What is Vicinity?
We are a place where everyone can gain access as stakeholders and lenders to businesses and owners in their community. This is where financial capital meets social capital. For as little as $100 with our funding portal, you can help finance your community with the hope of earning a return - financial as well as social.
You may already value the opportunity to shop local or eat local. Now you can invest local. Choose your investments and join a community supporting local resilience.
Why Invest Locally?
Diversify! But not mainly to make lots of money - this is a real investment and you could actually lose some or all of your invested dollars. Local businesses are the backbone of the economy. As communities become more interconnected, they are more self-reliant, resilient and healthy.
We believe in the economic "multiplier effect" - where a dollar spent at locally-owned business will generate ~3x the direct economic impact over the same dollar spent at a corporate-owned peer.
Is this Legal?
Yes. And good job asking responsible questions.
"Regulation Crowdfunding" or Title III of the 2012 JOBS Act (aka "Reg CF") became a new law in May 2016 allowing everyone 18 years and older to be able to invest in private companies through a regulated intermediary.
A big part of our job is to comply with the rules and regulations set forth by the SEC and FINRA for Reg CF.
So is this Crowdfunding?
Yes, but instead of making a donation (like GoFundMe) or getting a sort of reward for your contribution (like with Kickstarter), you are actually making an investment with the goal of earning a financial return. Oh, and we prefer the term "Communityfinancing".
How do I Invest?
Step 1 - Create an account. This involves getting some basic info and setting up your profile.
Step 2 - Choose investments. Browse the offerings, click the invest button for any you choose, then follow the prompts.
Step 3 - There is no step 3! It's that easy.
What type of debt investments are offered?
Vicinity offers a pretty standard term loan or a revenue share (an innovative twist on traditional debt).
Term Loan: nothing too surprising here - a loan with regular disbursements (payments made quarterly or annually), an annual interest rate, and a maturity date (when the loan is intended to be paid off). These loans will likely include additional terms like a grace period after the crowdfunding deadline, a payment deferral so a payment could be delayed to allow the business to recover from a tough period without being in default, subordination if there is a "senior lender" like a bank, and if the loan is secured by any assets of the business.
Revenue Share: this is a loan or note that is paid back from a set percentage of the revenues of the business. This is a flexible option that allows a business to repay more or less towards the payoff amount, depending on their sales performance. If their sales are great, you get paid back faster than if their sales are poor. Gross Revenue is the amount the business sells. Some exclusions may apply like pass-through shipping costs or returns, which will be stated in the contract as Net Revenue. Disbursements will be quarterly or annually and will be a set percentage of revenues. The total repayment amount will be set as a multiple of the fundraise - likely 1.25x to 3x.
For example, if you invest $1,000 in a company that sets the repayment amount at 2x, the amount they will pay you over the life of the note will be $2,000 (as long as they do not default on the note). If they set the percentage at 5% and have a quarterly disbursement, they will set aside 5% of their revenues each quarter to pay back their investors, of which you would get a portion. Your portion would be calculated based on your investment divided by the total amount raised.
What type of equity investments are offered?
A company can offer preferred stock through Vicinity, which gives any investor actual stock ownership of the company. Preferred stockholders do not have voting or management rights, but would receive dividends (when applicable) before common stockholders receive anything or, if the company is liquidated, earlier claim on the company's assets than a common stockholder. Common stockholders tend to be owners and employees of the company.
Generally, a preferred stock offering on Vicinity will have a "lead" investor who is accredited and will help negotiate the terms of the stock financing. The valuation (either pre-money or post-money), which is essentially what the company is considered to be worth, is what you can use to calculate your percentage ownership.
Unlike debt offerings that have a predetermined disbursement schedule, earning a return on equity only happens when (or if) the company is acquired or goes public AND the value of the stock has increased.
Whether you invest in a debt or equity instrument, you must understand that it is possible that you will lose every dollar you invest. You should only invest what you can afford to lose. Please read the "risks" section below for more information.
What are my payment options?
You can pay by ACH, bank transfer, or credit card.
What fees do I have to pay to make an investment?
Vicinity charges nothing up front, and 1% of amounts paid back to you from the issuer, though a credit card fee will also apply if you choose that payment option.
Where do my funds go?
Your investment is placed in an escrow account hosted by North Capital, and stays there until the fundraising target is met before being transferred to the business. If the target is not met, it will be refunded to you.
What if something goes wrong with my payment?
You will get a notification if something goes wrong. If something seems wrong or you need help or clarification, please email us at [email protected]. We will be happy to help!
Can I cancel my investment and get a refund?
Yes, you can change your mind up to 48 hours before a fundraise closes and receive a full refund. You will be notified before that point, but unfortunately investments cannot be cancelled within the 48 hour window.
How is Vicinity compensated?
Vicinity charges nothing upfront, but retains a 1% service fee on investor returns paid from the issuer, and the issuer is charged a standard 8% of the total funding amount. The compensation amount for any given company will always be listed on their offering page.
How much can I invest?
Reg CF limits how much you may invest in any 12-month period depending on a combination of your net worth (not including the value of your primary residence if you own your home) and your annual income. This limit applies to the total amount you are able to invest across ANY Reg CF platform (not just Vicinity). We actually make this calculation for you when you register on our platform.
You can also review our Educational Materials for more specifics on this topic, including how to calculate your limit.
Does Vicinity give investment advice or recommendations?
Not a chance. We provide a place where owners can showcase their business and you can peruse opportunities for investment within your own community. Each company provides their own information and they vouch for themselves. It is not legal for us to provide investment advice or recommend any company.
Can I invest through an entity?
Yes. For a number of reasons you may want to invest through a business entity or a Self-Directed IRA. For more information about these options, please email us at [email protected].
How Risky are Investments through Vicinity?
Whether you invest in a debt or equity instrument, you must understand that it is possible that you will lose every dollar you invest. You should only invest what you can afford to lose. All of this is based on future performance, which no one can predict as hard as they may try!
Can I Resell my Investments?
Assume not. There is not a developed secondary market for these types of investments, so don't count on finding a buyer. Also, Reg CF prohibits the resale of securities for one year, except to the issuer, an accredited investor, a family member, or their trust.
What else can you tell me about Debt Investments?
When compared to equity investments debt can be a little less risky, be a little more liquid (since you likely will get incremental payments over time), but they may have less or capped upside.
What else can you tell me about Equity Investments?
An equity investment only will give you a return upon a future sales event by the company (like an acquisition or an IPO). This means you need to be able to afford losing your investment and waiting quite a while (7+ years).
Also, you should expect that an equity ownership stake will be diluted due to additional financing rounds that could happen in the future. This could be due to success and a need for more capital or a lack of success and need to avoid bankruptcy. Either way would mean you own a smaller percentage of the business.
Finally, it would be rare that an equity investment on Vicinity to offer voting rights as this can be quite the logistical challenge for a company that could have hundreds of investors. Assume your investment does not, unless otherwise specified.