General

  • What is NextSeed?

    NextSeed is an investment crowdfunding platform where anyone can invest in small businesses. NextSeed allows issuers to offer debt securities on its platform in reliance on (i) the new Section 4(a)(6) of the Securities Act of 1933 ("Section 4(a)(6)"), which was added through the enactment of Title III of the Jumpstart Our Business Startups (JOBS) Act of 2012, and (ii) "Regulation Crowdfunding", which was promulgated to implement Title III of the JOBS Act.

    Issuers on NextSeed will offer debt securities in the form of term loan agreements, revenue sharing agreements or other debt products such as notes. For more information on the security offered in a specific offering, please see the applicable offering materials for such offering.

  • How does NextSeed work?

    A business applying to raise capital on NextSeed will provide relevant business and financial information to NextSeed. NextSeed will analyze the business's financial condition and risk factors through its proprietary standardized risk assessment process and propose investment terms to the business. If the business accepts the proposed terms, it will then create an offering that is listed on NextSeed. Investors will be able to sign up on NextSeed to view offerings and make investments. NextSeed facilitates monthly payments to investors.

  • Is NextSeed regulated?

    NextSeed US LLC is a Funding Portal registered with the Securities and Exchange Commission (SEC) and a FINRA member in accordance with "Regulation Crowdfunding” promulgated to implement Title III of the JOBS Act.

  • What is Regulation Crowdfunding?

    Regulation Crowdfunding provides a framework for registered funding portals such as NextSeed to operate an online platform for businesses to offer and sell securities in reliance on Section 4(a)(6). The regulations governing the sale of securities is very complex, and it has traditionally been very costly and difficult for small businesses or startups to sell securities to the public. The JOBS Act was enacted to provide less costly alternatives for businesses to sell securities through the internet. Section 4(a)(6), in particular, allows businesses to sell securities to anyone, not just investors with a certain level of income and net worth.

  • Who can invest on NextSeed?

    Anyone that is a U.S. resident can make investments on NextSeed. Please refer to the FAQ for Investors for more information.

  • Do I have to be an accredited investor to invest on NextSeed?

    Anyone that is a U.S. resident can invest on NextSeed. You no longer have to be wealthy to have access to investment opportunities other than the public markets!

  • Will investors receive any equity interests or any voting or management rights?

    No, investors will not receive any voting or management rights in a business as a result of their investments on NextSeed.

  • If I don’t get equity, how is this an investment?

    Contrary to popular belief, equity is only one kind of investment. There are actually three main types of investments - equity, debt and cash equivalents. On NextSeed, you are making debt investments. It's like buying bonds instead of stocks. Debt investors typically receive regular cash payments tied to an interest rate or total return. The payment terms would be specified in the investment contract. On the other hand, equity investors in a private company typically need the company to go public or get acquired before they receive any payment. Due in part to this difference, equity investments are generally considered to be riskier than debt investments.

  • Who can raise capital through an offering on NextSeed?

    Most types of business are eligible to raise capital through an offering on NextSeed so long as it meets the certain qualifications set forth in Regulation Crowdfunding. These qualifications, among others, require that the issuer be:

    • legally organized under the laws of a state or territory of the United States or the District of Columbia
    • a company that is not subject to certain reporting requirements of the Securities Exchange Act of 1934
    • a company that is not an investment company as defined in the Investment Company Act of 1940 or a company excluded from such definition under Section 3(b) or 3(c) thereof
    • a company (along with its affiliates) that has not sold more than $1 million through Section 4(a)(6) crowdfunding offerings in the previous 12-month period
  • Does NextSeed accept any business that applies to list an offering?

    No. Each application must meet preliminary business requirements set by NextSeed and strict legal requirements under Regulation Crowdfunding. Additionally, NextSeed completes a comprehensive standardized risk assessment of every proposed offering. In some instances, NextSeed will choose not to list offerings because of the characteristics of the business or the funding request. For example, NextSeed does not accept a business that promotes offensive behavior (e.g., hate speech, encourage violence toward others) through its business or via the products or services offered for sale.

  • How are the terms of an offering determined?

    Every offering undergoes a rigorous standardized assessment process by NextSeed. The assessment is intended to first determine if a prospective issuer fits the business categories offered on NextSeed, based on the objective criteria established by NextSeed. If a good fit is found, NextSeed helps the Issuer determine the terms to offer to their prospective investors. When assessing the feasibility of a prospective offering, NextSeed typically considers the following key factors:

    • Historical Financial Performance - comparison of key financial ratios to industry standards to evaluate the business’s strengths and weaknesses
    • Projected Impact of Proposed Funding Terms - analysis of proposed funding terms' potential impact on the business's overall financial condition
    • Credit History Information - credit history of the business, as well as personal credit histories of key personnel
    • Leadership Experience and Stability - level of industry expertise and length of tenure of the business’s leadership
    • Industry Risk - overall success/failure rate in the relevant industry in which the business operates, according to historical data

    The final investment terms that are offered to prospective investors on NextSeed reflect NextSeed's and the issuer’s good-faith assessment and are not a guarantee or guidance of performance of any kind. Investing in securities inherently involves risks, and investors should consider their own investment objectives before investing.

Revenue Sharing Notes

  • What is a revenue sharing note?

    Revenue-based financing, sometimes referred to as royalty investing or advance revenue purchases, has long been a common financing format in oil and gas development, film production, biotech/pharmaceutical development and numerous other industries.

    On NextSeed, you can invest in fractions of a revenue sharing loan. Each fraction of a revenue sharing loan is called a revenue sharing note. Instead of requiring a business to pay a fixed amount each month over a certain period of time (as typically required under a term note), a revenue sharing note on NextSeed requires a business to pay a fixed percentage of its monthly gross revenues until a predetermined total amount has been paid. The "Total Payment Amount" is calculated by multiplying the principal amount of the revenue sharing note by the applicable "investment multiple."

  • What makes a revenue sharing note unique?

    A revenue sharing note on NextSeed is unique because it provides entrepreneurs with capital in exchange for paying a percentage of future revenues to their investors. Investors are technically purchasing a note – a debt security – but investors can also participate in some of the potential upside of a business they have invested in. The more investors help the business by purchasing their products and services or spreading the word as brand advocates, the more revenue the business will generate and the faster the business will be able to pay its investors. Investors benefit because a shorter payment period increases the investors' rate of return. The flexible payment structure of revenue sharing is directly influenced by the success of the business and helps align the economic interests of the business and its investors.

  • How is a revenue sharing note structured?

    The terms of revenue sharing notes on NextSeed are documented through a note purchase agreement between a business and its investors and the revenue sharing notes. Under the note purchase agreement, an investor agrees to purchase a revenue sharing note issued by the business in exchange for the business paying a fixed percentage of the business’s gross revenue on a monthly basis until the investor has been paid a predetermined total amount. If the total payment amount has not been paid in full by the maturity date, the business is required to promptly pay the entire remaining balance.

    Note that debt securities offered on NextSeed are not guaranteed or insured and investors may lose some or all of the principal invested subject to an issuer’s ability to fully service the debt and not default.

  • How is a revenue sharing note different from a traditional term note?

    A term note typically carries a fixed interest rate and a monthly repayment schedule with a set maturity date. A business that has issued term notes is required to make fixed monthly payments to its investors irrespective of its operational performance.

