What is investment crowdfunding?
Investment crowdfunding is a financing method for small businesses and startup initiatives that allows them to secure funding from a diverse group of investors worldwide. Typically, investors contribute smaller sums of money in exchange for company shares, bonds, or convertible securities. Notable success stories include the "Pebble smartwatch" project, which raised $10 million on the "Kickstarter" platform in 2012, and "Star Citizen," a video game that holds the record for the highest funds raised through investment crowdfunding at approximately $500 million from 4 million investors, among many other examples.
How profitable is investment crowdfunding?
The profitability of investment crowdfunding depends on several factors, including the industry of the company, its stage of development, and the type of investment offered (equity, debt, convertible). It's important to acknowledge that investment crowdfunding generally carries higher risk compared to traditional investments. However, one can mitigate this risk and enhance the likelihood of success by adhering to the following principles:
- Diversify investments across multiple projects.
- Invest in businesses led by a professional and passionate team.
- Conduct thorough research and review information provided by the company.
What activities does ARFI carry out?
ARFI is the pioneer investment crowdfunding platform in Armenia, providing a rapid avenue for business development, as well as an opportunity to secure funding and establish partnerships with supporters who believe in the success of the venture. The platform enables individuals worldwide to invest in Armenian projects, contributing to the growth of the investment community in the country. In 2022, ARFI Investment Company received registration and licensing from the RA Central Bank. The primary objectives of the ARFI platform include creating new avenues for financing growth in Armenian companies, expanding alternative investment instruments, fostering business development in Armenia, and fortifying ties between Armenia and the Diaspora.
Are there sectors in the economy that will be prioritized?
There are no sectoral preferences on the ARFI platform. Any business project meeting the requirements is subject to approval by ARFI's investment committee and can be listed for investment crowdfunding. Exceptions are sectors with a negative social impact, specifically tobacco and online gambling.
How will investor rights be protected?
Investor rights are safeguarded on the ARFI platform through various measures:
- Regulation and control: ARFI, under the supervision of the RA Central Bank, conducts anti-money laundering (AML) and know-your-customer (KYC) checks for both company and investor profiles in compliance with legal requirements.
- Contracts: An investment contract is executed between the issuing company and the investor, outlining the rights and responsibilities of both parties.
- Disclosure of information: Companies on the platform are obligated to provide specific information to investors, including financial reports and comprehensive details about the project and team, enabling investors to make informed decisions.
- Provision of "Cooling off" time: ARFI offers investors a 4-day window to review their investment decision and retract it without penalty.
- Special account: Investor funds are held in a dedicated escrow account and only disbursed to the company in the case of a successful crowdfunding campaign. In the event of the company not reaching its targeted investment, funds are returned to the investors.
- Risk awareness: Prior to investment, the ARFI platform alerts investors to potential risks. Risks are also disclosed in the investment proposal documents provided by the companies. The platform gives an extra warning for investments exceeding the limit of 300 thousand drams.
- Business filtering: ARFI evaluates applications from companies, applying predefined criteria which include project objectives, team, market potential, marketing strategy, project risks, and social impact.
What are the benefits of investment crowdfunding for businesses?
Investment crowdfunding offers numerous advantages for businesses, including:
- Broad Investor Reach: The ARFI platform provides businesses with the opportunity to showcase their projects to a diverse global audience of potential investors.
-Financial Flexibility: Investment crowdfunding platforms offer a range of financing options, including equity, debt, and convertible securities, allowing businesses to select terms that align with their financial requirements.
- Cost Efficiency: Investment crowdfunding platforms typically have lower fees than traditional funding sources, resulting in significant cost savings for businesses seeking capital.
- Enhanced Brand Visibility: Through crowdfunding campaigns, companies can expand brand awareness and attract a wide audience, potentially acquiring new customers.
-Market Validation: Investment crowdfunding campaigns facilitate valuable feedback on products or services, providing businesses with a genuine understanding of market dynamics.
- Community Building: Crowdfunding campaigns help businesses cultivate a community of dedicated supporters, offering an invaluable source of feedback and support.
- Investment crowdfunding benefits companies and investors, enabling companies to secure funds expediently and efficiently, bypassing traditional channels like banks or venture capitalists. It provides investors an opportunity to invest in early-stage companies with substantial growth potential.
How will business rights be protected?
ARFI, under the oversight of the RA Central Bank, implements stringent measures to safeguard business and investor rights, including:
- Regulation and Oversight: ARFI conducts rigorous investor identity verification, anti-money laundering (AML), and know-your-customer (KYC) checks in compliance with legal requirements.
