The Equity Crowdfunding Blog Guide for Entrepreneurs

Venture Bonsai is an Equity Crowdfunding service.

We aim at demystifying the investment process and making it easier for any great company to get the financing it deserves to be successful. Venture Bonsai a tool for European companies to easily run a share issue in order to raise new capital. The service enables private placements as allowed by the EU regulation ( irective !""#$%&$E'( including later amendments) and as implemented in each member state country. Venture Bonsai is a marketplace bringing together the parties and offering the tools for the entrepreneurs. Venture Bonsai is not a party of the transaction itself like an investment bank (for e*ample) would be. We simply demystify this process + ,unding -ade Easy. /lease note that Venture Bonsai is currently in 01nvitation 2nly3 phase. 4ou can re5uest an invitation at venturebonsai.com.

Joining Venture Bonsai

Joining the service is free of charge. 4ou select your role to be Entrepreneur( 1nvestor or both (or none). 6fter entering the service it is useful to fill7in the profile information( no matter whether you are an entrepreneur( an investor or both. 6t this stage you can (and you should) invite your co7founders and other relevant team member to 8oin Venture Bonsai as well. They9ll be your help during the investment round later on.

Add Your Co pany

,irst add your company to Venture Bonsai. 4ou9ll get a company profile page which includes 5uestions and answers section. This is the place for your followers to ask 5uestions and a place for you to build trust and get traction. !lease note that you should not "due to financial regulation# discuss any invest ent round related atters on this pu$lic profile page. 2nce you have your basic company profile ready( you should make your Elevator !itch on the Video. This step is not obligatory but is really important for you to create online trust (for people who you have not met in real life). :oining Venture Bonsai as an entrepreneur( getting the market feedback and preparing for the investment round is free of charge. 1f you like( however( you can get professional help from one of our 'ertified /artners at any time. ;ead more about adding your company here. 2nce you are an Entrepreneur in Venture Bonsai( you can

6dd your company and start building your company profile. /lease note that you can only found a company in countries already validated by Venture Bonsai. 'urrently companies domiciled ,inland can run a funding round. 1f you9d like to be first one in your country( please contact us and we9ll work together to prioriti<e your country. Enter basic data for your company. 4ou do not need to fill7in everything at once( you can always continue later. 2nce your company is created( you can start giving updates and getting followers to your company.

4our company profile includes 5uestions and answers section. This is the place for your followers to ask 5uestions and a place for you to build trust and get traction.

6ll of this information is public( and should not contain any financing round7 related information. This is not our own re5uirement( but is based on the financial regulation. 4ou will also be notified about new 5uestions per email (once a day). 6ny of your team members can answer the 5uestions.

2nce you have your basic company profile ready( you should make your Elevator /itch on the Video.

1t9s basically a short two minutes video where you answer the basic 5uestions concerning your company. This is also a teaser for any investor( encouraging them to re5uest to become potential investors once your company is looking for funding. This step is not obligatory but is really important for you to create online trust (for people who you have not met in real life). The 5uestions you should answer on the video are here.

:oining Venture Bonsai as an entrepreneur( getting the market feedback and preparing for the financing round is free of charge. 1f you like( however( you can get professional help from one of our 'ertified /artners at any time.

!reparation !hase
6s the one of the key values of Venture Bonsai is enabling finding financing( you may find yourself in the ne*t phase( 0/reparing for an investment round3. This guided process helps you to upload and provide the information needed to get started with an e5uity crowdfunding round.

,irst( you need to upload (as instructed by the service) certain documents showing your company has decided officially to run a financing round. Those papers include for e*ample -eeting -inutes of the Board. Venture Bonsai will check those and there is a small legal fee to be paid in order to cover the e*ternal lawyer cost of this.

Venture Bonsai can provide you (free of charge) the e*ample te*ts you need for you =hareholders9 -eeting and for the Board of irectors meeting. 6t this stage you will also enter financing round related information

Target amount to be raised (typically between >".""" ? and >"".""" ?). -inimum si<e of the round (typically half of the target amount). -inimum investment per investor (must currently be at least >""" euros( but can be more). Ending date of the round.

The above mentioned figures are actually already decided by your board meeting( and are reflected in the documents you uploaded. Venture Bonsai offers you a well7thought process for preparing for running your financing round successfully. 4ou can e*plain your business plan in an easy and structured way (making it easy for the investors to understand your business)( easily create your own 1nvestor /itch on the Video( upload the necessary documents to the ata ;oom and do your own 'ompany @ealth 'heck. 6ll these tools make it easier for the potential investors to trust in you and your company and finally invest in you. oing all these steps carefully greatly increases the chances of finding 8ust the right investors for your business. 6s there are certain regulations concerning who can invest and where( you will also be shown related information( like from which countries your potential investors can be. This depends on the domicile of your company. ,or e*ample for a company domiciled in ,inland the investors can be from almost any EU7country. Aovernmental and non7governmental organi<ation wanting companies in their respective country to use Venture Bonsai can contact us to learn more about co7 operation possibilities. 6t this stage you should also fill7in the 5uestions in the %etailed Business !lan section.