    In contrast, a revenue sharing note on NextSeed requires the business to make monthly payments equal to a fixed percentage of its monthly gross revenue until it pays a predetermined total amount.

  • Why should investors consider investing through revenue sharing notes on NextSeed?

    Because a revenue sharing note provides payment flexibility to a business based on its performance, payments made to investors will also vary. If the business performs better than expected, the investors will be paid in a shorter period of time. If the business performs worse than expected, the investors will be paid over a longer period of time. In each case, the total payment amount is fixed, however, the rate of return on investment can fluctuate. As a result, a revenue sharing note could potentially provide a rate of return similar to an equity investment. The tradeoff is that a revenue sharing note investor forgoes the predictability of fixed payments that are available in a term note investment.

  • What can investors expect to receive when they invest through revenue sharing notes on NextSeed?

    Each offering of revenue sharing notes on NextSeed has a fixed investment multiple, which determines the total return to investors before fees are deducted. For example, if the investment multiple is 1.20, that means investors can expect to be paid 1.20x their original investments before fees are deducted.

    Note that debt securities offered on NextSeed are not guaranteed or insured and investors may lose some or all of the principal invested subject to an issuer’s ability to fully service the debt and not default.

Term Notes

  • What is a term note?

    On NextSeed, you can invest in fractions of a term loan. Each fraction of a term loan is called a term note. Term notes have a specified interest rate over a set period of time and are issued under the applicable note purchase agreement. The business will make fixed monthly payments during the term of the note, and will pay the unpaid balance (including any accrued interest) to the investor on the maturity date.

  • What is a note purchase agreement?

    A note purchase agreement on NextSeed is a legal agreement between the investors and a business governing the term notes purchased by the investors from the business.

  • What does the Interest Rate mean for term notes?

    The "Interest Rate" refers to the annualized interest rate applied to the balance of the principal of the investment each month. The term notes are amortized on a monthly basis, and the business pays fixed monthly payments of interest - based on the "Interest Rate" - and principal over the entire term of the investment. This is similar to a standard mortgage. The Total Payment Calculator on the offering page provides an example of how this works. Check out our blog for an example, or, check a standard mortgage calculator online to better understand the concept.

    Note that debt securities offered on NextSeed are not guaranteed or insured and investors may lose some or all of the principal invested subject to an issuer’s ability to fully service the debt and not default.

  • What can investors expect to receive when they purchase term notes on NextSeed?

    Each offering of term notes on NextSeed indicates an annual return, which is what investors can expect to be paid in addition to their principal before fees are deducted.

    Note that debt securities offered on NextSeed are not guaranteed or insured and investors may lose some or all of the principal invested subject to an issuer’s ability to fully service the debt and not default.

The Basics

  • Who can invest on NextSeed?

    Anyone that is a U.S. resident can make investments on NextSeed.

  • Do I have to be an accredited investor to invest on NextSeed?

    Anyone that is a U.S. resident can invest on NextSeed. You no longer have to be wealthy to have access to investment opportunities other than the public markets!

  • Is there a limit to how much I can invest?

    Yes, Regulation Crowdfunding places limitations on the aggregate amount of investments investors may make in Section 4(a)(6) crowdfunding offerings within a 12-month period, depending on your income and net worth. See SEC's Investor Bulletin for the latest information. To summarize:

    • If your (including your spouse’s) annual income or net worth (calculated in accordance with Section 230.501 of the Securities Act) is less than $107,000, you may invest the greater of (i) $2,200 or (ii) lesser of 5% of your annual income or net worth
    • If your annual income and net worth is greater than $107,000, you may invest the lesser of (i) 10% of your annual income or (ii) 10% of your net worth
    • Your total investments in Section 4(a)(6) crowdfunding offerings cannot exceed $107,000 per each 12-month period.

    If you are investing as an entity, the same limits apply based on the entity's revenue and net assets (as of its most recent fiscal year end).

  • Will investors receive any equity interests or any voting or management rights?

    No, investors will not receive any voting or management rights in a business as a result of their investments on NextSeed.

  • If I don’t get equity, how is this an investment?

    Contrary to popular belief, equity is only one kind of investment. There are actually three main types of investments - equity, debt and cash equivalents. On NextSeed, you are making debt investments. It's like buying bonds instead of stocks. Debt investors typically receive regular cash payments tied to an interest rate or total return. The payment terms would be specified in the investment contract. On the other hand, equity investors in a private company typically need the company to go public or get acquired before they receive any payment. Due in part to this difference, equity investments are generally considered to be riskier than debt investments.

  • Is there a minimum or maximum investment?

    The minimum investment amount is $100, and each investor’s maximum investment amount is subject to aggregate investment limits set by Regulation Crowdfunding. Investments are accepted in $100 increments within this range.

  • Are there any fees for investors to sign up or invest?

    There are no fees to open a regular NextSeed Account or to make an investment on NextSeed. There are certain fees associated with opening a NextSeed IRA, as explained below. NextSeed will deduct a service fee in an amount equal to 1.0% of each payment made to investors to cover transaction and administrative costs.

  • Are tax documents provided to investors?

    For each year that you’re an investor, you will receive an IRS Form 1099 by March of the following year.

  • If I don’t live in the U.S., can I invest on NextSeed?

    At this time, only people who live in the U.S. can make investments on NextSeed. However, our banking partner is looking for a solution to accommodate people outside of the U.S. If you would like to be notified when we are able to accept you as an investor, please send us a note at info@nextseed.com.

  • Where can I find out more about Reg CF investing?
    To find out more about Reg CF, see our welcome kit! Having trouble accessing the link? Please contact info@nextseed.com.

Choosing Investments

  • Does NextSeed make investment recommendations?

    No. NextSeed is a funding portal registered with the SEC and FINRA. NextSeed is neither a broker-dealer nor an investment adviser, and does not make any investment recommendations. You are encouraged to carefully consider all elements of an offering and consult with your advisors before making any investment decision.

  • Is investing on NextSeed risky?

    Any crowdfunding investment involves risk and investors may lose some or all of the principal invested. Investors may be subject to restrictions on canceling purchase orders, selling or transferring purchased securities.  Investors should not invest in a crowdfunding offering unless he or she can afford to lose the entire investment. Investors should review all disclosures provided by an issuer before making any investment.

    You should consult your own advisors and carefully review all information and disclosures provided by the business before making your investment. Past performance is not a guarantee of future performance, and you should be willing and able to withstand loss of your investment.

  • What sort of information can investors review prior to investing in a business?

    Information regarding the business's operating history, finances, management and ownership, and disclosures of material risk factors are made available to investors in the disclosure statement under the "Legal" tab of the business’s offering page. You should carefully review all information that is made available to you and understand the risk factors associated with the business and its industry before making an investment decision.

  • If I have questions for a business owner before I invest, how can I get them answered?

    Each offering page will have a Comments section, which shall serve as a forum for business owners and investors to correspond during the offering period. You can submit your questions and comments there.

  • Who can raise capital through an offering on NextSeed?

