FAQs

What types of crowdfunding options are available through Diversity Fund?

Rewards. Lending. Equity. Diversity Fund allows you to raise capital 3 different ways directly from accredited and unaccredited investors on our platform.

1) Rewards - businesses may want to pre-sell a product or offer a giveaway, such as a T-shirt, for a minimal donation amount (Reward) to strengthen their brand. Businesses offer a reward in exchange for money.

2) Lending – businesses ask to borrow money from investors at the interest rate (enough to entice investors) & term (up to 5yrs) they decide to offer. Accredited investors and unaccredited investors will be able to participate in lending money to the business owner(s).

3) Equity – businesses can raise capital by selling equity (shares of ownership) to both accredited investors and unaccredited investors. Diversity Fund seeks to level the playing field for women, LGBT & minorities who are far less likely to get equity investors. This is especially true for tech type startup companies, less than 5% of startups who obtain funding/equity investors are women-led. or any combination of the three - directly from investors who access the portal.

OR Mix & Match - We have the ability to grow with you & your company’s needs. You can choose different funding options or a combo of any of the 3 or all 3 options. (We will keep your company info & correspondence with investors to prevent having to start from scratch when you get to the next level of funding needs).

• How much capital can I raise?

Up to $1 million per year. Texas crowdfunding rules allow qualified businesses to raise as much as $1 million each year via registered crowdfunding portals (including Diversity Funds). But remember, it’s always better to raise only the amount that you actually need for your business, gain investor confidence, an then return to those investors later if you need more. Amounts raised as donations or for rewards are not counted towards the $1 million limit.

• Who can participate?

At this time, Lending and Equity deals are limited to Texas based businesses and investors only.

Businesses must be a formal legal entity in the state of Texas: formal partnership, LLC, corporation or S-Corp.

Investors must reside in the state of Texas. We welcome ALL investors, whether or not you are an "accredited" investor does not matter to us.

• What if the business owner(s) is not a woman, LGBT or a minority?

That’s ok! We are inclusive here at Diversity Fund we welcome everyone to join our platform and participate.

 

How do I determine if Diversity Fund is a good fit for my business?

Easy. Every business has unique financing needs but there is no better way to find capital than appealing to potential investors directly. Since Diversity Fund is open to both accredited and unaccredited investors throughout Texas, it’s a great place to find investors, even customers, who want to back your business and see it grow.

Do you have a business focus?

One of the reasons that we started Diversity Fund was to provide faster access to business capital “for the rest of us”, specifically with a market focus towards LGBT, women, and minority entrepreneurs along with companies that build social good. Because we help businesses, we don’t allow individuals or non-profits to raise financing on our platform.

What will I need before I get started?

We require you to complete business profile information about your company, team, market, and any financials. Additionally you’ll want to have photos, videos, pitch deck, etc. to add to your profile.

Also, Texas crowdfunding rules require that a Crowdfunding Exemption Notice (TSSB Form 133.17), a summary of the offering, and a disclosure statement be submitted to the Texas State Securities Board and then provided by us to potential investors for their review. We encourage you to thoroughly review these requirements. In many situations, you may need to prepare or revise company documentation in order to support your offering, including: a certificate of formation, bylaws, LLC agreement, or agreements with third parties that are material to your business. A Texas attorney that is familiar with the crowdfunding rules should be able to help you with these required materials.

What does it cost to get started?

Zero. You can launch your Deal for free. We only get paid if you raise the capital you need and close your deal.

What will my Deal look like?

We will ask you to structure your Deal by dividing your overall offering into “purchase” items in varying amounts. This makes it simple for investors to choose how much they'd like to invest. We allow up to nine purchase items per Deal, but you don't have to use them all. Here are some Deals that you can use to use as guide to structure your own.

How should I structure my Deal?

You should carefully consider how a Lending or Equity transaction would fit your business plan, and you should seek the advice of consultants and/or attorneys where necessary to fully understand the consequences of offering Lending or Equity. Below you'll find some basic information about Lending and Equity transactions.

Who can invest in my Deal?

Any Texan can invest in your deal (once they register with us). Both accredited and unaccredited investors can now provide financing as a result of changes to securities regulations. An unaccredited investor may make investments up to $5,000 per Deal and accredited investors can purchase any amount.

What are the terms of a Lending transaction?

Under our standard Lending structure, you determine the key terms, such as maximum principal amount offered, interest rate, the term to maturity, and the length of any initial payment holiday. (Some of these terms must fit within required parameters.) However, certain terms of the instrument are fixed and cannot be altered. For a sample Lending transaction including the required terms, see here.

I really want to raise capital using my own terms; can I?

Yes, you are free to structure your Deal in any way you like. Therefore, businesses that would prefer to raise money using a Lending arrangement other than our standard terms (including through a convertible note structure), should contact us about listing your unique Deal. However, businesses intending to structure a unique Lending or Equity transaction will need to prepare or provide the legal documentation effecting and describing their offering, and may need additional assistance from a qualified attorney.

