Crypto experts say it’s coming. Gamers say it’s already here, and investors are hungry to stake their claim in it. We’re talking about the metaverse, i.e., the virtual experiences, environments and assets that connect our lives together.
If you sign into work meetings using a digital avatar, you’re already on the fringe of the metaverse. If you play games like Fortnite or Animal Crossing, you’ve almost entered the metaverse entirely.
NextSeed (now part of Republic) is an online crowdfunding investment platform seemingly torn between the metaverse, and small-town U.S.A. On the one side, there is NextSeed, offering small business investment opportunities in restaurants, retail and local real estate.
On the other side is Republic, an investing platform offering a litany of investment opportunities in everything from gaming, augmented reality, cryptocurrency, and cutting-edge tech startups.
This review is for anyone looking to take part in the metaverse experiment, or simply invest in a local business they love. It details what we know about NextSeed; its services, and what you need to feel confident about making an investment.
NextSeed first launched in Texas where it took advantage of intrastate crowdfunding exemptions from non-accredited investors. Until recently they offered relatively few debt investments, with a focus on small retail/restaurant businesses.
Today, NextSeed has partnered with Republic, an investing platform created to “democratize fundraising and expand equity investing to the masses.” Together, NextSeed and Republic provide a robust ecosystem that enables investors with direct access to investments in
tech startups, gaming, crypto, and real estate assets.
What is NextSeed
NextSeed is a financing platform that provides new and growing businesses with opportunities to raise capital and engage with the local community as investors. In other words, NextSeed enables business owners with a way to find investors and raise money without giving up ownership in their company to accredited investors.
With NextSeed (and Republic), business owners can create a debt offering and invite anyone to invest in their company without the hassle of traditional financing. It also enables individual investors to put their capital to work with small businesses, growing startups, and commercial real estate.
How NextSeed Works
NextSeed works much like Kickstarter, but for local businesses. Once users create their account, they can browse NextSeed’s list of companies and choose one of two types of investments options:
- Preferred Equity – Preferred stockholders have ownership in a company. However, unlike common stockholders, preferred stockholders do not have voting rights or management rights. Founders and employees of a company are usually common stockholders.
- Debt Investments – Debt investment on NextSeed provides funds to a business so it can build and grow. Businesses expect to pay back the original investment, plus a return. But they can not guarantee their success.
NextSeed users can also invest in a menu of commercial, residential, and industrial real estate. Though some of these investment options are limited to accredited investors, most are free to all users. There are investment limits and minimum investments, as well as different individual accounts, investment entities, and self-directed IRAs.
Yet, despite the complexity of its investment options, NextSeed is one of the few platforms that allows users to invest in startups, small businesses, and real estate not typically offered by other brokerages.
Nextseed Investment Offerings
Prior to the partnership with Republic, NextSeeds investment offerings were admittedly few, and limited to “consumer-facing Main Street” businesses, such as:
- fitness studios
- salons, and
- retail stores.
As of late 2020, NextSeed is part of Republic, which enables its users to explore investment opportunities with high-growth potential in:
- real estate, and
Taken together, the investment offerings of NextSeed and Republic cover a wide range of different industries. Users can even browse investment opportunities organized by communities like veteran, female, and minority-owned businesses.
But that variety is only available to NextSeed users who expand their portfolios into verticals offered by Republic. Investors choosing to adhere strictly to NextSeed offerings must be content with four investment offerings in Texas and New York.
What Do You Get When You Invest with NextSeed
In addition to its investment offerings, NextSeed also provides an online Education Center, where users can learn about different types of investments; how to manage risk, and predict maximum returns. But NextSeed is most valuable to business owners seeking investment. Resources include:
- flexible debt financing from investors;
- legal templates and filing support,
- marketing expertise and consultation, and
- servicing payments to investors throughout the repayment cycle.
NextSeed also regularly hosts community events and networking opportunities to increase community support and engagement. What NextSeed does not offer is any specific protection once an investment is made, or any direct investment advice.
To their credit, NextSeed is upfront about the risks involved and provides plenty of useful information, including:
- Business Highlights
- Investment Terms
- Use of Proceeds
- Company Description
- Business Model
- The Team
- Bonus Rewards
Whether you invest to make money, or in the companies you love, success with NextSeed depends entirely on due diligence. Investors are advised to conduct their own research using the above materials before making an investment.
How Do Investors Earn A Return With NextSeed
The best way for NextSeed users to maximize their return on the platform is by carefully researching investments before making them into multiple companies. The goal here is to throw out a large net, knowing that some investments are unlikely to turn out, while others are more likely to win big.
Fortunately, the money contributed to any sale on the NextSeed platform is held in escrow until the entity meets its minimum funding goal. That’s when the capital is actually invested. If the entity does not reach its minimum funding goal, the investment is refunded to the user account.