These are the same 5uestion you most probably already have answered in your business plan (which you can also upload to the %ata &oo in the / ,7format). Bike the Elevator !itch on the Video( you should also create (this is strongly recommended even though not re5uired) what we call 1nvestor !itch on the Video. 1t9s easy to create this as the 5uestions you should answer are the same 5uestions previously answered( this time only on video. The 5uestions you should answer are listed here. will be used to handle all the documentation related

Venture Bonsai9s %ata &oo tasks.

'hareholders( Agree ent is one of the key documents you need to prepare during this phase. 1n order to make this as easy as possible( we have already created a standardi<ed documentation set together with BoreniusCDemppinen legal agency. We have earlier written about the benefits of standardi<ed documents. 4ou can also use your own 'hareholders( Agree ent which may be the case especially if you already have a )ead *nvestor. That is perfectly fine as long as the document is enabling new shareholders 8oining the agreement with a separate one7page 0 eed of 6dherence3 document. 1f you need any help for any parts of this phase( you can buy services from our Certified !artners. /lease email companies(at)venturebonsai.com to learn more.

4ou can also upload to the %ata &oo any other / ,7documents that you think might be of interest to your potential investors( like white papers and brochures. 4ou may also want to create in7official *nfor ation +e orandu ( telling information about your company in a more professional format. We will provide you with an e*ample you use as basis. We strongly recommend that you go through a Co pany ,ealth Chec- process.

1t9s basically a Vendor %ue %iligence where you list certain facts and historical information about your company( creating additional trust to you and your company by people who may not have ever met you. This document will be checked and certified by a Venture Bonsai certified lawyer. This wil cost you about &>"" euros( depending on the country. 4ou can read more about Vendor ue iligence here.

1n order to enable the actual investments( and on the other hand offer additional security the investments will be made to an Escrow Account held in the bank.

We will provide you information how to get this from your local bank. 6ll the investments will made with a bank transfer to this Escrow Account. The funds will be released to your company after a successful financing round as described later. 4our company needs to have an auditor so if you don9t have one( you should get one now.

6fter having prepared your company for the financing round( you9re ready to be verified and launch the round.

*f You Already ,ave a )ead *nvestor

Venture Bonsai is a great tool also if you alread have a Bead 1nvestor( or work with with 6ngel 2rgani<ation.

6n e*isting =hareholders9 6greement can be used as part of the process( as long as its structure allows new shareholders 8oining it with a eed of 6dherence document. 'ompany @ealth 'heck (the Vendor ue iligence) process can be used by this organi<ation as a tool( and verified by a party itself. The Escrow 6ccount can be managed bu this party.

1f you9re an 1nvestor or an 6ngel 1nvestor 2rgani<ation( please contact us to learn more about this opportunity.

&unning the &ound

6fter you have entered all the preparation information( you can submit your round information to Venture Bonsai for approval.

6 lawyer will confirm the validity of certain information( but not review your other material.

6t this stage we will also make a formal agreement between Venture Bonsai and your company about using the service as a self7service investment round tool. 6fter this you can decide when you will actually launch the round.

.hat happens during the invest ent round

6fter launching your investment round all your company9s followers will get a notification that you have started a investment round. 6nyone else can also see that you have an active investment round (in your company profile page). Eo user will however see any of the investment7round related information unless you have accepted that person to your round as a /!otential *nvestor0. This means that users can apply to become potential investors to your company9s investment round( and one by one you can either accept or re8ect those applications.

There are certain limitations on (due to the financial regulation) how many potential investors you can have from each country (the service will advice you on that). uring the investment round you can use the 'ocial %ue %iligence to communicate with your potential investors( you can also new documents to the ata ;oom and inform your potential investors about new developments you have achieved. 6ll this communication is 2EB4 visible to those people who you have accepted as your /otential 1nvestors. 4ou can (and you should) always check the profile of each person applying.

4ou can also see whether anyone you trust yourself is actually trusting this person. This 1etwor- of Trust will greatly help you on deciding who to accept and who not. There are many people outside these circles and you can rely your decision based on other information such as Binked1n profile( who have met this person in real life and what he is telling about himself. 4ou can also also send a message to this person (or call) to find out more.

There is another discussion forum available in your company profile. We call it 'ocial %ue %iligence.

