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Knowledge Base

WaterWorks Knowledge Base

Investing on WaterWorks

Investment offerings are speculative and involve significant risk. This information is intended to provide important details about investing on the WaterWorks platform. Before investing, you should carefully review and understand this information. If you do not understand something or have questions regarding the operations and processes of our platform, please contact us.

Who can invest in offerings listed on WaterWorks?

It depends on the type of offering.

WWF Funding Portal, LLC offers investment opportunities under Title III, Regulation Crowdfunding. Any U.S. citizen 18 years or older is eligible to invest under Reg CF, however there are limits on how much an individual can invest based on annual income, net worth and investments on other crowdfunding portals within the past year.

WWF Crowd, LLC offers investments under Regulation D, Rule 506(c) of the Securities Exchange Act and which are available to accredited investors only. Each company may have different limitations on who can invest in their offerings. More information can be found on the offering pages and disclosure statements of the offering companies.

How can I communicate with an Issuer?

Regulation Crowdfunding offerings listed via WWF Funding Portal LLC will include a discussion forum on the offering page that functions as a way for you to communicate with the Issuer. These forums are open to the public and are a place where you can ask questions directly to the Issuer. You must be registered and logged in to post in a Reg CF offering's discussion forum.

Offerings listed via WWF Crowd LLC under Regulation D; Rule 506(c) will include contact information for the Issuer that will enable you to communicate with the Issuer.

 

What happens if there are materially important changes to an offering company with an active Regulation Crowdfunding campaign before the Company's offering closes?

As defined under Regulation Crowdfunding rules, if the Issuer deems that a change in the offering documentation is "material", the Issuer is required to notify you of the changes, which will be done via an electronic notice from the Funding Portal.

Additionally, if you made an investment prior to the time that the “material” amendment was made your investment commitment will be canceled unless you reconfirm within 5 business days of receiving the notice from the company.  You will receive an email notice with instructions on how to complete this reconfirmation process.

 

When can I cancel my investment?

Under Regulation Crowdfunding rules, once your investment funds have been received and your subscription documents have been signed, you will have up to 48 hours before the close date to cancel your investment. If you don’t cancel 48 hours prior to an offering close, you will not be able to cancel later.

When you invest in securities offered via Regulation D, Rule 506(c), please refer to the Deal Room documents for cancellation details provided by the Issuer.

 

What does it mean when an offering is closing?

The closing date is indicated on the respective Issuer's offering page and on a Reg CF Issuer's Form C.

An offering is closed when the closing date is reached and no additional investments will be accepted.

After the closing date investors are notified of their investment and the issuer receives the proceeds from the offering.

Under Regulation Crowdfunding, an Issuer is eligible to perform a “close” on their offering if the offering has met its minimum funding goal and at least twenty-one (21) days have passed since the offering opened or completed a rolling close.

Under Regulation Crowdfunding, an Issuer is required to give each investor five (5) days’ notice before closing. After the five-day period, all cleared and received investments will be processed and cannot be refunded.

 

Who can post in a Regulation Crowdfunding offering's discussion forum?

Anyone registered and logged in to the WaterWorks platform may post in a Regulation Crowdfunding campaign discussion forum.

 

What types of questions can I ask in a Reg CF offering forum?

All Reg CF offerings include a discussion forum where you can ask the Issuer questions about the respective offering that you are interested in. It is your opportunity to ask questions directly to the Issuer to help inform your decision on whether to consider an investment.

How much can I invest?

How much you can invest depends on the type of investment offering.

How much you can invest under Regulation Crowdfunding depends on your net worth, your annual income and the total amount of Regulation Crowdfunding investments you’ve made on other funding portals. Each time you begin a Reg CF investment on the WaterWorks platform, you’ll be asked to verify this information. When you do, your investment limit is automatically calculated by WaterWorks.

Investment offerings via WWF Crowd LLC under Regulation D, Rule 506(c) are available only to accredited investors. Please refer to the deal’s private placement memorandum for further details on how much you can invest.

 

How do I calculate my Reg CF investment limit?

Your limit depends on a combination of your net worth and your annual income and is automatically calculated for you when you begin the investment process.

If either your annual income or your net worth is less than $107,000, you can invest up to the greater of either $2,200 or 5% of the greater of your annual income or net worth during any 12-month period.

If both your annual income and your net worth are greater than $107,000, you can invest up to 10% of annual income or net worth, whichever is greater; up to a maximum of $107,000 during any 12-month period.

The following table is an example of how a Reg CF limit is calculated:

[table]

These limits apply to everyone except “accredited investors". For accredited investors, this limit has been removed.