What’s more, every business featured by NextSeed has passed an approval process including review and submission of:
- last three years of business’s tax returns (if applicable);
- balance sheets, income statements, and statements of cash flow for the last three years and current year to date (if applicable);
- bank statements of the company for the last six months;
- five-years pro forma financial projection, and
- a copy of rental lease agreement (if funding request is for a new location).
Between the above-mentioned information, the NextSeed Education Center, and their own due diligence, users should have the resources they need to make prudent investments, and actually make some money using the NextSeed platform. To date, NextSeed claims to have paid out more than $7 million in cash returns.
How Do I Invest on the NextSeed Platform?
Investing with the NextSeed platform is as simple as creating an account, funding it with a $100 minimum investment, and choosing from the opportunities available. In contrast to their partner, Republic, NextSeed seldom offers more than five investment opportunities at a time.
To sign up for NextSeed, simply visit its website and Click Sign up > Create an account with a username and password > Use six-digit verification code to complete registration >Provide personal information to verify your identity:
- Phone number
- Social Security number
Choose the type of account you want > Browse investment options on NextSeed >Click Invest now once you’ve decided where to contribute > Provide an external bank account and routing number to make your initial investment.
The minimum investment on NextSeed is $100, with many businesses choosing to set their own investment minimum. The money contributed to any sale on its platform is held in escrow until the company meets its minimum funding goal. Should the company fall flat of its minimum funding goal, NextSeed will refund invested capital into the user’s account.
Pricing and Fees
NextSeed users are charged a 2% fee for every payment a business makes to their account. That’s a steep fee compared to traditional brokerages who charge between 0.25% and 1% annual management fees on their basic accounts.
Fortunately, NextSeed doesn’t function like a traditional brokerage. It charges no annual management fees or upfront fees. In other words, NextSeed fees depend entirely on returns from individual investments.
If you read our Introduction to Alternative Investment Crowdfunding & When to Try It, you know that there are some risks with the alternative investments offered by NextSeed, and, in some respects, Republic.
That said, the potential returns of alternative investments are often great, so long as investors choose their investments based on their individual risk tolerance and objectives. As stated in previous sections, NextSeed offers both preferred equity, and revenue sharing notes.
How Do I Get My Money Out
In general, debt investments (businesses) offer monthly payments to investors made in full by a certain maturity date. Investors have no ownership in the business and the investment ends when payments end.
Preferred equity investments, however, generally include quarterly dividend payments to preferred equity stakeholders. Capital for any investment on NextSeed can be withdrawn from user accounts at any time, assuming it is not tied up.
There are three ways to get in touch with customer service if you need more information, or help to withdraw money from your NextSeed account:
- Send an email to firstname.lastname@example.org
- Call 800-933-0885
- Leave a callback request in their chat window. There is no live chat option.
How Long Are Returns Tied Up?
The majority of debt investments on NextSeed are short and middle-term investments of up to six years. Investors have no ownership in the business and the investment ends when payments end.
If a business liquidates its assets, debt holders are first in line and have a claim to those assets before equity stakeholders. This means debt holders will be paid first before equity holders get anything. Preferred equity investments, on the other hand, are usually longer-term investments.
How Does NextSeed Make Money?
NextSeed does not charge investors anything upfront, though they do retain a 1% fee on all payments made by the business. NextSeed also charges the borrower 10% of the total capital raised.
Pros and Cons: How NextSeed Compares To Competitors
Taken at face value, NextSeed does offer only a handful of investment opportunities, most of which are high-risk. But there is value in the platform, especially for start-up businesses and anyone looking to invest in their local main street. Below we detail the pros and cons of the NextSeed platform so you can determine for yourself if it’s right for you.
NextSeed provides access to alternative investments that most brokerages ignore, like startups, small businesses and real estate.
Though NextSeed allows users to invest directly in local businesses and startups, these investments are innately risky. To NextSeeds credit, they make the risks of investment abundantly clear on their website, and in their Education Center.
Unlike many brokerages, NextSeed does not charge upfront fees, annual management fees, or commissions.
Though NextSeed provides a myriad of useful information to investors, they do not provide any direct investment advice to their users. Investors who use NextSeed are advised to conduct their due diligence and analyze all of their options before making an investment decision.
NextSeed is one of the few platforms to provide all investors with options that were once available only to accredited investors. These include debt investments and preferred equity.
NextSeed Investments are limited to a range of $2,200 to $107,000 across a 12-month period.
NextSeed does offer a way for alternative investors to invest in more startups and local businesses that they might not find elsewhere, but that’s about it. Without the investment opportunities offered by Republic, NextSeed falls flat.
If you’re looking to build your portfolio, NextSeed may be able to help you find a local business opportunity, or start-up to invest and believe in. But if you wish to grow your portfolio outside of Texas and New York, you will have to look elsewhere. Fortunately, Republic is just a click away.
If you are considering investing in NextSeed, or want to further discuss the investment opportunity with other Money Minx members, join us in the Money Minx community (open to everyone, not just subscribers).