Legal Structure of Investment and Participation Process

On this page, we explain the legal structure and the participation process of investments in start-ups and growth companies in detail.

Overview of Most Important Aspects

Legal structure
Profit-participating loan
Subordinated loan
Fixed interest
1 % p.a.
Up to 8 % p.a.
Payout of fixed interest
End of loan period (bullet loan)
Semi-annually
Loan period
Minimum period of 7-8 years
Fixed period of 3-4 years
Share in profits
 
 
Exit participation
 
 
Participation in company value
 
 
Repayment of loan
End of loan period (bullet loan)
End of loan period (bullet loan)
Subordination
Yes
Yes
 
 
 

How Do I Benefit as a Companist (Investor)?

Apart from the good feeling of supporting an innovative start-up, Companists benefit from their investment in several ways. Potential returns differ between start-up investments and investments in growth companies:

Start-up Investments:

1. Share in Profits

Each investment entitles Companists to a share of any potential profits. For this purpose, the amount of holding is calculated based on the amount invested. Every €5 of the investment amount corresponds to a certain share in the start-up's profits. The exact value is listed in the individual start-up profile on Companisto. The more a Companist invests, the larger the individual amount of holding becomes. The Companists' share in a company's profits is paid out once a year.

2. Exit Participation

Companists who invest in a start-up also participate according to their amount of holding if their start-up is sold to a large investor (also known as "exit"). In this case, Companists receive a share of the price that the large investor pays for the start-up. These exit proceeds are immediately paid out to the Companists once the purchase price for the start-up has been paid.

3. Participation in Company Value

If the start-up is not sold and the Companists' investments are thus terminated once the minimum loan period has ended, a business valuation of the start-up is carried out, and Companists are paid out a share in the company value according to their amount of holding (through a bank transfer). Therefore, Companists also benefit from an increase in the value of the start-up in case it is not sold.
In other words, it is not a problem for investors like you if a start-up reinvests its profits to grow faster. This is due to the fact that profits reinvested into the company increase the company value. You are also entitled to a share in this company value.

Investments in Growth Companies (Venture Loans):

Fixed Interest

Investments in growth companies on Companisto are made through venture loans. Venture loans are granted to established growth companies and have an attractive fixed interest that is paid out semi-annually.

 

How Exactly Does the Investment Process Work?

Start-ups present themselves on Companisto by means of a company profile. Companists may take their time getting an idea of all the projects in which they can invest. Moreover, Companists can send their questions to the founders and initiators.

The start-up decides on a minimum amount it needs to raise (also called "funding threshold"). This funding threshold is usually set to €100,000. You can find out the exact amount in the company's participation contracts that are publicly available on Companisto.

When the required amount has been invested by the Companists, funding is successful, and the Companists receive a share of the future profits, the exit proceeds, and the company value, or they receive a fixed interest rate. If the threshold is not reached, all Companists get their money back free of charge.

 

This is how it works in practical terms:

1. Sign up on the Platform

Most sections of the platform can be viewed without signing up. If, however, Companists want to see detailed information on the start-ups or invest money, they have to sign up on the platform. This registration is free.

2. Select Investment Opportunity on the Website

Companists have the freedom of choice. They can select the start-up in which they want to invest as well as the investment amount. Companisto does not have a minimum investment, which means that you can invest any amount you like.

3. Invest Online in a Convenient Way

The entire investment process takes place online within a few minutes. Companists can thus invest very conveniently with a click of the mouse.

 
4. Benefit from Profits and Value Increases of the Start-ups

From the moment they buy a share in a start-up, Companists are entitled to a share of this start-up's profits and benefit if the start-up is sold to a large investor and if its company value increases; alternatively, they receive fixed interest payments. In order to document their share in a start-up, all Companists receive a personal share certificate via email.

 

Which Legal Form Do the Companists' Shares Have?

Companists invest in start-ups in the form of subordinated (profit-participating) loans.

This means that the Companists lend the investment amount to the companies for the duration of their participation. In return, the companies share their profits and the possible exit proceeds if the company is sold (also called "exit") with the Companists, or they pay a fixed interest rate.

Both the share in the profits and the share in the exit proceeds are paid out in the form of interest.



Can I Also Invest from outside Germany?

Yes, that is no problem at all. Companists who are resident outside Germany may invest on Companisto as well. We offer several methods of payment that are available internationally, e.g., credit card payment, Sofortüberweisung (instant money transfer), and bank transfer (advance payment). Thus, a German bank account is not required to invest.

Investor Protection

To protect investors, Companisto has developed a safety mechanism. All start-ups marked with "crowd voting" include additional protection for investors, thus minimizing the risk. In the case of crowd voting, one third of each investor's investment is deposited in an escrow account protected against insolvency.

The investors then decide through a majority vote (weighted by shares and normally scheduled 6 months after the end of the financing campaign) whether they want to pay out the remaining third of their investment to the company or whether they want this third to be repaid to them free of charge. The investors can make this decision based on the current business development of the company, which provides them with additional financial safety.

All start-ups offering the crowd voting safety mechanism are marked with "crowd voting."

Risk Management

Investments in start-ups and growth companies can be very lucrative, but they are also risky. Generally speaking, the risk increases with the potential return. In the worst case, investors may lose their entire investment. However, investors on Companisto do not have any obligation to make further contributions to ailing companies.

The investors' shares are subordinated loans ("Nachrangdarlehen"). Such loans are shares in a business with similar characteristics as equity. If the investment object becomes insolvent, the claims of the investors – just like those of all other shareholders of the start-up or growth company – will be satisfied from the assets in the insolvency only after the claims of all other external creditors have been satisfied.

Many investors reduce their risk by splitting their total investment between several start-ups and growth companies from different industries and risk categories. In this way, investors also build up their individual investment portfolio. When investors use this strategy, their successful and less successful investments balance out.

What Is Equity Crowdfunding?

Companisto is an equity crowdfunding platform. Equity crowdfunding means that many people team up to invest in the same project. In other words, people do not invest on their own, but together with many other Companists who buy shares of the same project.

In return for their investment, Companists receive a share of the profits and, most importantly, of the value of the project, or they receive fixed interest payments.

In addition, Companists do some good in that they support innovation, creativity, and economic growth with their investment, which in turn facilitates the creation of new jobs.

Equity crowdfunding and conventional crowdfunding for start-ups are related to one another, but they differ in some fundamental aspects. A common aspect of crowdfunding for start-ups and equity crowdfunding is that a large number of people make a financial contribution to a start-up.

Crowdfunding originates from the world of arts. In that case, the contributor usually receives only a symbolic reward, for instance a CD or a photo.

In the case of equity crowdfunding, on the other hand, contributors make a true investment. This is also how Companisto works. In return for their investment, investors are entitled to a share of the start-up's profits and exit proceeds (if the start-up is sold), or they receive a fixed interest rate.



More details concerning the differences between equity crowdfunding and conventional crowdfunding can be found here.

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The acquisition of this asset involves considerable risks and can lead to the complete loss of the assets used.

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Your contact for all questions about investing on Companisto:
Andreas Riedel
Investor Relations

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