Frequently Asked Questions (FAQ)
- Can you confirm that the Project Owner will be the Primary recipient (i.e. Merchant of Record in the case of any Chargebacks or Refunds) in the automated payment process & you will collect your fees as Secondary recipient?
How is CrowdFunding Incubator LLC affected by the JOBS Act and the securities related regulatory agency actions and rules?
- Will the projects on your platform collect cross-border payments? What countries do you expect to receive payments and projects from?
- Do Donors receive any reward or gain for donations? If so, can you give us examples of what these would be please?
- What is the expected dollar amount per project?
- What is the maximum contribution allowed? Please note that certain merchant payment processing services would require a maximum contribution limit of $2,000.
- What will be the typical timeframe of the projects?
- How many Projects per Sponsor, Projects per Sponsor per year, Number of projects a Contributor may participate in (i.e., “provide funds to”) during any one time and the Number of times a donor can support one project?
- Do you have any internal processes for Anti Money Laundering monitoring or Project Vetting?
- What types of Projects is CFI interested in?
1. Can you confirm that the Project Owner will be the Primary recipient (i.e. Merchant of Record in the case of any Chargebacks or Refunds) in the automated payment process & you will collect your fees as Secondary recipient?
Answer: In conformity with responsible fiduciary policy and procedure, the Project Owner receives proceeds, if any, and to the extent that proceeds are collected from contributors, prior to any payment to CFI. Payments to CFI are neither deemed earned nor payable until the Project owner is paid. Our payment is treated as a residual. CFI’s residual will be treated by CFI for both legal and accounting purposes as fully reportable revenue and treated pursuant to AICPA standards as earned on a “cash basis” as actually paid to CFI following payment to each respective Project Owner. The Project owner is merely using our Platform as a service with which to promote his or her Project. We are a service provider and not a fiduciary agency.
Answer: A general comment is in order. CFI will not be engaged in any activity involving the sale, solicitation or offering of any type of securities of any of its Project Owners under any standards. We are not selling any interests or options to purchase interests in the debt or ownership of any Project under any circumstances. As such, we do not come under the regulatory provisions of the SEC, FINRA, U.S. Treasury Department or any of their counterpart state agencies which regulate private placements or public offerings within their domiciles.
Again, we will not be engaged in any securities-related activity and shall never hold ourselves out to the public as a securities broker-dealer, depository institution or any other type of money brokerage firm. The only crowdfunding firms which are or will become subject to the regulations to which you refer will be those raising funds in exchange for sales of participatory interests (stocks, bonds, convertible debentures, options and the like) in Project companies. CFI does not fall under this category and does not intend to ever change its business model to invite any type of securities regulations either in existence or as a result of the JOBS Act.
Additionally, our client agreement (please refer to attached Illustration A) is very strict in its requirement that each prospective client submitting agree that we are not engaging in any securities or banking transaction; that proceeds collected if any, cannot be used by the prospective client for any unlawful, unethical or immoral purposes under any circumstances. Should CFI have any doubt, we would not permit the Project to be initiated on our site -- and we have sole discretion to determine whether to accept or reject any project at the outset in our sole discretion. In addition, every prospective client indemnifies and holds harmless CFI and all of its affiliated and associated entities (merchant payment processors and other transactional facilitators are covered by this legal indemnification and hold harmless provision) of any liability with respect to the raising of any capital from any Contributors or for any other transactional activity relating thereto.
Answer: We expect to receive the overwhelming majority of our payments from the United States, with a possible small percentage from Canada or The United Kingdom. Cross border payments will likely account for less than 5% of our total collections at the outset of the business and for the foreseeable future, until exposure and demand warrant a larger sum of payments from these non-US countries and and other non-US countries on a case-by-case basis.
b. Do Donors receive any reward or gain for donations? If so, can you give us examples of what these would be please?
Answer: Contributors (we use this term instead of “donors” as that latter term invokes visions of strictly Not-For-Profit Projects and programs), receive various items of value in consideration of their contributions, such as discounts on purchases, collectible memorabilia, advertising services on various platforms at significantly reduced rates, opportunities to use a service (when it becomes available) for free [for a specified period of time], certain honorary certificates, beta testing opportunities, privileged memberships, special meetings with Project leaders, and other items of perceived value equal to or in excess of what their respective levels of contribution are. Contributors to Projects will always receive value in substantial perceived consideration for their early-stage participation, almost as if they were making bargain purchases to coincide with their generosity and visionary participation.
c. What is the expected dollar amount per project?
Answer: The expected dollar amount per Project should initially be (typically) $25,000.00 to $250,000.00 with few exceptions as reviewed on a case-by case basis, and as warranted. NOTE: In the case of these larger Projects, funds can be disbursed in stages (to match certain payment-level thresholds as arranged between CFI and the Project Sponsors. By way of an example, a $250,000.00 total Project ‘target raise’ may be drawn down in $10,000.00 increments, provided that these increments (in both amount and timing) correlate with accomplishments in furtherance of the Project Sponsors’ ultimate goal.
d. What is the maximum contribution allowed? Please note that certain merchant payment processing services would require a maximum contribution limit of $2,000.
