Private companies are entities not traded on public stock exchanges. Ownership is limited to a select group, and they are not obligated to disclose financial information publicly. Access to investment is restricted, and transactions often occur privately.
Private investment provides investors with historically higher returns. Investing in private equity can introduce diversity as most wealth is traditionally invested in public markets. Private-equity provide opportunities to invest in fast growing, disruptive and technologically advanced corporations at low valuations. Private investments typically experience lower portfolio volatility in terms of day-to-day price movements, however, there are certain elements of heightened risk.
Similar to most investments, private-equity investing comes with risks. It is considered to be one of long term goals and investments are considered illiquid. Additionally, there is no guarantee that a company invested in will have an exit or go public. Private companies are typically in their early to mid stages of development. They are smaller companies with more limited financial resources than larger, more established corporations. As a result, they are potentially more vulnerable to changes in economic conditions. Private investments may be subject to share dilution. If a company raises additional funds at a later date through the issue of new shares to investors, the percentage stake of investors in previous rounds may be reduced.
Due to private shares typically being offered in large blocks, they are ordinarily purchased by institutional investors. In the past large institutions such as hedge funds, private equity firms, and venture capital firms were the primary investors in private corporations, however, this has changed due to updated, modernized legislation.
The Jumpstart Our Business Startups (JOBS) Act of 2012 made it easier for investors to invest in private companies via pooled investments.
It was designed to promote investments in startups with under $1 billion in revenue and has drastically increased the number of opportunities available to retail investors. There are now many methods of investing in private companies falling under the categories of regulation A, regulation CF, or regulation D offerings.
SPVs, or special purpose vehicles, are entities created for the purpose of acquiring another asset. SPVs are often used for crowdfunded or pooled private-equity investing to represent investors' stakes in corporations.
The right of first refusal (ROFR) is a common transfer restriction for private-equity investments. Investors in companies are often granted a ROFR period prior to transfers or sales. A ROFR period gives companies or issuers the right to purchase the stock, at the same price as outlined in the sale, before allowing a shareholder to transfer or sell it to a third party.
Carry fees are a General Partner’s (Unity Growth Fund in this case) share of profits realized on an investment by investors. It represents a portion of profits that is paid to a GP based on the performance of an investment as a compensation for curating the investment opportunity.
Unity Growth Fund’s investments typically have a 10% carry fee.
Management fees are levied by GP’s annually as compensation for the active management of investments. They represent an annual fee that is typically a percentage of the total investment amount. They are payable to the GP until an exit occurs.
Follow the steps on our website to create your account, research the available offerings, then identify your ideal investments.
Once your account is created, use our portal to complete the investment process, view your portfolio, and track your performance.
Any individual 18 or older who qualifies as an accredited investor according to Rule 501 of the SEC can invest on our platform.
International investors who meet local jurisdictional qualifications also qualify as accredited investors.
There is no citizenship requirement to invest on Unity Growth Fund and our platform is available to anyone over the age of 18.
The minimum investment varies for each fund, however, it typically ranges from $10,000 to $30,000. Most investments have $10k as minimum.
If there are errors and you require a change in your investment size, please contact us immediately.
When you make an investment through Unity Growth Fund, you are purchasing ownership in a fund structured as an SPV that owns the shares of each company. Unity Growth Fund will act as the custodian for this fund in which investors will be limited partners. Each fund’s assets will represent fully vested stock in one corporation with the fund created for the sole purpose of investing in the company.
Investors with Unity Growth Fund are members of an offering-specific special purpose vehicle (SPV). The SPV is ordinarily structured as an LLC which owns the company’s shares. Investors are limited partners, or members, of an SPV rather than owning shares directly. Shares within the SPV are allocated according to each investor’s investment amount.
Once the fund is created and funded by investors, the investment process is initialized and the right of first refusal (ROFR) period begins. After the company approves the transaction during the ROFR period, shares are allocated.
In the event of a ROFR event or a transaction failure, investors will receive their funds in entirety in five business days, or one week from the date of the initialization of the refund.
The investment process typically takes between 45 to 60 days from the date of funding. Investing in private markets is a complex process. It is not as simple as investing in public markets where shares are readily accessible on regulated exchanges. As a result of ROFR rights and various other factors, there is no guarantee that all transactions will be successful.
An individual accredited investor under U.S. standard is any investor meeting one of the following criteria determined by the SEC under Rule 501:
SEC Rule 501 states an accredited investor is an individual that meets one of the following criteria:
1. An individual or joint net worth in excess of $1,000,000, excluding primary residence.
2. An individual in good standing of Series 7, Series 65, or Series 82 FINRA license.
3. Knowledgeable employees of a fund with respect to investments in a private fund.
4. An executive or the issuer of an executive within a General Partner (GP).
5. Income exceeding $200,000 (or $300,000 for joint filings) in the last two calendar years and expected income of over $200,000 (or $300,000 for joint filings) for the next calendar.
An accredited investor as an entity is any investor meeting one of the following criteria determined by the SEC under Rule 501:
1. Any entity in which all equity owners are individual accredited investors.
2. Family offices with at least $5 million in assets under management.
3. Brokers or dealers.
4. Registered investment advisors.
5. Revocable grantor trusts in which all grantors are accredited investors.
6. Certain other specialized entities as described in Rule 501.
7. Any business trust, partnership, or limited liability company with total assets valued at more than $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated individual.
Non-US, international investors must review local laws and regulations to determine accredited investor status within their home jurisdictions.
Ordinarily, the standards for qualifying as an accredited are the same as the United States, however it is necessary to verify with local regulatory bodies.