The definition of an “accredited investor” can be found in Rule 215 and Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended (Securities Act).

During the investment transaction process, investors will have the opportunity to request to invest as an accredited investor. Any investor who invests under the accreditation rules will be required to provide verification demonstrating qualifications prior to their investment commitment being accepted. An acceptable form of verification is written confirmation from an eligible third-party that reasonable steps have been taken to verify that the purchaser meets the definition of an Accredited Investor within the prior three months. A sample verification form and additional information will be provided to accredited investors during the transaction process.

 

Can my spouse and I combine our assets to determine our Reg CF investment limit?

Yes, you can calculate your annual income or net worth by jointly including your spouse’s income or assets. It is not necessary that property be held jointly. However, if you do calculate your income or assets jointly with your spouse, each of your crowdfunding investments together cannot exceed the limit that would apply to an individual investor at that annual income or net worth level.

More information about those investing jointly can be found at https://www.sec.gov/oiea/investor-alerts-bulletins/ib_crowdfunding-.html.

 

How do I calculate my net worth?

Calculating net worth involves adding up all your assets and subtracting all your liabilities.  The resulting sum is your net worth.

For purposes of crowdfunding, the value of your primary residence is not included in your net worth calculation. In addition, any mortgage or other loan on your home does not count as a liability up to the fair market value of your home.  If the loan is for more than the fair market value of your home (i.e., if your mortgage is underwater), then the loan amount that is over the fair market value counts as a liability under the net worth test.

Further, any increase in the loan amount in the 60 days prior to your purchase of the securities (even if the loan amount doesn’t exceed the value of the residence) will count as a liability as well.

The reason for this is to prevent net worth from being artificially inflated through converting home equity into cash or other assets.

Individual circumstances will vary.

For more information, including examples of calculations under the net worth test in order to determine crowdfunding investment limits, please visit: https://www.sec.gov/oiea/investor-alerts-bulletins/ib_crowdfunding-.html.

 

What is the Title III investment limit for an accredited investor?

The is no limit under Title III for accredited investors.

What is a P3?

P3 stands for Public-Private Partnership and represents a contractual arrangement between a federal, state or local public agency and a private sector entity.

Through this agreement, the skills and assets of the public sector and private sector are shared in delivering a service or project for the use of the general public.

We believe that P3s have the potential to deliver critical infrastructure solutions to our communities by providing communities new tools and ways to address their water challenges.

Can I sell my securities?

Securities issued under a Regulation Crowdfunding investment have a one year holding period before they can be sold.

There may be limited instances in which you may be permitted to sell or transfer your shares within the one-year period. More information about those instances can be found at https://www.investor.gov/additional-resources/news-alerts/alerts-bulletins/investor-bulletin-crowdfunding-investors.

Please keep in mind that there may be no market to sell your securities after the one-year period has expired and you may not be able to readily sell your securities.

Please consult with your legal advisor for additional information.

 

What are some things to consider before investing?

Investing involves risks, including the loss of your initial investment, as well as liquidity risk, which is the possibility of a lack of a secondary market to sell your securities. Please see our Educational Materials and the offering’s Form C for additional information on risks.

Among the many important questions to ask yourself before investing are:

  • Can I afford to lose all the money I invest?
  • Do I understand the company I’m investing in?
  • Do I understand their product/service?
  • Am I familiar with the market of the company I’m investing in?
  • Do I understand the business they are conducting?
  • Do I understand what I’m buying?
  • Do I understand the documents I’m signing?
  • Have I asked my independent advisors for help evaluating the investment?

What if a Regulation Crowdfunding campaign hits its goal early?

A company has two options when a Reg CF goal is met early.

First, oversubscribe the goal and continue accepting investments. Or, choose to end the campaign (as long as it has been 21 or more days since launch or a previous rolling close).

Investors will always be notified when an offering has met its goal.

Companies may choose a new closing deadline no earlier than five (5) days in advance. Investors will be notified about the early closing and will be reminded they may cancel their investment up to 48 hours before the new closing date.

Investment offerings are speculative and involve significant risk.

Investments in private companies are particularly risky, illiquid and you should only consider investing if you can afford to lose your entire investment. Additionally, these investments are subject to risks associated with the industries in which they operate, which includes changes in government policies, the economic environment, laws, regulations and more.

Raising Capital on WaterWorks

What is Regulation Crowdfunding?

In March of 2012, Congress passed the Jumpstart Our Business Startups Act, or as it’s commonly known; the JOBS Act, which President Obama signed into law the following month.