    Most types of business are eligible to raise capital through an offering on NextSeed so long as it meets the certain qualifications set forth in Regulation Crowdfunding. These qualifications, among others, require that the issuer be:

    • legally organized under the laws of a state or territory of the United States or the District of Columbia
    • a company that is not subject to certain reporting requirements of the Securities Exchange Act of 1934
    • a company that is not an investment company as defined in the Investment Company Act of 1940 or a company excluded from such definition under Section 3(b) or 3(c) thereof
    • a company (along with its affiliates) that has not sold more than $1 million through Section 4(a)(6) crowdfunding offerings in the previous 12-month period
  • Does NextSeed accept any business that applies to list an offering?

    No. Each application must meet preliminary business requirements set by NextSeed and strict legal requirements under Regulation Crowdfunding. Additionally, NextSeed completes a comprehensive standardized risk assessment of every proposed offering. In some instances, NextSeed will choose not to list offerings because of the characteristics of the business or the funding request. For example, NextSeed does not accept a business that promotes offensive behavior (e.g., hate speech, encourage violence toward others) through its business or via the products or services offered for sale.

  • How are the terms of an offering determined?

    Every offering undergoes a rigorous standardized assessment process by NextSeed. The assessment is intended to first determine if a prospective issuer fits the business categories offered on NextSeed, based on the objective criteria established by NextSeed. If a good fit is found, NextSeed helps the Issuer determine the terms to offer to their prospective investors. When assessing the feasibility of a prospective offering, NextSeed typically considers the following key factors:

    • Historical Financial Performance - comparison of key financial ratios to industry standards to evaluate the business’s strengths and weaknesses
    • Projected Impact of Proposed Funding Terms - analysis of proposed funding terms' potential impact on the business's overall financial condition
    • Credit History Information - credit history of the business, as well as personal credit histories of key personnel
    • Leadership Experience and Stability - level of industry expertise and length of tenure of the business’s leadership
    • Industry Risk - overall success/failure rate in the relevant industry in which the business operates, according to historical data

    The final investment terms that are offered to prospective investors on NextSeed reflect NextSeed's and the issuer’s good-faith assessment and are not a guarantee or guidance of performance of any kind. Investing in securities inherently involves risks, and investors should consider their own investment objectives before investing.

Revenue Sharing Notes

  • What is a revenue sharing note?

    Revenue-based financing, sometimes referred to as royalty investing or advance revenue purchases, has long been a common financing format in oil and gas development, film production, biotech/pharmaceutical development and numerous other industries.

    On NextSeed, you can invest in fractions of a revenue sharing loan. Each fraction of a revenue sharing loan is called a revenue sharing note. Instead of requiring a business to pay a fixed amount each month over a certain period of time (as typically required under a term note), a revenue sharing note on NextSeed requires a business to pay a fixed percentage of its monthly gross revenues until a predetermined total amount has been paid. The "Total Payment Amount" is calculated by multiplying the principal amount of the revenue sharing note by the applicable "investment multiple."

  • What makes a revenue sharing note unique?

    A revenue sharing note on NextSeed is unique because it provides entrepreneurs with capital in exchange for paying a percentage of future revenues to their investors. Investors are technically purchasing a note – a debt security – but investors can also participate in some of the potential upside of a business they have invested in. The more investors help the business by purchasing their products and services or spreading the word as brand advocates, the more revenue the business will generate and the faster the business will be able to pay its investors. Investors benefit because a shorter payment period increases the investors' rate of return. The flexible payment structure of revenue sharing is directly influenced by the success of the business and helps align the economic interests of the business and its investors.

  • How is a revenue sharing note structured?

    The terms of revenue sharing notes on NextSeed are documented through a note purchase agreement between a business and its investors and the revenue sharing notes. Under the note purchase agreement, an investor agrees to purchase a revenue sharing note issued by the business in exchange for the business paying a fixed percentage of the business’s gross revenue on a monthly basis until the investor has been paid a predetermined total amount. If the total payment amount has not been paid in full by the maturity date, the business is required to promptly pay the entire remaining balance.

    Note that debt securities offered on NextSeed are not guaranteed or insured and investors may lose some or all of the principal invested subject to an issuer’s ability to fully service the debt and not default.

  • How is a revenue sharing note different from a traditional term note?

    A term note typically carries a fixed interest rate and a monthly repayment schedule with a set maturity date. A business that has issued term notes is required to make fixed monthly payments to its investors irrespective of its operational performance.

    In contrast, a revenue sharing note on NextSeed requires the business to make monthly payments equal to a fixed percentage of its monthly gross revenue until it pays a predetermined total amount.

  • Why should investors consider investing through revenue sharing notes on NextSeed?

    Because a revenue sharing note provides payment flexibility to a business based on its performance, payments made to investors will also vary. If the business performs better than expected, the investors will be paid in a shorter period of time. If the business performs worse than expected, the investors will be paid over a longer period of time. In each case, the total payment amount is fixed, however, the rate of return on investment can fluctuate. As a result, a revenue sharing note could potentially provide a rate of return similar to an equity investment. The tradeoff is that a revenue sharing note investor forgoes the predictability of fixed payments that are available in a term note investment.

  • What can investors expect to receive when they invest through revenue sharing notes on NextSeed?

    Each offering of revenue sharing notes on NextSeed has a fixed investment multiple, which determines the total return to investors before fees are deducted. For example, if the investment multiple is 1.20, that means investors can expect to be paid 1.20x their original investments before fees are deducted.

    Note that debt securities offered on NextSeed are not guaranteed or insured and investors may lose some or all of the principal invested subject to an issuer’s ability to fully service the debt and not default.

  • When will I receive my monthly payments and for how long?

    NextSeed will seek to distribute monthly payments to investors by the 15th business day of each month. Payments to investors will correspond to their proportionate shares of the business’s revenue from the previous month.

    Monthly payments will continue until the business has paid investors in full pursuant to the terms of the applicable note purchase agreement. The exact length of time that it will take a business to pay all of its revenue sharing obligations cannot be known in advance since the business's revenues may vary during the payment period.

    If any balance remains outstanding on the maturity date, the business will be required to promptly pay the entire outstanding balance to investors.

  • What does Revenue Sharing Percentage mean?

    Revenue Sharing Percentage is the percentage of the business's gross revenue that it must pay to its investors on a monthly basis.

  • How will I know whether a business has accurately reported its monthly revenue and I’ve received the correct monthly payment?

    Each business that completes a successful offering of revenue sharing notes is required to enroll in NextSeed's Payment Automation Service, which enables NextSeed to monitor the business's revenue on an ongoing basis.

    Additionally, each business is required to provide NextSeed with its tax return every year. If NextSeed determines that the amount paid by the business to its investors over the relevant year requires adjustment, the business will be required to make additional true-up payments to its investors.

  • What happens if a business doesn’t report its monthly revenue?

    In order for its offering of revenue sharing notes to be listed on NextSeed, each business must agree to comply with the revenue reporting requirements described in its NextSeed crowdfunding portal agreement. Material breach of these reporting obligations may result in the business being deemed to have defaulted under its note purchase agreement and being required to immediately pay the entire outstanding balance.

  • What is the Payment Automation Service?

    Each business that issues revenue sharing notes is required to participate in the Payment Automation Service, which enables NextSeed to monitor the business’s revenue on an ongoing basis. Each business will provide NextSeed with passive access to the business’s bank accounts for purposes of revenue verification and monthly payment calculation. NextSeed will not have the ability to take any unauthorized actions in relation to any business’s bank accounts. Participation in the Payment Automation Service provides the following benefits:

    • NextSeed will indicate on the business's offering page that it participates in the Payment Automation Service. This provides investors with additional confidence in the transparency of the business's revenue reporting process.
    • NextSeed automatically generates a monthly revenue estimate for the business based on its bank account activity, and automates monthly payments to investors.
  • How can investors estimate the implied return of a revenue sharing note?