6nybody who you have accepted as a /otential 1nvestor can ask you a 5uestion. 4ou or anybody in your team can answer those 5uestions. This is the right forum to answer any 5uestions your potential investors ask you. 6s the law re5uires all communication being e5ual to all (potential) investors( you might want to prefer this channel over for e*ample direct one7to7one communication with each investor (as you should always tell all of them all the same information).

uring the investment round( new people can re5uest to 8oin the round (to be /otential 1nvestors). 4ou can accept or re8ect those individually. 4ou can check their profile and see if they are in your Eetwork of Trust.

4ou can also invite any of your own contacts directly to your round( this is very handy way of spreading the word. ,ow *nvestors *nvest When one of your /otential 1nvestors decides to *nvest( the following events will take placeF

Venture Bonsai sends that person the necessary documents (such as eed of 6dherence to the =hareholders9 6greement) to be signed electronically. We9re using Echo=ign system for this process. 4ou will get your own copy of the signed document as well. 6nother document with the payment instructions (to the escrow account) will be sent.

The Escrow 6ccount is a great tool for organi<ing the financial transactions. 1t allows your potential investors invest and not worrying if there is anyone else investing. 1nvestor will get his money back if the minimum amount for the round is not e*ceeded. 6fter the potential investor has signed the documents and the amount has arrived to the escrow account (bank transfer may take few days)( the amount will be shown on your investment round page. The money will be released to your company when the investment round is successful. 1f it9s not( then the money will be paid back to the investors from the escrow account. The bank holding the escrow account will charge a fee for this activity( as defined in the agreement between the company and your company.

Closing the &ound

The investment round is successful after

The ending date of the round is reached and the minimum amount for the round was e*ceeded. 2r after the ma*imum amount of the round was reached.

6fter that

The auditor will check the escrow account (to confirm the amount match the other documentation. 4our company9s Board of irectors will decide on the allocation of the funds (you can still re8ect any individual investment if you like). The funds are released to your company9s bank account. 4ou will inform the new shareholders about the happy event. 6t this time you will also pay Venture Bonsai9s success fee (>G V6T "G).

We9ll tell you later about the tools we9ll have to manage and communicate with your shareholders.

T,E C&2.% E33ECT

ecember &( !"&" 1t9s not ending after the investment round was closed. That9s 8ust the start. =top for a second and imagine what all you could do if everybody (yes( everybody) was helping you. Unlimited possibilities. 6nything could be done. 1n order that to happen( it might however be re5uired you to be in the business of saving the earth (maybe you areH). ,or rest of us( we could still get a lot done with a little help of few other people. -aybe you are in the business of selling something relatively many can understand. 6nd if all of those end up investing little bit of money in your company( they all got owners9 interest to help you. Bet9s call this The 'rowd Effect. Bet9s take an e*ample. =ay you have a new start7up producing custom7made shoes( based on individual measurements. 1f you run a crowdfunding financing round and get !"" individuals all over Europe investing in your company( you 8ust got !"" new marketing agents. 1n the old world( you were supposed to get this & -? from one or two Venture 'apitalists who said 0they have connections3 and therefore are 0value7adding3. Ever heard those thingsH /robably yes. =o what happens after thatH 4ou find out they don9t really know so many people after all in your industry( maybe in some other industries. 6nd getting connected to a friend of theirs who happens to run a shoe shop doesn9t really take you anywhere. 4ou end up using big portion of this &-? you 8ust raised in sales and marketing. @ow about re7thinking the whole thing with The 'rowd EffectH 1magine getting that &-? from those !"" people( who one way or another are interested in your business. -aybe they see it as a good business opportunity or maybe they are in that business themselves. But for sure( the day after they invested in you( they all start marketing your company9s products like never before.

That9s something you cannot buy with money.

But that9s not all. 4ou suddenly may find out that you also have !"" market sensors active. With the right communication tools (not to make it your full time 8ob) you can learn what kind of shoes people really want (market research)( what kind of sales channel opportunities there are (advice) and probably some useful piece of advice as well. =ounds like too futuristicH /robably too much work anywayH

Eot really. Venture Bonsai crowdfunding service makes all of that reality today.

