How does my company benefit from registration?
By registering on the platform, you let us know about yourself – this is a first communications channel through which we learn about you. At the same time, Crowdberry commits to keeping the information you provide confidential – registration is a confidentiality agreement between your company and Crowdberry. Crowdberry will consider your investment opportunity based on your registration. Registration allows us to create a specific profile for your investment opportunity and a campaign on the platform.
What does my company commit to by registering?
If you represent a company which registers for the purpose of its presentation, you commit to accepting that Crowdberry, if a campaign is successful, will charge you a fee in the amount specified in the Terms and Conditions of the Crowdberry service. If you have been running a campaign on the platform as an entrepreneur, your cancellation of your registration depends on the investment process – if you have already received relevant commitments to making the investment, Crowdberry will charge you for its service. Specific arrangements and agreements are, as a rule, subject to a special service contract. A proposal will be sent to you based on your registration and a positive preliminary opinion on the suitability of your investment opportunity.
Is my company’s confidential data protected by Crowdberry?
Crowdberry commits to keeping your data confidential. By registering on the platform, all investors agree to comply with the Terms and Conditions of the use of Crowdberry’s services, including the obligation of confidentiality which applies to your confidential information. Only registered users – Crowdberry investors – have access to confidential information.
What does Crowdberry help me with?
Crowdberry helps companies with various business and investment aspects. To companies running an investment campaign with Crowdberry, we provide marketing services, financial modelling, business and organizational guidance, even beyond the investment process – we have helped companies connect with relevant contacts in their business sector and relevant partners and suppliers. We have also linked these companies in our eco-system and connected companies with our professional advisors.
During the investment process, Crowdberry acts as a transaction manager in cooperation with a lawyer responsible for preparing the legal investment documents.
At the same time, Crowdberry’s support does not stop after processing an investment. Crowdberry provides long-term support and advice to companies to help increase a company’s potential and improve the chance for the investment to appreciate.
What do we need as a company?
You need to prepare documentation about your company, particularly the business and development plan, the financial statements from previous years and other relevant organisational and economic documents. Crowdberry will then evaluate these documents and request any further information to properly assess the company’s potential. In discussion with your company, Crowdberry will revise the documents provided and help prepare additional necessary documentation for an investment campaign.
How long is a campaign?
Pre-campaign preparation may take a few weeks depending on the quality of the materials prepared by the company and its overall readiness. The campaign typically runs for 3–6 months, depending on the target amount of the investment, the business sector or market situation. Crowdberry’s support, however, does not stop at the moment of actual investment but continues indefinitely. Crowdberry will help the company with its business and help investors appreciate their investment.
Does investment from a crowdfunding campaign mean that we, as a company, need to deal with dozens of investors individually?
No, Crowdberry pools investors and their investments into one Special Purpose Vehicle that subsequently invests the total volume of the investment in your (Target) company. This means that only one company (the SPV) becomes a partner in your company and that one nominated person from Crowdberry will represent its rights. You provide the Special Purpose Vehicle and Crowberry’s nominee with all your statements and Crowdberry will subsequently inform investors and provide follow-up reporting.
Crowdfunding and crowdinvesting in general
What is the difference between crowdinvesting, crowdfunding and peer- to-peer lending?
a) Crowdfunding means lending funds to a company, traditionally in the form of a gift or pre-orders, in exchange for a product or service created with these funds.
b) Crowdinvesting is a long-term relationship between an investor and the company the investor provides an investment to, either in the form of equity (investor becomes a co-owner) or a debt instrument (investor becomes a creditor).
c) Peer-to-peer lending is the mutual lending of money between ordinary persons – consumers.
Crowdfunding, especially its investment type – crowdinvesting – is considered by the European Commission to be one of the most prospective sources of alternative funding to companies because of its potential to catalyse local startups and small and medium-sized enterprises.
Is crowdinvesting suitable for startups or is it just for small and medium-sized enterprises? Is it suitable for real-estate projects?
a) Generally speaking, crowdinvesting is suitable for all three segments.
b) SMEs already have a certain business history, therefore the potential returns from investments are traditionally relatively lower, but at the same time they have a lower level of risk, as they are usually already an established business.
c) Real-estate projects, similarly to SMEs, are less risky since part of the project is usually a real estate.
d) Startups are riskier, so they are more suitable investment opportunities for people whose standard of living will not be affected by the potential loss of the investment. Most investors interested in investing in startups are traditionally venture capital funds and bigger private investors, but also an increasing number of smaller individual investors are seeking to diversify their portfolios. From this point of view, we can conclude that some types of startups are suitable for crowdinvesting.
e) Some startups can benefit from a sophisticated investor who understands the market which startups operate in and who is also willing to actively support the startup by sharing his or her experience, advice and contact network. We call this kind of investor smart money or a so-called “smart investment”. Not only startups benefit from the involvement of this kind of professional but also other less active investors. Crowberry’s goal is to find and engage these investors to co-invest along with more passive investors.
How is crowdinvesting regulated in Slovakia and the European Union?
a) Crowdinvesting is currently not specifically regulated in Slovakia nor in the European Union, although some member states of the EU follow specific regulations.
b) The European Commission is currently working on regulatory proposals, as they have seen the potential for developing crowdfunding and crowdinvesting in the capital markets union.
c) Crowdberry’s goal is to provide services of the highest standards.
d) We also transparently communicate that Crowdberry is not an entity supervised by the National Bank of Slovakia and that it is not a part of certain protection schemes created on the finance market, such as the Investment Guarantee Fund.