I'm forming a Texas entity in order to create a Deal; what should I do?

While several business structures are available in Texas, most small businesses are organized as either a corporation or limited liability company (LLC). In any case, you should very choose your entity with care, and consult with an attorney if you have any questions about type of entity. The type of entity and content of your organizational documents can have significant effects on your business.

How quickly can I raise capital?

All Deals must be posted for at least 21 days to give investors an opportunity to view, and comment, on your Deal structure and the provisions of your business documents. This process is designed to provide transparency and equal informational access to all investors. Following the 21-day period, investors will be allowed to “purchase” items from your Deal. Depending on how many investors have subscribed to your Deal, you may close immediately upon meeting your minimum offering amount. After closing, funds are typically sent to your bank account within three to four days.

What else do I need to spread the word about my Deal?

We’ll ask you to provide your social media links, website and blog URLs, and an e-mail list to announce your offering. When your Deal launches, we'll send an announcement to your contacts, as well other investors who have indicated interest in your business type. Additionally, we regularly distribute news releases and other information, through a variety of channels, for every business and Deal. The Texas crowdfunding rules regulate the methods and content of communications about your Deal, so we encourage businesses to review those rules before distributing information about your Deal yourself.

What happens after my Deal is financed?

After a successful Deal closing, your account will remain active and serve as the channel for communications with your new investors. Monthly, you will be asked to summarize business performance (for example, by providing gross sales for the month), and provide an investor message about your progress and successes. We hope you'll keep your investors engaged and informed, helping build long-term trust and a relationship for any future financing needs.

What is the cost for using Diversity Fund?

Diversity Fund charges 6% on the amount of money raised by you when you close a Deal. There are no additional fees or charges.

What if I’m not LGBT, a woman or minority? Can I still raise capital through Diversity Fund?

At Diversity Fund we believe in inclusion; anyone can participate.

Who can invest?

Any Texan can investor on Diversity Fund, regardless of accredited or unaccredited status. Unaccredited investors may invest up to $5,000 per deal and accredited investors may invest any amount.

What types of investments are offered on Diversity Fund?

Rewards. Lending. Equity. Diversity Fund allows you to fund Rewards (e.g. Donations), or invest in Lending or Equity transactions – or any combination of the three (though some businesses don't utilize all three structures). For example, you may want to purchase a product or giveaway, such as a t-shirt, from you favorite local brand for a minimal amount (Reward). You might also decide that you want to loan money (Lending) directly to the business based on their interest rate and repayment terms. Or, you might wish to purchase stock (Equity) to help finance the business and share in their future growth.

How much can I invest?

Unaccredited investors may invest up to $5,000 per deal and accredited investors can invest any amount (up to the $1 million crowdfunding limit).

How do I pay for investments?

The Texas crowdfunding rules require that funds pass through a Texas-based escrow account. Diversity Fund contracts with GoldStar Trust, and affiliate of Happy State Bank, to provide this service via an API integrated with Diversity Fund's website. Through that API, you will be asked to set up a (free) custodial account with Happy State Bank, which you can fund via electronic bank transfer in order to make investments.

What types of businesses participate on Diversity Fund?

One of the reasons that we started Diversity Fund was to link LGBT, women and minority entrepreneurs with investor allies who believe in building social good as well as wealth. However, we also believe in inclusion and allow all businesses and lenders to participate. Nevertheless, we limit fundraising to businesses, and do not facilitate fundraising for individuals or charities.

Why invest through Diversity Fund?

We believe that business financing is about funding businesses that you find interesting, fit your ideologies, and believe can grow (with your support).

What does Diversity Fund do to qualify companies and Deals?

Each company that registers with Diversity Fund must disclose information about their business, markets, team, and finances, etc. Additionally, we run background checks on each business principal and review each Deal before launching. However, Diversity Fund is prohibited from providing legal advice to these businesses and does not certify the accuracy of their Disclosure Agreements. Furthermore, Diversity Fund does not attempt to (nor is it allowed to) vet companies based on expected investment return. Investors should carefully review the Deal, any available documents, and any discussions between the business and other potential investors before making investment decisions.

How do I learn more about a company or their Deal?

We encourage potential investors to comment and ask questions about Deals, in an effort to provide equal and transparent informational access to all potential investors.

What happens if a Deal doesn’t reach its target?

Deals that do not reach their target investment will not close and investors that made commitments to that Deal will receive their money back from escrow.

Why is crowdfunded Lending and Equity better than existing investment structures?

Unlike investments through venture funds, syndicates, or trading exchanges, by making investments directly via Diversity Fund, you have an opportunity to get to know the entrepreneurs you're investing in. Additionally, since the total transaction and carrying costs of this “crowdfunding” model is cheaper than more traditional financing methods, these entrepreneurs will be able to devote more energy and actual dollars to building and operating their business.