Oversubscription overview
When an offering is placed on the CrowdStreet Inc. Marketplace, typically the sponsor has a total allocation they are seeking based on certain factors, including but not limited to the capital stack for the offering. In some instances, the investor demand for the offering exceeds the total allocation.
CrowdStreet strives to ensure that all investors have a reasonable opportunity to participate in offerings on the Marketplace, including IRA investors who are typically unable to use Docusign to seamlessly complete offering documents, or new investors who may be unfamiliar with the process and the required account setup and documentation.
Therefore, CrowdStreet utilizes an allocation framework in an effort to ensure consistent and fair allocation of investment opportunities. Among other factors, this framework:
- Seeks to accommodate more investors in deals that could oversubscribe. To do so, CrowdStreet may cap the size of offers accepted at a predetermined amount in order to allow more investors to participate.
- Seeks to accommodate all investor types. To do so, CrowdStreet will reserve allocations for investors, based on the size and type of account, for the first 24 hours after offers are accepted. Once that group has reached its reserved allocation size, subsequent offers will be accepted.
- Creates consistent timing of offer submission. CrowdStreet begins to accept investor offers at the beginning of the offering’s Live Q&A event with the Sponsor. Offers are admitted in order of document completion in conjunction with the reserve allocation above.
What happens if an offering falls short of its total allocation?
If an offering does not reach its total allocation, it runs the risk of unwinding. In some instances, if the total allocation set forth by the sponsor is not raised, investor’s funds may be returned. Depending on the specifics of the offering, there are situations where even if the minimum amount is not raised, the sponsor may have the right to proceed with the offering. It is important for investors to carefully review the offering’s legal documents to understand whether a minimum allocation amount is defined and, if so, the impact of failing to achieve it.
Further, investors on the CrowdStreet Marketplace may not be the only source of capital for the offering. In some cases, investors on the CrowdStreet Marketplace are investing alongside a sponsor’s balance sheet equity, as well as an existing network of passive investors. This structure may inherently lead to variability in how much each capital channel can contribute to the total allocation.
How to help ensure your offer is submitted
To help ensure you are ready to submit an offer for an investment opportunity on the Marketplace, investors should consider taking the following steps;
- Set up your Investing Account and complete the account agreement. Your Investing Account specifies how you intend to hold your investment (e.g. as an individual, jointly with your spouse, through an LLC or trust, etc.) and is a requirement for submitting an offer. Taking a few minutes to set up your Investing Account may save you time once an offering is open for investment. To set up an Investing Account, refer to this article: How to create or update an Investing Account.
- Carefully review the offering documents. Offering documents are available to potential investors on the offering’s detail page so that investors can carefully review and complete due diligence prior to submitting an offer.
Once the investment period starts, investors should complete their documents in a timely manner. For more information about the offer process, refer to this article: Offer process overview. - Register for the offering’s Live Q&A with the sponsor. Investors can find the link to register for the Live Q&A webinar on the offering’s detail page. While attending the Live Q&A webinar is not required to submit an offer, investors should consider attending to learn more about the offering and its sponsor.
- Make note of important dates for the offering. Each offering has defined time periods for conducting due diligence, submitting an offer, and funding your investment. Investors should become familiar with these key dates to help ensure participation in an offering.
What can I do on the day the offering opens for investment?
Investors should be prepared to submit an offer when the Invest Now button becomes available. The timeframe for a given offering will be defined on the offering’s detail page.
If an investor is attending the Live Q&A webinar and decides to submit an offer, the investor should navigate to the offering’s detail page and look for the Invest Now button. Once the investment period opens, that page will automatically refresh to display the Invest Now button.
What are the next steps after I’ve submitted my offer?
Investors should monitor their email inbox closely for instructions at each subsequent step of the offer process. To learn more about the steps required to complete the offer process, refer to this article: Offer process overview.
I have a scheduling conflict and will not be available at the time the Invest Now button is live. Can CrowdStreet help?
Unfortunately, CrowdStreet can not place investment offers on behalf of investors.