- Contractual Agreements: An investment contract is established between the issuing company and the investor, outlining the rights and responsibilities of both parties.
What happens when investment crowdfunding does not end successfully, and the required amount is not collected?
In the event of an unsuccessful crowdfunding campaign where the required funding target is not met, investors will receive a full refund of their invested amount within 10 working days.
Can I continue to invest once the crowdfunding has been successfully completed and the required amount has been raised?
Absolutely. An investor can participate in multiple projects concurrently and can also invest repeatedly in the same project during the fundraising period. However, once the crowdfunding period concludes, no further investments can be made.
Is the platform liable when the business does not succeed after crowdfunding an investment?
As an intermediary between investors and businesses, the platform does not bear responsibility in case of business failure. Prior to project submission, the Platform Operator diligently provides comprehensive information about the Company to Investors. Investors are strongly encouraged to thoroughly review the information on the Platform, conduct independent research, and make informed investment decisions.
Why invest in IT startups?
Investing in IT startups allows you to support promising, newly formed companies whose vision aligns with your interests. Unlike traditional crowdfunding platforms, where you simply contribute, here you become a shareholder, actively contributing to the company's growth. As the company thrives and generates profits, the value of your investment asset grows, leading to potential returns over time.
How do I know if I am a professional or non-professional investor?
Upon registration, investors classify themselves as professional or non-professional by completing a questionnaire. Professional investors possess the requisite experience and knowledge to make independent investment decisions and assess associated risks, in accordance with regulation 4/07.
How do I cancel an investment?
Non-professional investors have the option to cancel investments within 4 days without any penalties (except within 4 days of the investment offer deadline). After the 5th day, cancellations are not possible.
Can I contact the organization?
Certainly! Feel free to reach out to us through ARFI by sending an email to firstname.lastname@example.org.
How much money can I invest in business projects?
The minimum investment starts at 40 thousand drams, and the maximum limit corresponds to the project's targeted funding amount.
Is there a calculated investment limit per investor?
There are no predefined investment limits. Each project may have a different funding goal, with the maximum limit set by the project's target amount.
Can I invest in more than one business project?
Absolutely. On the ARFI platform, you can invest in multiple business projects simultaneously.
Who can invest in the ARFI platform?
Any individual who is at least 18 years old, has completed the account registration process with verified identity and KYC, is eligible to invest through ARFI.
Can a foreign investor invest in the ARFI platform?
Yes, the platform extends the opportunity for foreign investors to invest in business projects operating in Armenia.
How can I track my investment?
The company in which you've invested should maintain regular communication, providing updates on the project's progress through online meetings.
When will I get the bonus?
Upon making an investment, the bonus details will be provided to you by the company.
After making an investment, will I receive updates about the investment?
Yes, the company will keep you and other investors informed through regular online meetings, reporting on the project's progress.
What to do if ID verification is pending?
Please inform us by sending an email to email@example.com, specifying the issue.
What types of documents can I use for identity verification (KYC)?
For RA investors, you may use the following documents for identity verification or KYC: Passport, identification card, or driver's license. For foreign investors, both passports and identification cards are acceptable forms of verification.
Can I increase or decrease my investment amount?
Within four days of your initial investment, you can adjust your contribution without penalties. However, once the fourth day has passed, adjustments cannot be made.
Can I make a contribution after the crowdfunding deadline?
No, once the crowdfunding period concludes, additional investments cannot be made in the given company.
My investment was canceled. Can I make an investment again?
Yes, if your initial investment was canceled for any reason, you can reinstate the investment process.
When and how will my investment be compensated?
If the company you invested in doesn't reach the minimum funding target within the specified period, funds will be returned to investors within 10 days after the period concludes.
Can I make an investment with my checkbook?
No, on the ARFI platform, investments can only be made through bank cards and transfers.
Can I make a deposit via bank transfer?
Yes, you can opt to make your investment payment via a money transfer, including the use of the investment identification number. However, please note that transfers are only possible from banks operating within the Republic of Armenia, and they must be conducted in AMD.
Are there any discounts and how do they work?
There are two types of discounts available on our platform:
- ARFI "Promo Code": This discount is provided directly by ARFI Investment Company. Investors can input the promo code in the designated field during the payment process, resulting in a reduced amount paid.
- "Investment Incentives" by Issuing Companies: These incentives, offered by the issuing company, come with specific time and amount requirements and are automatically applied. They are also subtracted from the total investment amount paid.