Invest in the future of hospitality

About Investing On HMx

About Investing With HMx


You’ll see these terms on HMx and throughout this page.

Site, HMx, and HMx Invest refer to our website and investment platform.

Issuers are the companies trying to raise money by selling securities on HMx.

A security is a share of stock, a promissory note, a bond, or any other instrument offered by an Issuer on our site.

Title III refers to Title III of the JOBS Act of 2012, which allows Regulation CF.

Funding portal describes sites, like HMX, which are allowed to offer and sell securities under Title III. A funding portal, though similar, is not a broker-dealer.

SEC is the US Securities and Exchange Commission. Learn more at

FINRA is the Financial Industry Regulatory Authority. Learn more at


What To Consider First

Investing in the companies on HMx is very different from investing in the public stock market. Companies on HMx are likely to be small, with limited or no track records or profits. In view of these caveats and the Risks of Investing below, we believe that the companies on HMx offer worthwhile opportunities to earn interest and invest in businesses you care about.

The first area of consideration before investing in any company on HMx is your own personal circumstances. Among the questions you should ask yourself are:

  • Can I afford to lose the money I invest?
  • Will losing all or part of the money I invest impact me psychologically?
  • Do I understand the company I’m thinking about investing in? Do I understand its product or service, and am I familiar with that market?
  • Do I understand how the company can make money?
  • Do I understand the security I’m buying?
  • Do I trust the owners and managers of the company?
  • Do I understand the documents I’m being asked to sign?
  • Do I feel comfortable making this decision myself? If not, have I consulted with an advisor?

Learn More About

What We Do (And Don’t Do)

How We Screen (And Don’t Screen) Issuers

The Types Of Securities Offered On HMx

Investment Limits

Information The Issuer Will Disclose

How To Invest With HMx

Risks Of Investing

What We Do (And Don't Do)

We are a funding portal, registered with the SEC and FINRA to act as an intermediary in securities offered and sold under Title III. We are not a registered broker-dealer.

Think of us as a marketplace, bringing together companies and investors. When you invest, you are not investing in us or any affiliated entity. You are investing in a third-party business that has chosen to raise money using our marketplace.

We do:

  • Conduct background checks on a company and its principals.
  • Conduct due diligence to have a reasonable basis to believe the Issuer is complying with all its obligations.
  • Conduct due diligence to have a reasonable basis to believe the Issuer has established a means to keep accurate records of the holders of its securities.
  • Advise Issuers about their offerings and help them prepare their offering documents.
  • Screen investors to ensure they satisfy applicable per-investor limits.
  • Provide communication channels between you and the Issuer, and between you and other potential investors, where you can ask questions and exchange information.
  • Provide search functions and other tools for investors.
  • Provide you with educational materials to help investors assess potential risks.
  • Keep records of investor communications and materials.

We do not:

  • Offer investment advice or recommendations.
  • Guarantee any particular investment outcome or assume responsibility for what happens to your investment.
  • Guarantee the accuracy of information you receive from Issuers.
  • Speak to investors about the merits of any company or offering.

Our Relationship With Issuers

Issuers pay us to use our funding portal in a variety of ways. When you invest in an offering, we always disclose our compensation.

Issuers might:

  • Pay us flat fees, in commissions on funds raised with HMx, or by other means.
  • Pay us for services we provide them and/or reimburse us for expenses we incur on their behalf.
  • Pay us in whole or in part with their own securities, which will always be the same class of securities offered to investors on HMx.

We will never own any financial interest in Issuers listed on HMx, other than securities we receive from them as compensation. After an offering is complete, we might or might not have an ongoing relationship with the Issuer. For example, they may decide to raise money on HMx in the future or use services provided by (and pay compensation to) entities affiliated with us.

