We try our best to list multiple types of securities which we accrue from the partnerships of multiple funding portals. Below you can find a quick 101 of types of securities you can find listed on Newchip, but please make sure to do your homework as well!
Types of securities:
Conveys a portion of the ownership interest in the company to the holder of the security. The following are the different types of equity offerings:
Conveys a portion of the ownership interest in the company to the holder of the security. Stockholders are usually entitled to receive dividends when and if declared, vote on corporate matters, and receive information about the company, including financial statements. This is the riskiest type of equity security since common stock is last in line to be paid if a company fails. You should read about the risks of early-stage investing and pay special attention to the fact that your investment will only make money if the company’s business succeeds. Common Stock is a long-term investment.
Stock that has priority over common stock as to dividend payments and/or the distribution of the assets of the company. Preferred stock can have the characteristics of either common stock or debt securities. While preferred stock gets paid ahead of common stock, it will still only be repaid on liquidation if there is money left over after the company’s debts are paid. In certain circumstances (such as an initial public offering or a corporate takeover) the preferred stock might be convertible into common stock (the riskiest class of equity).
The equivalent of having stock but in a Limited Liability Company (LLC).
Debt allows an investor to lend money to a company in hopes of getting their money back with interest. The following are the different types of debt offerings:
A promissory note will obligate the Issuer to pay your money back, plus interest at a specified rate, over a specified period of time. However, interest payments are not guaranteed and promissory notes are subject to default, which could cause the loss of your entire investment. Owning a promissory note does not make you an owner of the company; instead, you are a creditor. You don’t share in the appreciation if things go well. If the company increases in value 100-fold, you only have the right to get your money back, plus interest.
A type of security that can be converted into a different security like any type of equity or common stock.
This form of investment is popular with technology startups because it allows investors to initially lend money to the company and later receive shares if new professional investors decide to invest. The sort of convertible note that is most often offered may limit the circumstances in which any part of the loan is repaid, and the note may only convert when specified events (such as a preferred stock offering of a specific amount) happens in the future. You will not know how much your investment is “worth” until that time, which may never happen. You should treat this sort of convertible note as having the same risks as common stock.
Similar to a convertible-note; future conversion to equity, but without a maturity date. They are crowd-sourced to ensure that smaller investors have the same economic terms as larger investors.
A Simple Agreement for Future Equity (SAFE) Note is an investment contract between an investor and a startup company; the instrument promises the possibility of a future equity stake (shares), if certain trigger events occur. There is no guarantee that these triggering events will occur. Each company can customize their SAFE, therefore terms may vary.
When you invest with a SAFE, you become an investor, but not an actual shareholder of stock, unless the company elects to convert the SAFE into company stock. Since there is a fixed conversion price, you will always receive the same economic outcome (regardless of whether the company elects to convert) if and when there is a liquidity event.
Keep it Simple Securities (KISS) are available in equity and debt versions. They generally convert automatically to preferred stock with a qualifying priced round. They differ from SAFEs as they have an established maturity date, they accrue interest (for debt version only), and may provide additional rights for qualifying investors.
A form of lending that involves sharing operating profits with investors as return on their investment.
Revenue Share Note
One of the investment products we present on Newchip is a revenue sharing loan. Each month, the business shares with you and other investors a percentage of the business’s gross monthly revenues. That’s why it’s called “revenue sharing.” The way it works is like this:
1) You invest in a revenue sharing loan issued by a business.
2) The business agrees to pay you monthly until a predetermined total amount is paid.