    How can investors estimate the implied return of a revenue sharing note?

    A revenue sharing note on NextSeed requires the business to make monthly payments equal to a fixed percentage of its monthly gross revenue until cumulatively the total amount paid to investors has reached the promised investment multiple by the business either before or by the note’s maturity. As a result, the payment received by investors could vary month on month, subject to changes in the monthly gross revenues of the business. Because of this variance in monthly payments, a standard simple interest rate calculation (such a mortgage calculator) does not appropriately measure investors’ expected return underlying the revenue sharing note.

    Given the expected varying cash flows coming to them under a revenue sharing note, investors could evaluate the expected investment performance using the concept of Internal Rate of Return (“IRR”). IRR is a popular methodology commonly used by corporations and investment professionals to measure the profitability of potential investments. Investors can calculate the expected IRR of a revenue sharing note using the estimated monthly cash flow derived from their own assumptions and assessment of the financial projection provided by the business.

    References to the IRR methodology (and the academic explanation) and the different ways to calculate IRR can be found from public sources such as Wikipedia and Investopedia.

    Note that debt securities offered on NextSeed are not guaranteed or insured and investors may lose some or all of the principal invested subject to an issuer’s ability to fully service the debt and not default.

Term Notes

  • What is a term note?

    On NextSeed, you can invest in fractions of a term loan. Each fraction of a term loan is called a term note. Term notes have a specified interest rate over a set period of time and are issued under the applicable note purchase agreement. The business will make fixed monthly payments during the term of the note, and will pay the unpaid balance (including any accrued interest) to the investor on the maturity date.

  • What is a note purchase agreement?

    A note purchase agreement on NextSeed is a legal agreement between the investors and a business governing the term notes purchased by the investors from the business.

  • What does the Interest Rate mean for term notes?

    The "Interest Rate" refers to the annualized interest rate applied to the balance of the principal of the investment each month. The term notes are amortized on a monthly basis, and the business pays fixed monthly payments of interest - based on the "Interest Rate" - and principal over the entire term of the investment. This is similar to a standard mortgage. The Total Payment Calculator on the offering page provides an example of how this works. Check out our blog for an example, or, check a standard mortgage calculator online to better understand the concept.

    Note that debt securities offered on NextSeed are not guaranteed or insured and investors may lose some or all of the principal invested subject to an issuer’s ability to fully service the debt and not default.

  • What can investors expect to receive when they purchase term notes on NextSeed?

    Each offering of term notes on NextSeed indicates an annual return, which is what investors can expect to be paid in addition to their principal before fees are deducted.

    Note that debt securities offered on NextSeed are not guaranteed or insured and investors may lose some or all of the principal invested subject to an issuer’s ability to fully service the debt and not default.

Your NextSeed Account

  • What is my NextSeed account?

    Your NextSeed account is an FDIC insured bank account with our partner bank, Happy State Bank DBA GoldStar Trust Company (“GoldStar”), that you can use to make investments. Your account is  provided and serviced by GoldStar, and the uninvested cash that accumulates in your account is FDIC insured up to $250,000. You may fund your account by ACH, and all payments to you will be credited to your account. You have the option to transfer funds into your account, withdraw funds from your account and make additional investments using the funds in your account at any time.

  • Why do I need a NextSeed account to invest?

    Our banking partner, GoldStar, handles all investments, escrow processes, disbursements from businesses, and payments to you. For GoldStar to process all these processes smoothly, NextSeed members open and maintain a NextSeed account.

  • Why do I need to provide my banking information?

    To make an investment on our platform, your external bank account must be provided, as our partner bank requires an external bank account be connected to your NextSeed account for deposit and withdrawal purposes. The information you provide on NextSeed is protected with bank-level security and encrypted.

  • Why do I need to provide my social security number to invest?

    Your social security number is required by our banking partner GoldStar to verify your identity and open up your NextSeed account. The information you provide on NextSeed is protected with bank-level security and encrypted.

  • How do I know my personal information is secure?

    Privacy and protection of your data is paramount for us.  We follow industry best practices such as multiple levels of bank grade encryption and strict access control and audit monitoring of all customer data.  Also, we use proactive site monitoring and web application firewalls along with many other precautions to help secure your data.

     
  • Why can’t I use Paypal or debit cards to fund my account?

    At this time, our banking partner GoldStar only supports deposits and withdrawals from bank accounts only. Note that it is not clear that using a third party payment processor such as Paypal would be in compliance with the current escrow rules. In addition, GoldStar is able to provide NextSeed accounts at a low cost because of the current cost effective process. Allowing Paypal or debit cards would require GoldStar to pass on the cost of using such services to the investors.

  • How can I delete my account?

    You can delete your account by clicking “Close Account” at the bottom of the "General Settings" tab.

  • How can I withdraw my funds from my NextSeed account?

    You can withdraw funds by clicking "Transfer Funds" on the lefthand menu of your account summary page.

    If you initiate a deposit, the funds need to arrive in your NextSeed account before you can withdraw them. A deposit can take up to 5-7 business days to clear, and we will notify you as soon as the funds are available.

  • What happens to my NextSeed investments if NextSeed is no longer in business?
    Your NextSeed account and payment processes for your investments are facilitated by our partner bank, independent of circumstances affecting NextSeed. In the event NextSeed determines we are unable to continue our business operations, we pledge to allocate necessary resources to maintain staff and technology infrastructure sufficient to work with our partner bank to service existing investments.

Your Investment

  • How does the investment process work on NextSeed?

    You can browse offerings here and sign up to ask questions in the Comments channel. Before investing, you'll spend about 5 minutes setting up your NextSeed investment account. When you decide to invest, you'll e-sign a contract with the business you're investing in. If you change your mind, you can cancel your investment until the last 48 hours of the offering period.

    Your investments will be held in an escrow account by our partner bank (GoldStar Trust Company) until the end of the offering period. If the business successfully meets its funding goal, it will receive the investments being held in escrow. If the business fails to meet its goal, your investment will be returned promptly to your NextSeed investment account.

    Monthly payments from the business will be made directly to your NextSeed investment account. A 1% service fee will be deducted from payments before they are deposited in your account.

  • Can I cancel my investment commitment?

    If you’ve made an investment commitment, you may cancel anytime during the offering period until the last 48 hours prior to the end of the offering period (such 48-hour period, the “Lock-in Period”). You may not cancel your investment during the Lock-in Period.

  • How can I cancel my investment commitment?

    You can cancel your investment commitment by logging in to your account, clicking on "My Portfolio" and clicking “Cancel” next to the relevant investment during the Offering Period until the Lock-in Period.

  • Can I increase or decrease the amount of my investment commitment?

    If you would like to increase the amount of your investment commitment, you may make an additional investment commitment at anytime during the offering period.

    If you would like to decrease the amount of your existing investment commitment, you may do so at anytime during the offering period, except during the Lock-in Period. Please cancel your existing investment and submit a new investment commitment order for your desired investment amount.