Fast forward to May of 2016, the U.S. Securities and Exchange Commission (SEC) enacted Title III Regulation Crowdfunding of the JOBS Act.  This is known as Reg CF.

Reg CF enables eligible companies to offer and sell securities through crowdfunding, pursuant to certain rules.

You can learn more about those rules by visiting the SEC website.

 

How does a campaign get listed on WaterWorks?

First, a company completes an introductory form on our website. Ultimately, we will select what’s listed on WaterWorks by conducting background checks, check that the issuer is complying with certain obligations, check that the issuer understands their requirement to keep accurate records, and evaluate whether the company’s mission and values align with WaterWorks.

For more details on listing an offering, please fill out the introductory form or contact us.

 

 

What is a Form C?

Form C is the offering document that describes the offering of securities under Title III Regulation Crowdfunding (Reg CF). Investors need to understand the background of the offering company, the risks that come along with investing in the offering company, and how the company plans to use the monies raised.

 

What is a Bad Actor Check?

Under Regulation Crowdfunding, offering companies and their associated persons cannot raise capital by selling securities if anyone is deemed to be a bad actor as that term is defined by the SEC.

As an important part of our anti-fraud and due diligence requirements to ensure disqualified parties do not list an offering for securities, WaterWorks conducts a Bad Actor Check on the issuing company and all its covered persons.

 

Who needs a Bad Actor Check?

Regulation Crowdfunding and SEC rules required a Bad Actor Check be conducted on covered persons which includes every executive officer, director, and major shareholder (beneficial owner of 20%+ equity) in the company, as well as certain types of promoters and solicitors involved with the securities offering.

 

What's including in initial financial disclosures for a Regulation Crowdfunding offering?

 

What's included in initial Reg CF financial disclosures? The SEC requires companies prepare and submit the following statements in accordance with Generally Applicable Accounting Procedures (GAAP) which cover the company’s operations for the past two years, or if less, since the date of formation:

  • Income Statement
  • Statement of Cash Flows
  • Balance Sheet
  • Statement of Changes in Equity
  • Notes to the Financial Statements

If an offering is for $107,000 or less, financial statements must be certified by the principal executive officer of the issuer.

If an offering is for $107,000 up to $535,000, financial statements must be reviewed by a public accountant that is independent of the issuer, and must include a signed review report.

If an offering is from $535,000 up to $1,070,000:

  • If the Issuer has not previously used regulation crowdfunding, financial statements must be reviewed by a public accountant that is independent of the issuer, and must include a signed review report.
  • If the Issuer has previously used regulation crowdfunding, financial statements must be audited by a public accountant that is independent of the issuer, and must include a signed audit report.

If an offering is from $1,070,001 up to $5,000,000:

  • Financial statements audited by a public accountant that is independent of the issuer which must include a signed audit report.

Please refer to Title III of the JOBS Act (Regulation Crowdfunding) for additional information. Subpart B (Requirements for Issuers) details information regarding initial and ongoing disclosure requirements for Issuers.

Can a campaign accept investments from non-U.S. investors?

It depends on the Platform and the type of campaign.

Right now, Regulation Crowdfunding campaigns on WaterWorks can only accept U.S. based investors.

Regulation D, Rule 506(c) campaigns on WaterWorks may be able to accept investments from non-U.S. investors.

For more details, please refer to each campaign’s offering page.

 

How do I calculate my Reg CF investment limit?

Your limit depends on a combination of your net worth and your annual income and is automatically calculated for you when you begin the investment process.

If either your annual income or your net worth is less than $107,000, you can invest up to the greater of either $2,200 or 5% of the greater of your annual income or net worth during any 12-month period.

If both your annual income and your net worth are greater than $107,000, you can invest up to 10% of annual income or net worth, whichever is greater; up to a maximum of $107,000 during any 12-month period.

The following table is an example of how a Reg CF limit is calculated:

[table]

These limits apply to everyone except “accredited investors". For accredited investors, this limit has been removed.

The definition of an “accredited investor” can be found in Rule 215 and Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended (Securities Act).

During the investment transaction process, investors will have the opportunity to request to invest as an accredited investor. Any investor who invests under the accreditation rules will be required to provide verification demonstrating qualifications prior to their investment commitment being accepted. An acceptable form of verification is written confirmation from an eligible third-party that reasonable steps have been taken to verify that the purchaser meets the definition of an Accredited Investor within the prior three months. A sample verification form and additional information will be provided to accredited investors during the transaction process.

 

Can my spouse and I combine our assets to determine our Reg CF investment limit?