3&E45E1T)Y A'6E% 45E'T*21'

.hat is eant with the ter /crowdfunding0 in Venture Bonsai7 Venture Bonsai is an 0e5uity crowdfunding platform3. 1t means an e*isting company can run a financing round where it collects for e*ample #"".""" euros from >" investors so that each investor invests in average I.""" euros. Venture Bonsai acts as market place that enables and facilitates the investment process to be done efficiently( and offers a self7service facilities for the entrepreneurs and investors. ,ow does it actually wor-7 .hat happens when an investor puts her oney in a co pany7 *s it a fund or so ething7 When an investor puts her money to a company through Venture Bonsai( she becomes a shareholder in the company. There are no hidden parties( all this is totally and truly transparent + which is of course very important in today9s world. *n which countries is Venture Bonsai availa$le for a financing round7 Venture Bonsai is a tool for European companies. ue to legal regulation there is a need to do certain legal checks for each country. 1n the beta phase( companies based in ,inland can already use Venture Bonsai. The order on which other countries will be opened is also based on interest and in5uiries from entrepreneurs. .ho can $eco e an investor in Venture Bonsai7 This depends a bit on where you live. 1f you live for e*ample in the continental Europe( almost anybody can become an investor here. ,or some countries( like the UD( there are some re5uirements concerning being an accredited or certified investor. .hat can an entrepreneur do with Venture Bonsai7 Venture Bonsai has carefully thought about this whole investment process from the view point of an entrepreneur. The most important thing( of course( is making it easier to find investors for all those great new companies. E*panding the e*posure to a larger number of potential investors is of course important( as well as offering tools to present the business opportunity. Venture Bonsai( even in its initial version gives tools for a company to build positive company profile( communicate with potential investors and among other things( actually run the investment round in a legal and structured way.

.hen should an entrepreneur to 8oin Venture Bonsai 9 8ust when it needs oney7 The company should 8oin Venture Bonsai as soon as it has a clear business idea what it will be doing. 1t can build the profile( collect followers and get market feedback even before it9s are looking for funding. That is actually the way how it should be done it( you cannot build the trust and interest over night. ,ow uch oney can a co pany raise with Venture Bonsai and are there any li itations7 Typical financing round would be between >".""" and one million euros. There are certain limitations concerning for e*ample what9s the smallest amount one investor can invest (for e*ample >.""" euros) and how many investors in total there can be. Venture Bonsai follows strictly the European Union directives as well as the national law of each member country. .hat -ind of co panies can use Venture Bonsai: are there any require ents or preferences concerning the industries7 There are no specific re5uirements what industry the company can or cannot be in. There are interesting growth opportunities in many different industries( and what Venture Bonsai offers is suitable for all of those. 2f course( in order to be interesting investment target( the company truly must offer some real value and profitable growth opportunity. Typical industries benefiting from Venture Bonsai include the obvious internet and mobile services but as well for e*ample franchising and fashion industries. ,ow uch does it cost to 8oin Venture Bonsai7 ,or both entrepreneurs and investors using Venture Bonsai is free of charge. ,or companies raising funds( there is a success fee for a successful investment round. 2ne of the things Venture Bonsai has as part of the /trust creation process0 is Vendor %ue %iligence. .hat is that and why is it needed7 6s within Venture Bonsai there can be many investors investing a relatively small amount of money( and they will not necessarily even meet the entrepreneurs( there is a need to create trust online. That9s of course 5uite challenging( for e*ample the videos help to create more personal feeling. ue iligence is kind of 'ompany @ealth 'heck( where company9s important data including finances are checked to make sure the basic company matters are in order. ue iligence is not done and paid by the individual investor here as it would make no financial sense. Therefore the company can prepare a ue iligence on its own( typically called Vendor ue iligence. Venture Bonsai provides a tool to do it in a standardi<ed way. This ue iligence is then available for all the potential investors. 1n order to ensure that the data is correct( the ue iligence should be verified by a third7party lawyer before the investment round is closed. .hat if the co pany needs so e e;pert help 9 does Venture Bonsai provide it7 Venture Bonsai itself does not provide legal or other consulting help (as it is a market place( not financial or legal advisor) but it has been made very easy and cost7efficient to buy third7party services. The company can even buy an e*pert to guide you through the whole process.

There is a lot of paperwor- involved: li-e 'hareholders( Agree ent and Ter 'heet and so on. %oes Venture Bonsai provide any help for that7 4es. Venture Bonsai believes that the world is going in the direction of more standardi<ed =hareholders9 6greements and that is supported. Venture Bonsai provides standardi<ed documents which are built to be acceptable for all parties in this kind of service. There is an additional benefit of this as investors become familiar with the standardi<ed documents( it actually becomes easier to invest in new companies as there is no longer a need to go through yet another kind of documentation. .hen the actual invest ent is done $y the investor: the oney goes to a /escrow account0 in a $an-: why is that so7 ,irst of all( it gives security for the investor that she can get the money back if the investment round is not successful. =econd( it makes the whole process easier and gives additional security for all parties involved. After the invest ent round is successfully closed: what happens then7 %oes Venture Bonsai offer any $enefits for the co pany after that7 4es. Venture Bonsai offers communication and other tools for the entrepreneurs to keep in touch with those new shareholders that may offer additional value in the form of market research or customer leads( for e*ample. This enables to use the 0crowd3( potentially consisting of people in various countries to help you based on the ownership( it9s a great opportunity.