Communication Channels

HMx offers online communication channels — chat rooms, essentially — where investors can ask questions and talk with Issuers and with one another. All discussions in these channels are visible to the public, but only investors registered with HMx are allowed to post. Representatives of the Issuer and anyone engaged in promoting an Issuer’s offering must clearly identify themselves as such. As an intermediary, we cannot participate in chat rooms except to establish guidelines and remove potentially abusive or fraudulent content.


An Issuer might hire a public relations firm or other third party to promote the Issuer’s offering on the Platform – for example, by talking about the offering in our chat room. Or an employee or founder of the Issuer might do the same thing. In either case, the person doing the promoting must identify himself or herself on the Platform and disclose that he or she is engaged in promotional activity. In the case of a third party, the third party must also disclose that it is being paid for its promotional activity.


How We Screen (And Don't Screen) Issuers

Our team of hospitality industry veterans maintains a holistic vetting process to exclusively choose Issuers we believe will run successful fundraising offerings, will contribute to our community, and show potential for growth.

We are committed to providing investors with a range of offerings that is diverse in terms of:

  • Entrepreneurs’ experience level, gender, and ethnicity
  • Hospitality industry segments representing restaurants, consumer goods, and technology
  • US markets beyond metropolitan areas
  • Funding pathways including debt and equity
  • Business stage, from emerging to growing to established

Our Review Process

HMx partners with North Capital to conduct legal due diligence to review and verify the legal standing of the applicant’s company. Our team raises any potential issues directly with the applicant and allows them to either adjust or withdraw their application.

All offerings are subject to the same objective review process, outlined below.


  • Background check on the company and entrepreneur(s) using industry-leading tools
  • Financial review confirming the company has successfully executed projects in the category they are looking to bring to the HMx platform. If they don’t have a track record in the same category, we evaluate their track record in their core business(es) and identify potential blind spots and risks for entering a new category. 
  • Legal review and background check, conducted with North Capital to ensure the company is lawful and eligible to raise funds on HMx.


Issuers applying to host Growth Offerings (raises over $500,000) must meet the following criteria:

  • Restaurants: At least 1 operating unit and 1 year of financial operating statements and cash flows to verify performance.*
  • Consumer Goods: At least 6 months of sales volumes online, in-store, vending, or at a farmer’s market. For kitchenware and other non-food items, we require a prototype in production and supply chain partners secured.
  • Hospitality Technology: A prototype in production and supply chain partners defined. 
  • Real Estate:  A concept, opportunity, or expansion of an existing asset 

*We offer an exception for existing restaurant groups or individuals with significant industry track records who wish to issue securities for new concepts. 


  • The offering is within a core competency of the company. 
  • The business plan and supporting materials demonstrate professionalism and follow industry standards. 
  • The business plan and offering terms are supported by market data. 
  • The offering aligns with HMx investor preferences in terms of brand, category, security type, and geography. 
Under regulations issued by the SEC, we are required to:

  • Have a “reasonable basis” for believing that every Issuer on our Platform is eligible to offer its Securities on our Platform and is complying with Title III. We might perform our own due diligence, but we are generally allowed to rely on the representations of the Issuer.
  • Have a “reasonable basis” for believing that every Issuer on our Platform has established means to accurate records of the holders (owners) of its Securities. Again, we might perform our own due diligence, but we are generally allowed to rely on the representations of the Issuer.
  • Deny access to the Platform to any Issuer if:
    • We have a “reasonable basis” for believing that an Issuer or any of its officers, directors, or beneficial owner of 20% or more of its outstanding voting securities is subject to disqualification under the rules discussed under “Disqualification of Issuers” below. We are not allowed to rely solely on the Issuer’s representations to form this “reasonable belief,” but must conduct background checks with third parties.
  • We have a “reasonable basis” for believing that the Issuer or the offering presents the potential for fraud or otherwise raises concerns about investor protection, or we can’t effectively assess the risk.

We are neither required nor allowed to:

  • Conclude that Issuers on our platform are “good investments” for our investors.
  • Tell you if we think one Issuer offers a “better investment” than another.