  • Are investment returns guaranteed?

    Investment returns are not guaranteed. By investing in a NextSeed offering, investors are entering into a contract with the business who agrees to pay the investors a certain amount over a certain time period. However, if the business cannot make its payments, investors may lose some or all of their investment. Before investing in a business on NextSeed, an investor should consider all of the risks associated with making the investment.

  • I’ve made an investment with NextSeed. What date of the month should I expect to receive my monthly payments?
    Payments are usually processed on the 6th business day of each month. Note that our banking partner observes the standard U.S. bank holidays.
  • What happens if the business does not make its monthly payments?

    If the business is more than 10 business days late in making a monthly payment, it is in default. NextSeed will enforce the appropriate default remedies on behalf of the investors.

  • When is a business with revenue sharing notes in default for not making payments?

    The monthly payment for a business with revenue sharing notes varies depending on its gross revenue for the applicable month. Here are a few examples of default:

    Assume a business with revenue sharing percentage of 10%.

    - If the business’ revenue for month X is $0, the required payment for month X is $0 * 0.10 = $0. The business is not in default for paying $0 to investors for month X.

    - If the business’ revenue for month Y is $10,000, the business’ required payment for month Y is $10,000 * 0.10 = $1,000. The business is in default if it does not pay $1,000 to investors for month Y.

    At the end of the term, the business is in default if it has not fully paid its “Total Payment Amount”. The "Total Payment Amount" is calculated by multiplying the principal amount of the revenue sharing note by the applicable "investment multiple."

  • What happens if the business is in default?

    If a business is in default, NextSeed will take commercially reasonable steps on behalf of the investors to collect payment from the defaulting issuer. If the business has granted a lien on its assets or the principals have provided personal guarantees, NextSeed will also take steps to enforce the lien and guarantees.

  • Can investors enforce remedies on their own?

    An investor cannot contact businesses directly for payment purposes. Any attempt to do so is a breach of the investment agreement.

  • What does it mean if an investment is secured by a blanket lien on the business?
    If an investment is secured by a blanket lien, it means that NextSeed, as agent for the investors, will obtain a lien on all assets of the business if the offering is successful. The lien does not include any personal assets of the key persons of the business, unless otherwise noted. If there are any present or anticipated senior secured obligations, such obligations will be disclosed in the disclosure statement.
  • What is a personal guarantee?

    A personal guarantee is an individual’s legal undertaking to personally assume any remaining liability of the relevant NextSeed loan received by a business entity, should the business default. For NextSeed offerings, a businessowner may sometimes elect to provide a guarantee to further substantiate and represent his/her personal commitment to the success of the business. In order to provide a guarantee, the guarantor provides to NextSeed a self-certified personal financial statement which provides an overview of his/her current state of personal finances prior to the launch of the relevant offering which on its face indicates a greater value than the aggregate amount of potential financial obligation under the relevant NextSeed loan. NextSeed does not independently verify the accuracy of the value of personal assets presented and certified by a guarantor in its personal financial statement, and each businessowner has the sole discretion whether to provide a guarantee.

    Note that a personal guarantee is simply a general personal obligation and not tied to a specific asset (such as the guarantor's home). The existence of a personal guarantee is also not an absolute guarantee of an investment return (e.g., such as guaranteed insurance contracts), and will be subject to applicable laws and regulations if/when presented for enforcement. The current state of finances certified by a guarantor is not necessarily indicative of his/her future financial state, and there is no guarantee that the guarantor will be in a position to assume the remaining liability in the event the business becomes insolvent in the future (e.g., if the guarantor also becomes personally bankrupt).

  • What are the tax implications of investing on NextSeed?

    Each investor agrees to treat the investment agreements that it invests in on NextSeed as "debt instruments" (as defined in U.S. Treasury regulations) for U.S. federal income tax purposes.

    NextSeed does not provide tax, financial or legal advice and this information is not intended to be tax, financial or legal advice. Investors should consult their own financial or tax advisors to determine the tax implications of any potential investment on NextSeed.

  • Are bonus rewards covered by my investment agreements?

    No. Bonus rewards are offered by businesses purely on a voluntary basis, and are not governed by your investment agreements.

  • What happens if a target offering amount is reached prior to the end of the offering period?

    If the target offering amount is reached prior to the end of the offering period, the issuer has the option to close the offering at an earlier date, so long as the shortened offering period is at least 21 days. If the issuer chooses to close on an earlier date, investors will be given at least 5 business days’ notice. The investors will still be able to cancel their investment commitments until the the Lock-In Period (see above) of the shortened offering period.

  • What happens if an offering that I’ve committed to invest in doesn’t meet its funding goal by the end of the offering period?

    If an offering doesn't meet its minimum funding goal by the end of the offering period, no securities will be sold in the offering and your funds will be returned to you.

  • What happens when an offering that I’ve committed to invest in successfully meets its funding goal?

    The business will be notified promptly after it meets its minimum funding goal. If the business also has a maximum funding goal, it can continue to accept investments until the maximum funding goal has been met (at which point it will be notified promptly and no more investments will be accepted).

    After a funding goal has been met and the business has signed all documents necessary to close the offering, you will receive the relevant investment documents and the business will receive its funds.

Investment Return Calculations

  • How does NextSeed calculate investment returns?

    NextSeed strives to provide a fair and reasonable measure of investors’ current investment performance, updated on a monthly basis in conjunction with the latest cash payments made by businesses. For this purpose, we are utilizing the concept of Net Annualized Return (“NAR”) to measure the current financial return on each investment in your portfolio. Generally speaking, with respect to a particular investment, NAR is an annualized measure of the rate of return on the principal invested over the life of such investment, calculated based on actual cash payments received each month, net of service fees, actual write-offs and actual recoveries. NAR is not a forward-looking projection of the performance of any investment, and reflects the full principal value of such investment until and unless such investment is written off.

    On NextSeed, we currently offer two types of investment products (a term loan and a revenue sharing loan), and NAR for each investment product is calculated differently to better reflect its underlying characteristics. Additional explanations for NAR calculations are described below.

    In addition, we have adopted the concept of Total Net Annualized Return (“TNAR”) to approximate the overall financial return on your investment portfolio, regardless of what type of investment you have made on NextSeed. TNAR is a weighted average of NARs on all current investments in your portfolio based on the formula described below.

    With respect to a particular investment, NAR is first calculated when an investor begins to receive payments from the underlying business (usually after the first full month following the closing date, or following the initial startup period, as applicable). Until that time, NAR will display as "New" and no calculation will be available, and only the investments that have NAR will be considered in your TNAR calculation.

