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Other fundraising questions

What is a nominee and how does it affect my cap table?

What is a nominee?

As companies grow and change over time, they sometimes need investors to make decisions about their investments or about the future of the company. A nominee is an agent that has the right to act on behalf of investors—rather than having companies collect decisions individually from thousands of Republic investors. Republic’s nominee process has specific contractual rights, including voting, which follow a predetermined company appointee’s instruction (often the company's CEO, its board, or an existing major investor). This also includes the ability to agree to convert investments into custodial accounts on behalf of investors. Learn more about custodial accounts here.

For offerings using a nominee through Republic, Republic Investment Services LLC (f/k/a/NextSeed Services, LLC), a subsidiary of OpenDeal Inc. dba Republic is the nominee. A nominee rider is attached to each company’s Crowd SAFE or relevant security instrument. .

Note: The nominee is typically only used in Regulation Crowdfunding offerings.

What does this mean for founders?

In short, the nominee structure allows companies to keep their cap tables clean and makes the mechanics of fundraising post-Republic campaign as seamless as possible.

While represented by the nominee, each individual investor remains a holder of record, but the nominee is representing a block of SAFEs that are not currently shareholders. When companies raise more capital from VCs or other private investors after their Republic campaign, they have the choice to convert their Crowd SAFE into shares. Upon conversion, the nominee structure allows companies to only add one additional shareholder (or one “holder of record”) to their cap table—not the thousands of Republic investors individually—by electing to accept the shares through a custodial solution. The nominee can, on behalf of investors, consent to holding the shares investors are entitled to “in custody” or “in street name” with a custodian. This custodian is the single shareholder and holder of record, while investors are “beneficial interest holders” and have the economic rights to their investment.

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Core may choose to make an offering to some, but not all, of the people who indicate an interest in investing, and that offering may or may not be made under Regulation A. For example, Core may choose to proceed with its offering under Rule 506(c) without ever conducting a Regulation A offering, in which case only accredited investors within the meaning of Rule 501 will be able to buy Republic Notes.

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