3DAGOGO, the startup company behind 3D print cloud service provider Astroprint, is attempting to raise funds through crowdsourcing.
The MicroVentures campaign intends on raising at least USD $50,000 for the company, with a maximum amount set at USD $500,000. As of this writing, early into the campaign, they’ve raised a little over USD $20,000.
On the surface, this looks much like a Kickstarter campaign, where you select a value and receive some perks.
But that’s not at all what this is about. It’s a way to raise cash for the company in exchange for equity – or “partial ownership” of the firm. Like selling shares, except it’s far more complex.
To understand what’s going on you’ll have to review the rather detailed legal documents attached to the offer.
These USD$1 units being sold appear to be shares at first glance, but they are not. Buried in the legalese is this:
The Securities are not currently equity interests in the company and can be though of as the right to receive equity at some point in the future upon the occurrence of certain events.
If that doesn’t sound right, then don’t worry, as this is a very common practice with startups: you get the shares later.
But what are “certain events”? They explain:
Upon each equity financing of greater than $1,000,000.00 (an “Equity Financing”), the securities are convertible at the option of the company, into CF Shadow Series Securities, which are securities identical to those issued in such future Equity Financing except 1) they do not have the right to vote on any matters except as required by law, 2) they must vote in accordance with the majority of the investors in such future Equity Financing with respect to any such required vote and 3) they are not entitled to any inspection or information rights (other than those contemplated by Regulation CF). The Company has no obligation to convert the securities in any future financing.
Whew! Yes, this can be very confusing. Your USD$1 share stake in the company should be put into perspective as well. Currently the company holds something just shy of 5,000,000 shares, so a USD$100 purchase of the offer (the minimum amount), would get you something like 0.002% of the company. However, it will likely turn out to be less, as a future Equity Financing event will no doubt dilute the shares to some degree.
The legal documents describe how the funds will be used, which turns out to be future wages and general working capital, which seems reasonable.
There are some other interesting bits in the documentation, including their most recent financials, where a loss is indicated. However, the company says they will not be profitable for at least 12 months in the document, so it could be some time before the shares become valuable.
Needless to say, this is a risky investment, and this is broadcast all over the legal documents. Most startups are in this condition behind the scenes, it’s just that you don’t see it as visibly as shown here. Usually such details are matters for experienced investors with legal teams, as opposed to the public, who are being solicited to invest in this campaign.
On the other hand, you can view this in another way: if you like Astroprint and their products and services, you might consider giving them a hand by taking up their offer and providing some funds for them to operate. You may or may not get a return on your investment in the future, but you can feel good supporting something you like.
For many reasons, it’s worth a look.