  • How does NextSeed calculate NAR for a revenue sharing note?
    NAR for a revenue sharing note is an IRR calculation using the following formula, which is applied to all cash flows received by an investor starting on (i) the closing date of the applicable note purchase agreement (such closing date indicated as date “d0”) until (ii) the final month when the total required payment under the applicable note purchase agreement is paid by the business to the investor (such final monthly period indicated as the Mth month, and the final payment date indicated as dM): Revenue Sharing Loan NAR Formula This formula is applicable to any monthly period ending while a particular revenue sharing note is outstanding, where "i" refers to the monthly period and where:
    • d0 = closing date of the loan
    • di = actual date of the “i” monthly period on which the investor received a cash payment
    • dN = most recent date on which the investor received a cash flow
    • dM = date of expected final payment when the loan is fully repaid in the Mth month, assuming continuous payment of the rolling average of monthly payments to date
    • (Note: For purposes of determining inputs to utilize in this formula, we have adopted Microsoft Excel’s convention to store dates in sequential serial numbers for computation)
    Furthermore, with respect to an investor:
    • Cash Flow0 = the amount of the investor’s initial investment on the applicable closing date
    • Cash Flowi = the amount of the net cash payment received by the investor for any “i” monthly period (e.g., with respect to a particular note, the sum of Paymenti + Late Feesi – Service Feesi – Write Offsi received by the investor)
    In addition, as of any “i” monthly period, for purposes of calculating the hypothetical Cash Flowi for future monthly periods (i.e., (N+1) ≤ i ≤ M) in order to determine overall NAR, we assume that the average Cash Flow i for all past monthly periods (i.e., 1≤ i ≤ N) will be made continuously until the total required payment under the applicable loan is paid by the business to the investor. This assumption is reflected by the below formulas:
    ,
    In the context of a revenue sharing note, the applicable NAR calculation is designed to reflect the flexible nature of a revenue sharing arrangement, in which (1) the total payment required to be made by a business to its investors is fixed, (2) the revenue sharing percentage used to determine the amount of monthly payment is fixed, and (3) the amount of time it ultimately takes to pay off the total required payment will vary depending on the actual revenues of a business. This NAR calculation seeks to capture a reasonable snapshot of the current rate of return of such note, assuming that cash flows received by the investor to date are reasonable proxies for estimating future cash flows expected by the investor until the total required payment under the applicable note purchase agreement is paid by the business. Based on the cumulative amount of cash flow received for a particular month, we calculate NAR for the relevant calculation period as if the remainder of such total required payment is paid off based on the rolling averages of monthly cash payments to date. NAR is not applicable for any investment during the period in which the underlying business is not required to make any payments in accordance with the terms of the applicable note purchase agreement (including during the Startup Period).
  • How does NextSeed calculate NAR for a term note?

    NAR for a term note is calculated using the following formula, which is applied to each monthly period ending during the term of of a term note from the 1st full month following the closing date to the final and Nth month of such term:

    This formula is applicable to any monthly period during the term of a particular note, where the "i" refers to such monthly period. If during any monthly period no payments are received by the investors, then the interest and late fees received (if any) and service fee paid, in such monthly period will be zero. If a particular note is written off, we subtract the entire outstanding principal amount of the note from the numerator. But if a portion of such written off note is later recovered, we add back the amount recovered net of applicable fees. Once the net payment amount is determined for a particular monthly period, we divide such amount by the outstanding principal as of that monthly period. This calculation yields a fraction for the monthly period.

    This calculation is performed for each monthly period, taking into account all interest received, late fees received, service fees paid, and all charge offs and recoveries made relative to the principal outstanding in such monthly period. We then annualized the result of the calculation by taking the sum of (1 + the dollar-weighted average performance for all monthly periods), raising it to the 12th power, and subtracting 1. This calculation results in NAR for a term note, which is expressed as a percentage.

  • How does NextSeed calculate portfolio TNAR?
    TNAR for an investor’s portfolio is calculated using the formula below, where “i” refers to the number of investments made sequentially in an investor’s portfolio and “N” refers to the latest and Nth investment made by such investor.

    Portfolio TNAR does not include NAR calculations for investments that are not yet required to begin payments under their applicable note purchase agreement (including during the Startup Period).

  • What are the limits of NAR and TNAR return calculations?

    The NAR and TNAR calculations described above represent only one of many different ways to calculate and measure the return on cash invested. There are other methods for evaluating the historical and potential investment returns on fixed-income securities and other investments that you may prefer to use to assess the performance of your investments. As NextSeed is unable to provide any other measure of investment returns other than as described above, you should consult your financial advisors if you have any questions about measuring your investment returns.

IRA Accounts

  • Can I invest through my Individual Retirement Account on NextSeed?

    Yes, you can! Investing on NextSeed is available for Individual Retirement Accounts. Your NextSeed IRA*, which can be Self-Directed Traditional, Roth, SEP or SIMPLE IRA, can be funded through contributions, transfers and rollovers from Qualified Retirement Plans (such as 401(k), 403(b), pension and/or 457 plans).

    NextSeed is not a tax, investment or legal advisor and does not provide any tax, investment, or legal advice; please consult your own advisors or IRS guidelines to determine whether investing in NextSeed offerings through a self-directed IRA is right for you.

    *IRAs permitted on NextSeed are provided by GoldStar Trust Company (GoldStar).

     
  • Who is my IRA custodian?

    To ensure a seamless service for your investments through NextSeed, we have partnered with GoldStar Trust Company, who will be the custodian for your NextSeed IRA. All IRA services for purposes of NextSeed investments are offered solely through GoldStar. NextSeed and GoldStar are not affiliated with one another, and NextSeed does not receive any fees from GoldStar in connection with new IRA accounts established by NextSeed members.

  • Can I convert my regular NextSeed investment account to a NextSeed IRA?

    No. A regular investment account at NextSeed cannot be converted to a NextSeed IRA. You may fund your IRA for investments on NextSeed with a cash contribution (check or wire transfer) or transfer or rollovers from your existing IRA or a Qualified Retirement Plan.**

    **This funding mechanism is specific to NextSeed; a taxpayer’s general ability to convert IRA accounts may differ. NextSeed does not provide any tax advice and this information is not intended to be investment or tax advice.

  • Why do I need a separate account for my NextSeed IRA?

    NextSeed currently requires separate accounts with separate email addresses for regular investment accounts and IRAs, as they are legally considered to be separate investment accounts that cannot be combined with other accounts.

  • What are the advantages of investing with a NextSeed IRA?

    A NextSeed IRA allows you to combine the returns of an investment in NextSeed offerings with the potential tax advantages of a retirement account. The IRS provides favorable tax treatment on IRA accounts. As a result, you won’t have to pay taxes on your investments while they are in your IRA account. See IRS guide to IRAs .

    NextSeed is not a tax, investment or legal advisor and does not provide any tax, investment, or legal advice; please consult your own advisors or IRS guidelines to determine whether investing in NextSeed offerings through a self-directed IRA is right for you.

  • Are there any additional fees for setting up a NextSeed IRA?

    GoldStar charges a one-time account establishment fee of $25 to open a NextSeed IRA, which must be paid separately at account opening. GoldStar also charges an annual fee of $65 to maintain the account, which may be paid separately or deducted from amounts transferred to NextSeed IRA.

    As with regular investment accounts, NextSeed charges a service fee equal to 1.0% of each payment made to investors in connection with their investments on NextSeed to cover transaction and administrative costs.

  • Can I take a Required Minimum Distribution (RMD) from a NextSeed IRA?

    Yes, you can take a RMD from your NextSeed IRA. Please note that it is your responsibility to have cash available for withdrawal. To request a RMD, please contact IRAsupport@nextseed.com.

    NextSeed is not a tax, investment or legal advisor and does not provide any tax, investment, or legal advice; please consult your own advisors or IRS guidelines to determine whether investing in NextSeed offerings through a self-directed IRA is right for you.

  • Are there any tax documents provided to investors with IRA accounts?

