What is LoyaltyHub?
LoyaltyHub helps startups and small businesses get the funding they need to thrive. We help do all the hard work of fundraising, so you can focus on what is important: growing your business.
How are you different from a Ponzi Scheme?
LoyaltyHub is focused on making money work and creating value for the society by allowing people invest in businesses and good ideas around them.
On LoyaltyHub customers and investors have the opportunity to have a stake in businesses around them. In addition, businesses have the opportunity to raise funds by actual sales of their items. While ponzi scheme just moves money from one person to another, LoyaltyHub is focused on giving customers and investors the opportunity to help businesses they care about over the long-term.
Why raise funds from the crowd?
To turn your customers into owners. Looking for a connection to a big customer? Want feedback on your product from an industry insider? A crowd of investors can help in ways traditional investors can’t. They are often your most passionate evangelists.
How are you better and different?
We know what it takes to work with good companies… and therefore have one of the best portfolios in the industry. You want to raise funding on a web site alongside other good companies. We’ve worked hard to ensure that raising on LoyaltyHub is not a negative signal to investors, like it is with some of our competitors.
We understand legit founders are super busy running their companies and can’t afford wasting time doing stupid stuff. So we do all the grunt work for you. More than that, as founders ourselves (not finance guys or bankers), we know exactly what you are going through. We’re a friendly team.
Finally, we’ve spent years preparing and developing the technical and commercial skills required for this Job to ensure we can keep costs down. People expect Crowdfunding to cost over 10% of the fund raises. We charge $0 to generate the stuff you need to start fundraising. We also only charge 6% (4% cash fee and 2% investment in the business).
Why did you guys create LoyaltyHub?
We founded LoyaltyHub in 2017 because we thought it was stupid that it was illegal to invest even ₦10,000 in our friends simply because we weren’t rich. We also thought the Venture Capital model was dysfunctional and focused only on helping a tiny sliver of deserving businesses. Finally, we felt banks were taking less and less risk. 50 years ago, your community bank – composed of your neighbors – funded you. Now some conglomerate on Broad Street ignores you.
So we are going to lobby Senate and SEC to pass the Regulation Crowdfunding rules. Meanwhile, we would be helping businesses that can create jobs raise funds in a small way until it is fully approved.
How do I create a profile?
Visit the Raise Funds page, put in your company and fund-raising details, then hit the submit button.
Can I have a profile and not fundraise?
Yes. We actually think it’s a good idea to create a basic profile and start collecting followers. Build trust and gain an audience before starting a fundraise.
How much does it cost to create a profile?
It’s free to create. We charge a ₦1,000 fee when you want to enable fundraising.
I’m too busy to create a profile. Can I hire LoyaltyHub to do it?
Sure. We charge ₦10,000. Learn more by contacting firstname.lastname@example.org. Hiring us to build your profile has absolutely no impact on how you are featured on LoyaltyHub. That would be unethical.
How do I build a good profile?
Check out our tips.
Can I promote my profile?
Yes, you can share your profile publicly. However, until your fundraise is enabled on LoyaltyHub, it is not legal to say that you are fundraising now, or have a concrete plan to do so in the future.
You are allowed to ask people to “follow” your profile to show their support.
What other legal issues should I be aware of?
When building your profile, avoid future promises and forward-looking numbers like “we plan to make ₦50 million next year.” Instead try, “We hope to continue growing by doing x, y, and z.” If you decide to fundraise on LoyaltyHub, you are legally liable that every statement on your profile is 100% true, and that you have not omitted any important information investors should know about (for example, a lawsuit).
When am I ready to start fundraising on LoyaltyHub?
We fund businesses at all stages: you can use LoyaltyHub to raise as little as ₦20,000. However, unless you plan to raise from only a circle of close friends, we recommend not to fundraise on LoyaltyHub until you have some proof points that can convince investors you “get stuff done,” and are not just a dreamer. While there are no requirements, we recommend at least one experienced investor or investment club that publicly endorses your company, and sets the terms of your fundraise. It also helps to have at least a working prototype, and ideally, a few paying customers. But before then, create a free profile, and start collecting followers and getting introduced to investment clubs!