Spousal equivalent joint income and assets can be included in calculations for accredited investor status. A spousal equivalent according to the SEC is a cohabitant (sharing the same house) who has a relationship that is generally equivalent to that of a spouse.
A qualified purchaser according to the Investment Company Act is one who meets one of the following criteria:
1. A representative of a trust sponsored and managed by qualified purchasers.
2. An individual or entity not formed for the specific purpose of acquiring the securities offered who owns and invests more than $25,000,000 in investments.
3. A representative of an entity in which all beneficial owners are qualified purchasers.
4. An individual or representative of a family-owned business not formed for the specific purpose of acquiring the securities offered that has total assets valued at more than $5,000,000.
The SEC defines investments as either publicly or privately traded securities (such as stocks, bonds, or other debt instruments), real estate (excluding residences), physical commodities, commodities futures, financial contracts (such as swaps, options, or warrants), capital committed for investment companies or commodity pools, or cash and cash equivalents not used as working capital.
A family office is an entity established by families to manage their wealth, manage and plan the financial future of their families and provide disbursements or other services to family members. They are defined by the SEC under the Investment Advisers Act of 1940 as one of the following:
1. An entity that has no clients other than family members.
2. An entity that is owned exclusively by family members.
3. An entity that is exclusively controlled by one or more family member.
4. Other specialized criteria are specified under the SEC Family Office rule [202(a)(11)(G)-1].
A benefit plan investor as defined by ERISA are entities that invest on behalf of people with funds from employment benefits or retirement accounts. They are defined as the following:
1. An employee benefit plan that is subject to part 4 of Title I of ERISA
2. A plan including, without limitation, individual retirement accounts and Keogh plans
3. An entity whose assets include plan assets including, without limitation, an insurance company general account
Once an investment is closed, all investors and limited partners of the offering-specific SPV will receive an operating agreement between Unity Growth Fund and the shareholder. We will maintain custody of the shares until the lock-up period expires after an exit occurs. Investors can view their investments at any time via our online portal. In the online portal, investors are able to manage their investments, and all documents & details related to each investment are easily visible.
Investments can be exited in many ways. An exit typically occurs when a company is acquired by another or if it files to go public. Investors, through our software and SPV partner Assure, can also sell their shares to buyers when the company is still private. In order to successfully initiate the share transfer after the lock-up period expiration, it is necessary for your Unity Growth Fund profile’s investor name to match the name registered to your brokerage.
According to SEC Rule 144, it is necessary to hold shares purchased through the platform for one year before selling. If there is an interested buyer for your shares in a company, you can reach out to Assure, our SPV provider, for further steps. Assure might charge fees, however, Unity Growth Fund will not be handling the exit process.
A private company can be acquired in many ways but there are three main scenarios:
1. A merger or acquisition with a private company in which your shares are converted to cash shares in the new company.
2. A merger or acquisition with a public company in which your shares are converted to cash or publicly traded shares in the new company transferable to your brokerage.
3. An acquisition by a special purpose acquisition company (SPAC) in which your shares are converted to shares in the publicly traded SPAC if the business combination is approved by the SPAC’s shareholders.
Private investments are considered to be illiquid and there are no guarantees for timelines in terms of exits or IPOs. Exits can vary in time from months to ten years or more, and in some cases, may not occur.
There are no fees when initially investing with Unity Growth Fund. Investors do not pay an initial fixed fee or annual management fees.In the event of a successful exit, investors pay a carry fee as specified for each specific offering.
The typical carry fee for investments with Unity Growth Fund is 10%.
The carry fee for an investment is specified, in detail, for each offering.
Carry fees are determined by a percentage of an investor's profits from a specific offering, typically set at 10%. These fees are disbursed through the sale of shares before being transferred to an individual's brokerage account.
For calculation purposes, to determine price, a rolling average share price of the five days prior to a lock-up period expiration is used. An example has been provided below for further clarification:
Share Price: $10.00
Carry fee: 10%
Subscription Amount: $10,000.00
Lock-Up Period: 180 Days
Investment Amount: $10,000.00
Purchase Price Per Share: $10.00
Shares Purchased: 1,000
Fee Initiated After 180 Days (lock-up period)
Day of Lock-up Expiration - Closing Price: $18.00
1 Day Prior to Lock-up Expiration - Closing Price: $21.00
2 Days Prior to Lock-up Expiration - Closing Price: $18.00
3 Days Prior to Lock-up Expiration - Closing Price: $23.00
4 Days Prior to Lock-up Expiration - Closing Price: $20.00
Average Closing Price: $20.00
Current Value: $20,000
Profit: $10,000
Carry Fee: $1,000
Shares Payable to Unity Growth Fund: 50
Shares Transferred to Brokerage Account: 950
If the average share price of an offering (in the five days prior to the lock-up period expiration) is lower than an investors purchase price, there is no carry fee levied.
Paperwork received by Unity Growth Fund investors is similar to most fund investments and is simplified for investors to easily manage.Investors will initiate their investments and sign subscription agreements through which they would purchase shares in an SPV for a company.
Investors will complete W-9 forms (W-8 BEN for foreign investors) as well as a Suitability form. On an annual basis, investors will receive a Schedule K-1 form to update them on their investments.
Unity Growth Fund investments are taxed identical to other fund investments. A K1 will be issued annually, however, unless there is a taxable event such as an exit, there will not be any taxes due.
Private companies, especially those offered for investment on our platform, generally do not issue dividends.
Companies in this phase of development require cash to finance their investments in technology and business models.
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