Yes, you can calculate your annual income or net worth by jointly including your spouse’s income or assets. It is not necessary that property be held jointly. However, if you do calculate your income or assets jointly with your spouse, each of your crowdfunding investments together cannot exceed the limit that would apply to an individual investor at that annual income or net worth level.

More information about those investing jointly can be found at https://www.sec.gov/oiea/investor-alerts-bulletins/ib_crowdfunding-.html.

 

How do I calculate my net worth?

Calculating net worth involves adding up all your assets and subtracting all your liabilities.  The resulting sum is your net worth.

For purposes of crowdfunding, the value of your primary residence is not included in your net worth calculation. In addition, any mortgage or other loan on your home does not count as a liability up to the fair market value of your home.  If the loan is for more than the fair market value of your home (i.e., if your mortgage is underwater), then the loan amount that is over the fair market value counts as a liability under the net worth test.

Further, any increase in the loan amount in the 60 days prior to your purchase of the securities (even if the loan amount doesn’t exceed the value of the residence) will count as a liability as well.

The reason for this is to prevent net worth from being artificially inflated through converting home equity into cash or other assets.

Individual circumstances will vary.

For more information, including examples of calculations under the net worth test in order to determine crowdfunding investment limits, please visit: https://www.sec.gov/oiea/investor-alerts-bulletins/ib_crowdfunding-.html.

 

What is the Title III investment limit for an accredited investor?

The is no limit under Title III for accredited investors.

What corporate governance documents will I need before my Regulation Crowdfunding offering can launch?

If you’re an LLC, the items that you will need include:

  • Operating Agreement: Must show that your company is managed by a board of managers. This should also elaborate on the classes of units and how many units you have to issue. If your LLC gives out “membership certificates” you may need to change the Operating Agreement to show the change.
  • Board Resolution authorizing the Regulation Crowdfunding offer.
  • Certificate of Good Standing: Received from the Secretary of State and dated within 60-days prior to launch showing that your company is in good standing.

 

If you’re a Corporation, the items that you will need include:

  • Certificate of Incorporation: Must be filed with the Secretary of State and show that you have enough shares and detail the class of stock you will be offering.
  • Bylaws: Bylaws must allow for business to be done with companies that operate almost entirely online. An amendment may need to be added to ensure that your company fits these requirements. For instance, your bylaws must allow that you can provide investors with an electronic Stock Certificate. Board resolution authorizing the Regulation Crowdfunding offer.
  • Certificate of Good Standing: Received from the Secretary of State and dated within 60-days prior to launch showing showing that your company is in good standing.

 

What are some examples of the information typically found on a Form C?

  • The Issuer’s name, address, and website;
  • The Issuer’s directors and officers;
  • The principal occupation and employment for the last three years of each director and officer;
  • The names of each person owning 20% or more of the Issuer’s voting securities;
  • The risk factors associated with the investment;
  • The Issuer’s business and business plan;
  • How the proceeds of the offering will be used;
  • The Issuer’s ownership and capital structure;
  • A description of how rights exercised by the principals of the Issuer could impact investors;
  • The compensation paid to us in the offering;
  • A description of previous offerings by the Issuer;
  • Whether the Issuer has previously failed to file the reports required by law;
  • Transactions with officers, directors, and other “insiders”;
  • Whether the Issuer would be disqualified from offering securities under Title III under the “bad actor” rules, if the effective date of those rules were different;
  • A discussion of the Issuer’s financial condition;
  • How the Issuer will deal with over-subscriptions;
  • Where on the Issuers website it will post annual reports, and when the annual reports will be available;
  • Financial information about the Issuer, as described below; and,
  • Any other information needed in order to make the statements made, in light of the circumstances in which they were made, not misleading.

How long is the closing process?

Each offering's closing process varies in length depending on factors such as operational and regulatory factors which could cause a delay.

 

Why do closings have different timelines?

Closings have different timelines because there are many different factors that could impact the Issuer’s decision regarding the amount of time needed to complete the close. Some of these factors could be  related to operation, accounting or regulatory considerations.

What ongoing obligations does an Issuer have after a successful Reg CF offering?

After a successful Regulation Crowdfunding offering, an issuing company must file an annual amendment to the Form C that was filed with SEC and included in the offering statement.

The annual filing – Form C-AR – is to include financial statements and material changes to the business for the most recent fiscal year.

Companies must continue to file annual reports according to the guidelines of 17 CFR § 227.203 and shall include include the information required by 17 CFR § 227.202(a).

Investors may review these filings by searching for the Issuer in the SEC EDGAR Company Search website.

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