    Investors with IRAs will not need to annually report their earnings to the IRS; therefore, NextSeed is not required to and will not provide Forms 1099 for IRAs.

    NextSeed is not a tax, investment or legal advisor and does not provide any tax, investment, or legal advice; please consult your own advisors or IRS guidelines to determine whether investing in NextSeed offerings through a self-directed IRA is right for you.

The Basics

  • Who can raise capital through an offering on NextSeed?

    Most types of business are eligible to raise capital through an offering on NextSeed so long as it meets the certain qualifications set forth in Regulation Crowdfunding. These qualifications, among others, require that the issuer be:

    • legally organized under the laws of a state or territory of the United States or the District of Columbia
    • a company that is not subject to certain reporting requirements of the Securities Exchange Act of 1934
    • a company that is not an investment company as defined in the Investment Company Act of 1940 or a company excluded from such definition under Section 3(b) or 3(c) thereof
    • a company (along with its affiliates) that has not sold more than $1 million through Section 4(a)(6) crowdfunding offerings in the previous 12-month period
  • Why can only U.S. businesses raise capital on NextSeed?

    NextSeed is operating under Regulation Crowdfunding, which allow only U.S. businesses to raise capital by crowdfunding in the United States.

  • Does NextSeed accept any business that applies to list an offering?

    No. Each application must meet preliminary business requirements set by NextSeed and strict legal requirements under Regulation Crowdfunding. Additionally, NextSeed completes a comprehensive standardized risk assessment of every proposed offering. In some instances, NextSeed will choose not to list offerings because of the characteristics of the business or the funding request. For example, NextSeed does not accept a business that promotes offensive behavior (e.g., hate speech, encourage violence toward others) through its business or via the products or services offered for sale.

  • How much money can my business raise on NextSeed?

    NextSeed can help your business raise anywhere from $50,000 to $1,070,000 per offering. A business may launch follow-up offerings on NextSeed but can only raise up to $1,070,000 under Section 4(a)(6) crowdfunding offerings during any 12-month period under Regulation Crowdfunding.

  • How much does it cost for me to create and launch an offering on NextSeed?

    There is no charge for registering with NextSeed and completing the application process in order to find out potential funding terms. If you decide to proceed with creating an actual offering, our banking partner and escrow agent, GoldStar Trust Company, will charge a one-time $500 escrow setup fee. NextSeed charges a crowdfunding fee equal to 10% of the total amount raised (subject to discounts if you bring your own investors), payable only if your offering is successful.

  • Will my business be charged any fees in connection with the payment process?

    No fees will be charged to your business for making payments to investors. A 1.0% service fee will be charged to investors on amounts disbursed to them.

Listing an Offering

  • How long does the offering process take on NextSeed?

    Regulation Crowdfunding requires an offering to be open on a crowdfunding portal for at least 21days during which investors can make investment commitments to purchase securities in your business. During this period, prospective investors can ask questions, review the offering, express interest on NextSeed and make investment commitments.

  • How is the funding goal for an offering determined?

    After you submit the minimum amount of funding your business would like to raise, NextSeed will evaluate your business's financial statements to determine if the proposed minimum funding goal is acceptable. You can also set a maximum funding goal, subject to the same approval process.

  • How are the terms of an offering determined?

    Every offering undergoes a rigorous standardized assessment process by NextSeed. The assessment is intended to first determine if a prospective issuer fits the business categories offered on NextSeed, based on the objective criteria established by NextSeed. If a good fit is found, NextSeed helps the Issuer determine the terms to offer to their prospective investors. When assessing the feasibility of a prospective offering, NextSeed typically considers the following key factors:

    • Historical Financial Performance - comparison of key financial ratios to industry standards to evaluate the business’s strengths and weaknesses
    • Projected Impact of Proposed Funding Terms - analysis of proposed funding terms' potential impact on the business's overall financial condition
    • Credit History Information - credit history of the business, as well as personal credit histories of key personnel
    • Leadership Experience and Stability - level of industry expertise and length of tenure of the business’s leadership
    • Industry Risk - overall success/failure rate in the relevant industry in which the business operates, according to historical data

    The final investment terms that are offered to prospective investors on NextSeed reflect NextSeed's and the issuer’s good-faith assessment and are not a guarantee or guidance of performance of any kind. Investing in securities inherently involves risks, and investors should consider their own investment objectives before investing.

  • Does NextSeed help businesses find investors?

    NextSeed is constantly working through various channels to increase its network of investors. NextSeed also provides business owners with crowdfunding tools and strategies within the confines of Regulation Crowdfunding so they can leverage their own networks (e.g., family, friends and customers) and increase the likelihood of a successful offering.

  • Can I set a minimum or maximum investment amount for investors?

    No, the minimum investment amount is $100, and each investor’s maximum investment amount is subject to aggregate investment limits set by Regulation Crowdfunding. Investments are accepted in $100 increments within this range.

  • Do I have to provide a personal guarantee?

    A personal guarantee by the principal owner(s) of the business is recommended but not required. Providing a personal guarantee provides investors with additional comfort and security regarding their investments. Lack of a personal guarantee will affect the risk profile of the offering and potentially affect the investment terms for the offering.

  • Do I have to provide bonus rewards?

    No. Each business has the discretion to offer bonus rewards to investors as part of its crowdfunding offering, which can create additional excitement and loyalty among investors. While bonus rewards are offered on purely a voluntary basis, any business that commits to doing so is expected to use all commercially reasonable efforts to honor its commitment.

  • What happens when investors commit to invest in my business?

    Committed investors will be required to contribute their funds into an escrow account managed by an independent escrow agent after the last 48 hours before the end of the offering period. All investments will be held in escrow until the offering successfully closes or is terminated.

  • What happens when my business meets its funding goal?

    You will be notified promptly after your business meets its minimum funding goal. If the business also has a maximum funding goal, it can continue to accept investments until the maximum funding goal has been met (at which point you will be notified promptly and no more investments will be accepted).

    After a funding goal has been met, each investment agreement previously signed by the investors will need to be signed by your business (or its agent or designee) before the investors’ committed funds are released to your business.

  • What happens if my business has not reached its funding goal by the end of the offering period?

    If the offering still doesn’t meet its minimum funding goal at the end of the offering period, all previously committed funds will be returned to the investors. You may then choose to launch a new offering with a different offering page and different investment terms.

  • What are the tax implications of raising capital on NextSeed?

    Each business agrees to treat the investment agreements in its offering as "debt instruments" (as defined in U.S. Treasury regulations) for U.S. federal income tax purposes.

    NextSeed does not provide tax, financial or legal advice and this information is not intended to be tax, financial or legal advice. Businesses should consult their own financial or tax advisors to determine the tax implications of raising capital on NextSeed.

Revenue Sharing Notes

  • What is a revenue sharing note?

    Revenue-based financing, sometimes referred to as royalty investing or advance revenue purchases, has long been a common financing format in oil and gas development, film production, biotech/pharmaceutical development and numerous other industries.

    On NextSeed, you can invest in fractions of a revenue sharing loan. Each fraction of a revenue sharing loan is called a revenue sharing note. Instead of requiring a business to pay a fixed amount each month over a certain period of time (as typically required under a term note), a revenue sharing note on NextSeed requires a business to pay a fixed percentage of its monthly gross revenues until a predetermined total amount has been paid. The "Total Payment Amount" is calculated by multiplying the principal amount of the revenue sharing note by the applicable "investment multiple."