What kind of businesses can get funded?
We accept nearly any for-profit Nigerian Business, be it a brick and mortar restaurant or a tech startup.
What fundraising exemptions do you support?
We support Raising funds by crowdfunding for a Project, Start-up, Business with cash flow. In addition, we allow businesses raise funds by selling future inventory through a crowd-sale. To learn what all this means, and to choose the best one for your business, read our raise funds page.
What investment agreement can I use?
We support raising funds with the following: Revenue share, Priced share or ownership, Project share. You can upload your own investment contract, or, if you’d rather not hire a lawyer to re-invent the wheel, we can send you an investment agreement.
How do I set my valuation or terms?
It’s best to raise funding on LoyaltyHub after you’ve raised from at least one professional investor you personally know, or have a commitment from an investment club. They will help set the terms.
How much does it cost to fundraise on LoyaltyHub?
It’s free to create a profile and start collecting followers. When you decide to turn on fundraising, we charge a ₦1,000 fee. For Raising funds by giving part ownership, project and revenue share , LoyaltyHub charges a 6% fee (4% cash, 2% equity) based on your online funding total, only if your funding is successful. Any additional payment processing fees are paid by investors.
How is this legal?
We are working hard to ensure the law to allow businesses raise funding online is officially passed. This would make it officially possible for everyday Nigerians (not just the rich or banks) to invest in private companies.
Do you group all investors into one shareholder?
If you are raising with an investment club on LoyaltyHub, we can group all of your small investors into one shareholder on your cap table. For Direct Crowdfunding through us, we can proxy all voting power to a Lead Investor and the CEO. With both mechanisms, if you ever need a signature during your follow-on financing, you only need to deal with one person.
Do all those investors have voting rights?
No. We avoid this by having small investors proxy their voting rights to LoyaltyHub, and we act on their behalf. We will exercise all of the voting rights held by a LoyaltyFund in the interest of the fund’s investors.
Small investors also don’t have any voting rights except they meet the requirement for voting right stipulated by the business raising funds.
How does the investment process work?
When an investor applies to invest, they digitally sign the investment documents and enter their bank account information. Once accepted, the investment is sent to an escrow account. The money will be transferred to your corporate account 7 days after the round closes, provided your fundraising target has been met.
How should I set my fundraising target?
If you are fundraising your Project, Start-up or business, you must hit your funding target in order to get funded. However, you are allowed to accept oversubscriptions.
So we recommend setting the funding target to the lowest amount of money you can make use of, then specifying how you’d use any extra cash. For instance, if it costs ₦50,000 to purchase a new widget-maker, but you could use ₦500,000 to buy a bunch more quipment, set ₦50k as your funding target then indicate what you’d do with the ₦500k.
What is the minimum I can raise?
What is the maximum I can raise?
With Start-up, Revenue Share and Project financing, you can raise a maximum of ₦50 million per year. You can, however, always raise an unlimited number of naira by crowd-selling your items.
Does LoyaltyHub curate projects?
No. It’s not our role to choose what is worthy of investment. We screen companies for signs of fraud, but we do not otherwise pass judgement.
Instead, each investment club on LoyaltyHub may curate companies in their particular area of expertise.
How can my company be featured more highly?
Investment clubs are groups of industry experts who can choose to endorse companies. If your business gets endorsed by a club, it will appear higher in the sorting algorithims on LoyaltyHub, and be much more likely to be featured on the home page. After you create your profile on LoyaltyHub, you can submit it to the relevant investment clubs.
If I don’t apply or get accepted to an Investment Club, where will my company show up?
Your company will still be listed on LoyaltyHub, it just won’t be at the top of the page. Companies vetted by Investment Clubs are sorted first.
How are companies sorted on LoyaltyHub by default?
Those vetted by Investment Clubs are always first. After that, offerings are sorted by objective metrics including menu tab, page views, press mentions, Twitter followers, Facebook likes, investment velocity, number of LoyaltyHub followers, endorsements, ratings by club members, profile completeness. This algorithim can NOT make good investment decisions. That’s what some humans can do.