Answer: The maximum contribution per individual Contributor to any Project would be $1,500.00 pursuant to our own internal policy. Any larger amount would be ‘flagged,’ ‘stopped from direct processing and be re-routed via autoresponder to where special arrangements would have to made regarding any acceptance (in CFI’s sole discretion). In addition, the subject Contributor would have to execute a standardized statement, representation, and warranty regarding legality and anti-money laundering (please refer to letter g, below for more about this).
e. What will be the typical timeframe of the projects?
Answer: The typical timeframe of a project will be anywhere from 60 days to one year*, with most falling closer to the 60- to 90-day timeframe. We do permit time extensions and oversubscription. The increment of any oversubscription on a Project is strictly non-refundable. Further, our Contributors understand that their contributions are non-refundable, regardless of any stated Project fundraising goals. The philosophy behind this is that 1) CFI will not take on any Project under any circumstance that requires a certain minimal “critical mass of funds” to be initiated. We require that every Project be scalable such that any contributions generated could be immediately applied to the benefit of the Project’s stated purpose. 2) We do not take any “idea projects which do not have management and leadership in place whom have already committed substantial personal resources to the Project. Contributions are used for furtherance or in order to accelerate processes, but are never “wasted funds” to be returned.
* In the case of Project campaigns lasting for longer periods, these are phased campaigns (as clarified above) where smaller “sub-targets” are reached over time to correspond with Project phases. A Project , in theory could have monthly or quarterly incremental payouts to correspond with smaller dollar subgoals.
f. How many Projects per Sponsor, Projects per Sponsor per year, Number of projects a Contributor may participate in (i.e., “provide funds to”) during any one time and the Number of times a donor can support one project?
- We permit only one single Project at a time for any Project Sponsor;
- We will permit more than one (perhaps two or three) if a Project Sponsor has successfully and fully funded his/her stated financing objectives on the earlier Project [which has subsequently been closed out], but we require that that Project Sponsor show us (and our Contributors by independent party-reviewed success reports and/or financial statements); that they undergo a new due diligence review by our Members; and that they execute a new Agreement with us. Serial financings are possible, but we insist on going through this process before any subsequent fundraising is permitted;
- A contributor can only contribute to a given Project the aggregate sum of $1,500.00 per year, and this may be in up to three installments, not totaling more than $1,500.00 per given Project during a given year;
- A contributor can contribute to as many Projects as he or she desires during the course of a given year, not to exceed $1,500.00 in total, without our “flagging” the account of that particular Contributor and obtaining a statement from him/her regarding the nature of the proceeds, i.e., that they are “good, clean, cleared funds, free of any and all liens, taxes and attachments, and they were derived by lawful means, and that they are being conveyed in complete compliance with all applicable laws, including, but not limited to all regulations applicable to money-laundering and tax evasion” This language is absolutely approved by the U.S Treasury Department, The Comptroller Of The Currency, The ICC and all depository financial institutions participating in the SWIFT network of banks worldwide.
Answer: We respectfully request that you refer back to the answers which were given in response to your earlier questions. To this, we add: CFI requests rigorous disclosure on the part of every prospective Project promoter (through our application process), as well as extensive telephonic interviews with the principals involved in the promotion of the Project. Projects are never automatically submitted and posted (although we realize many other crowdfunding platforms and companies permit clients to freely post, CFI does not and will not permit this -- it causes most of the problems associated with the industry in general), without our having completed our own due diligence, and without our having obtained an executed agreement regarding the same from the prospective Project sponsor/s. Please refer to Illustration A.
Answer: Our focus is on Projects for both profit-oriented (the majority of Projects) and Not-For-Profits that have, in no particular order, all of the following attributes:
- a sensible, written business plan and some management already in place;
- early-stage, fast-track growth-oriented plans and programs, but not only high technology or scientific undertakings;
- that provide, or have the potential to provide benefits to the communities in which they are domiciled, or to the United States Of America in general;
- that create permanent jobs of dignity and substance, and/or provide employment training and assistance with reaching a goal of greater employment and other benefits to the the USA;
- that are sponsored by, or will benefit minorities, persons with disabilities, returning veterans, women (categorically, in accord with the UN Women’s Initiative), female entrepreneurs, and other categories of persons designated by the SBA as being in need of “extra help and attention”.
Most significantly, CFI wants Projects that will succeed in their missions, and which are amenable to mentoring, guidance and strategic planning advice during the pre-fundraising process, the crowdfunding process, and after the completion of the crowdfunding process until CFI feels, in its opinion, that the Project is likely to be self-sustaining.