  • What makes a revenue sharing note unique?

    A revenue sharing note on NextSeed is unique because it provides entrepreneurs with capital in exchange for paying a percentage of future revenues to their investors. Investors are technically purchasing a note – a debt security – but investors can also participate in some of the potential upside of a business they have invested in. The more investors help the business by purchasing their products and services or spreading the word as brand advocates, the more revenue the business will generate and the faster the business will be able to pay its investors. Investors benefit because a shorter payment period increases the investors' rate of return. The flexible payment structure of revenue sharing is directly influenced by the success of the business and helps align the economic interests of the business and its investors.

  • How is a revenue sharing note structured?

    The terms of revenue sharing notes on NextSeed are documented through a note purchase agreement between a business and its investors and the revenue sharing notes. Under the note purchase agreement, an investor agrees to purchase a revenue sharing note issued by the business in exchange for the business paying a fixed percentage of the business’s gross revenue on a monthly basis until the investor has been paid a predetermined total amount. If the total payment amount has not been paid in full by the maturity date, the business is required to promptly pay the entire remaining balance.

    Note that debt securities offered on NextSeed are not guaranteed or insured and investors may lose some or all of the principal invested subject to an issuer’s ability to fully service the debt and not default.

  • How is a revenue sharing note different from a traditional term note?

    A term note typically carries a fixed interest rate and a monthly repayment schedule with a set maturity date. A business that has issued term notes is required to make fixed monthly payments to its investors irrespective of its operational performance.

    In contrast, a revenue sharing note on NextSeed requires the business to make monthly payments equal to a fixed percentage of its monthly gross revenue until it pays a predetermined total amount.

  • How does my business pay investors back?

    Upon receiving your business's monthly revenue information, NextSeed will calculate the monthly payment amount to be paid to investors. You will verify the payment amount, and NextSeed will debit your business's bank account via ACH. NextSeed will then make proportionate disbursements to your investors.

  • How long will my business be required to make payments to investors?

    Monthly payments will continue until your business has paid investors in full. The exact length of time that it will take for your business to pay all of its revenue sharing loan obligations cannot be known in advance since your business's revenues may vary during the payment period. However, if any balance remains outstanding on the maturity date, your business will be required to promptly pay the entire outstanding balance to investors.

  • Is there a minimum payment each month? What if my business doesn’t generate any revenue during a particular month?

    If your business doesn’t generate any revenue during a particular month, there is no payment obligation for that month. Note that your business must still report its revenue to NextSeed on a monthly basis regardless of how much revenue is generated. Failure to report monthly revenue may trigger a default under the note purchase agreement and result in all amounts owed to investors becoming due immediately.

  • What does Revenue Sharing Percentage mean?

    Revenue Sharing Percentage is the percentage of the business's gross revenue that it must pay to its investors on a monthly basis.

  • What does my business have to do after successfully closing its offering and receiving the offering proceeds?

    Your business will be obligated to report its monthly revenues to NextSeed in order to calculate the amounts of monthly payments.

    As part of the NextSeed revenue verification process, your business must provide a copy of its tax return to NextSeed on an annual basis. Any discrepancies between tax returns and previously reported revenues will be resolved by making additional true-up payments to investors, if necessary. Aside from the amounts of any true-up payments, no other financial information received by NextSeed for verification purposes will be disclosed to investors.

    Additionally, your business is encouraged to keep its investors and NextSeed informed of important progress and updates. Dialogue and communication will help create and keep advocates for your business.

  • When does my business need to report its revenue each month?

    On or before the 7th day of each month, your business is required to report its gross revenue for the prior month. NextSeed will use this number to calculate the monthly payments owed to investors.

  • What is the Payment Automation Service?

    Each business that issues revenue sharing notes is required to participate in the Payment Automation Service, which enables NextSeed to monitor the business’s revenue on an ongoing basis. Each business will provide NextSeed with passive access to the business’s bank accounts for purposes of revenue verification and monthly payment calculation. NextSeed will not have the ability to take any unauthorized actions in relation to any business’s bank accounts. Participation in the Payment Automation Service provides the following benefits:

    • NextSeed will indicate on the business's offering page that it participates in the Payment Automation Service. This provides investors with additional confidence in the transparency of the business's revenue reporting process.
    • NextSeed automatically generates a monthly revenue estimate for the business based on its bank account activity, and automates monthly payments to investors.
  • How can investors estimate the implied return of a revenue sharing note?

    How can investors estimate the implied return of a revenue sharing note?

    A revenue sharing note on NextSeed requires the business to make monthly payments equal to a fixed percentage of its monthly gross revenue until cumulatively the total amount paid to investors has reached the promised investment multiple by the business either before or by the note’s maturity. As a result, the payment received by investors could vary month on month, subject to changes in the monthly gross revenues of the business. Because of this variance in monthly payments, a standard simple interest rate calculation (such a mortgage calculator) does not appropriately measure investors’ expected return underlying the revenue sharing note.

    Given the expected varying cash flows coming to them under a revenue sharing note, investors could evaluate the expected investment performance using the concept of Internal Rate of Return (“IRR”). IRR is a popular methodology commonly used by corporations and investment professionals to measure the profitability of potential investments. Investors can calculate the expected IRR of a revenue sharing note using the estimated monthly cash flow derived from their own assumptions and assessment of the financial projection provided by the business.

    References to the IRR methodology (and the academic explanation) and the different ways to calculate IRR can be found from public sources such as Wikipedia and Investopedia.

    Note that debt securities offered on NextSeed are not guaranteed or insured and investors may lose some or all of the principal invested subject to an issuer’s ability to fully service the debt and not default.

Term Notes

  • What is a term note?

    On NextSeed, you can invest in fractions of a term loan. Each fraction of a term loan is called a term note. Term notes have a specified interest rate over a set period of time and are issued under the applicable note purchase agreement. The business will make fixed monthly payments during the term of the note, and will pay the unpaid balance (including any accrued interest) to the investor on the maturity date.

  • What is a note purchase agreement?

    A note purchase agreement on NextSeed is a legal agreement between the investors and a business governing the term notes purchased by the investors from the business.

  • What does the Interest Rate mean for term notes?

    The "Interest Rate" refers to the annualized interest rate applied to the balance of the principal of the investment each month. The term notes are amortized on a monthly basis, and the business pays fixed monthly payments of interest - based on the "Interest Rate" - and principal over the entire term of the investment. This is similar to a standard mortgage. The Total Payment Calculator on the offering page provides an example of how this works. Check out our blog for an example, or, check a standard mortgage calculator online to better understand the concept.

    Note that debt securities offered on NextSeed are not guaranteed or insured and investors may lose some or all of the principal invested subject to an issuer’s ability to fully service the debt and not default.

  • What can investors expect to receive when they purchase term notes on NextSeed?

    Each offering of term notes on NextSeed indicates an annual return, which is what investors can expect to be paid in addition to their principal before fees are deducted.

    Note that debt securities offered on NextSeed are not guaranteed or insured and investors may lose some or all of the principal invested subject to an issuer’s ability to fully service the debt and not default.


If you still have questions, please don’t hesitate to contact us at info@nextseed.com.