Can I pay to be featured more highly?
No. That would be unethical. Every company that has ever asked us this question has looked super scammy.
How do I close my campaign?
After your funding target has been met, and at least 16 days have passed, you may initiate the close of your campaign at any time.
After you decide to close your campaign, investors are given a 5 day warning. They are given one last chance to cancel their investment and request a refund.
What happens if a material change occurs?
If a material change in your business has occured during your fundraise, you must disclose it to your investors before you close the round. All investors must then reconfirm their investment.
A material change is anything a reasonable person would think should be disclosed to investors because they might change their mind. Some examples could be your co-founder quitting, the big deal you bragged about falling through, or a big drop in sales.
What if my campaign fails?
If your campaign fails, you can run a new campaign on LoyaltyHub a month after the original campaign closes. Use this 30-day buffer to gain more followers, improve your numbers, and do anything that might boost your investments for the new campaign.
Can I extend my funding deadline?
Yes. However, this is a material change that requires all of your investors to reconfirm their investment. Still, it’s a better option than failing.
How long does it take to get the money?
We wire the funds to your corporate account within 7 days after your round closes on LoyaltyHub.
Will investors contact me directly?
No. We don’t hand out your email addresses or phone numbers. All communications with investors are handled on your company feed.
How do I update investors?
You can send updates out to the LoyaltyHub community through an independent financial advisors selected by your company. The financial advisors would help you in the preparation of financial statements if you dont already have and send information to investors based on your reporting agreement.
You can also reach and reply to investors on your question and answer feed on your profile page or by sending emails.
How often should I provide investor updates?
We try to update our investors at least once a quarter, while plenty of our portfolio businesses send updates monthly. Do what works for you, as long as you keep your investors in the loop.
Do I need to file an annual report?
You need to file an annual report once a year with financial statements and a discussion of your business, no later than 3 months after the end of the fiscal year. If you neglect to file a report, you will be unable to fundraise with LoyaltyHub again until you file the annual report.
Companies are not obligated to file annual reports if they file for an IPO, are acquired by a purchaser, repurchase all crowdfunded investments, have fewer than 300 shareholders after 1 year, or if they go bankrupt.
Is it free to use LoyaltyHub after my fundraise?
Yes. It’s free to continue to use our platform to communicate with your investors.
What is a LoyaltyFund?
We advice startups raising funds on LoyaltyHub to do so with a LoyaltyFund. A LoyaltyFund exists for the sole purpose of investing in one specific startup. All the investors pool their capital in the LoyaltyFund, which then invests as one entity in the startup. The startup only has one direct investor: the LoyaltyFund.
Why use LoyaltyFunds?
Startups use a LoyaltyFund to ensure their follow-on financing won’t be at risk. Venture capitalists are uncomfortable when startups have many small investors (they don’t like collecting thousands of signatures). With a LoyaltyFund, all those smaller investors are represented by one large entity: us.
Can I invite anyone to invest directly, bypassing the LoyaltyFund?
Yes. If you meet an investor who wants to invest a smaller amount and doesn’t wish to use the LoyaltyFund, you may invite them to invest directly in your company. This is up to your discretion.
Who manages the LoyaltyFund?
LoyaltyFunds are managed by our fully-owned affiliate: LoyaltyHub Advisors, an exempt reporting investment advisor. Technically, the smaller investors who invest via the LoyaltyFund are not your investors: they are ours.
Who decides who gets to invest in the LoyaltyFund?
We do, but with your input. We’ve found that startups are often too busy to research people who want to invest smaller amounts like ₦10,000. If your deal is over-subscribed, we prioritize the investors who we feel can help your company the most. At the end of the day, we’re trying to find the best investors for your startup, so feel free to tell us what you are looking for.
Do LoyaltyFund investors have voting or information rights?
No, Members of the LoyaltyFund do not have voting or information rights. All voting and information rights are proxied to the Moderator of the LoyaltyFund, LoyaltyHub Advisors, which will act on their behalf.
How many can invest in a LoyaltyFund?
We advice not more than 99 investors invest in a LoyaltyFund.