The startups that raise on Republic set the terms at which they sell their securities.
A Crowd Safe is an investment contract between investors and companies looking to raise capital. Individuals make investments in exchange for the chance to earn a return—in the form of equity in the company—if it’s acquired or has an IPO.
The Crowd Safe was created by Republic and is an equity crowdfunding-specific version of a SAFE, a financial instrument widely used by angels and VCs investing in startups. It’s now used by several industry players in various forms.
Investors using the Crowd Safe get a financial stake in the company, but are not immediately holders of stock. Investments are converted to equity if certain “trigger events” occur, such as the company’s acquisition or IPO.
Risk note: trigger events are not guaranteed. Investors should see them only as possibilities.
Your return depends on your investment amount, the company’s exit valuation (how much the company is worth if and when the trigger event happens), and the terms of the Crowd Safe.
Helpful calculators demonstrate how different offering terms and company outcomes produce a range of returns on investments.
Risk note: If there is never an exit valuation you may never get a return on your investment.
Risk note: Calculators can't be used to project performance of one particular investment, but can serve as an educational tool for those making investment decisions on our platform.
Each company can customize its Crowd Safe, including or excluding certain provisions. Most include a valuation cap and a discount. If the Crowd Safe includes both a valuation cap and a discount, the provision more favorable to the investor applies if there is ever a trigger event.
The valuation cap specifies the maximum valuation at which the investment converts into equity shares or cash. This means that investors, when a trigger event occurs, receive equity shares or cash at the valuation cap price—no matter the valuation at which the company sells. Therefore, the higher the valuation of the company at the time of sale, the greater the investor’s return.
If a trigger event for the company occurs, the discount provision gives investors equity shares (or equal value in cash) at a reduced price relative to what others pay at IPO or for the company’s acquisition.
Crowd Safe Calculator can help understand these terms better.
Investors can earn a return, if a trigger event occurs at a certain price threshold. Although trigger events sometimes happen earlier, many don’t occur for 4-6 years after the initial investment, and some take even longer.
Risk note: Startup investing is risky, so there’s no guarantee of a return on this kind of investment.
In general, you can only sell a Crowd Safe after one year from purchase date and only if you find a buyer, which might not be easy to do.
Republic plans to work towards providing additional liquidity of the secondary market of Crowd Safes and other securities in the future.
In the event of a subsequent equity financing round, the company may choose to “roll-over” Crowd Safe holders and continue the terms of the Crowd Safe, or to convert the investment into shadow shares.
Shadow shares are shares that mirror the type of security issued in the subsequent financing, except they don’t get voting rights or information rights. Companies may choose to convert Crowd Safe investments to Shadow Shares at a subsequent equity financing round.
Risk note: If there is never an exit valuation you may never get a return on your investment. If no subsequent equity financing or trigger event occurs, the Crowd Safe will not convert and produce no return for the investor, likely leading to a loss of invested principal.
Republic does not verify information provided by companies on this Portal and makes no assurance as to the completeness or accuracy of any such information. Additional information about companies fundraising on the Portal can be found by searching the EDGAR database.