Some Issuers and “certain other people” (defined below) involved in disqualifying events (defined below) within the last ten years are no permitted to raise funds under Title III.

“Certain other people” refers to:

  • Any predecessor of the Issuer.
  • Any director, officer, general partner, or manager of the Issuer.
  • Any person owning 20% or more of the Issuer’s voting power.
  • Any person who will be paid for soliciting investors, and any general partner, director, officer, or manager of such a solicitor.

Disqualifying events involve improper actions in the securities business — for example, a felony or misdemeanor conviction in connection with the purchase or sale of any security, or the loss of a license for misconduct. As noted above, we conduct background checks before allowing Issuers to list on HMx.

Types Of Securities Offered On HMx

Investment opportunities on HMx always explain what type of security is being offered. Below is some additional, general information about securities.

Promissory Notes are a type of Debt Security that require the Issuer to pay your money back, plus interest at a specified rate, over a specified time period. Owning a promissory note does not make you an owner of the company; rather, you are a creditor. Provided the company has enough money to repay your loan and any interest you’ve been promised, the value of your security stays the same. On one hand, most fluctuations in the fortunes of the company don’t affect you. On the other hand, you don’t share in the appreciation if things go well.

Revenue Sharing Notes require the Issuer to pay a specified percentage of its revenue. For example, a revenue-sharing note might require the Issuer to pay investors 5% of its revenue for four years. Typically, a revenue-sharing note will also state a maximum that investors are entitled to receive (e.g. double their investment) and a due date for repayment of the original investment.

When you buy an Equity Security, such as the common stock of a corporation, you become a shareholder in the company. The value of your interest fluctuates with the fortunes of the company; if the company does well the value of your interest goes up, while if it does poorly the value goes down, possibly all the way to zero. As a shareholder, you generally have the right to share in any profit distributions made by the company, and you also share in the appreciation in the value of the company. Owning an equity security in a company is like owning a house, both the good part and the bad part. When a company dissolves, the owners of the equity securities are paid last, after all the creditors.

Typically, the holders of Preferred Equity Securities have a right to receive some distributions before holders of regular equity securities. For example, the holders of a preferred stock might have the right to receive a 4% dividend before any dividends are paid to the holders of common stock. But preferred equity is still equity — owners are paid after creditors.

Hybrid Securities have characteristics of both equity and debt securities.

Convertible Securities start out as one type of security and can be changed to another type of security. Sometimes the conversion is triggered at the option of the holder, sometimes at the option of the company, and other times upon the occurrence of a specified event. For example, a company might issue a debt security that can be converted by the holder into common stock at a specified time.

SAFE stands for “simple agreement for future equity.” Although there are many kinds of SAFEs, they typically convert into an equity security — either common stock or preferred stock — when the issuer raises more money in the future. If the Issuer never raises more money, investors typically have to wait until the company is sold or dissolved to get their money back.

Callable Securities can be bought back (“called”) by the Issuer, and any type of security can be a callable security. In the case of a Debt Security, this is equivalent to an issuer having the option to prepay a loan prior to its maturity.

The possibilities for other types of securities are limited only to the imaginations and financial needs of companies, investors and lawyers.


Investment Limits

Accredited Investors can invest as much as they please in offerings under Title III. Accredited Investors include:

  • A person with an individual or joint (with a spouse or spousal equivalent) net worth exceeding $1 million at the time of investment, excluding the value of their primary residence.
  • A person with income exceeding $200,000 in each of the two most recent years or a joint income with a spouse or spousal equivalent exceeding $300,000 in each of those years, with a reasonable expectation of the same income level in the current year.
  • A person who holds any of the following licenses from FINRA: a General Securities Representative license (Series 7), a Private Securities Offerings Representative license (Series 82), or a Licensed Investment Adviser Representative license (Series 65).
  • A person who is a “knowledgeable employee” of the Issuer if the Issuer is an investment company as defined by the Investment Company Act (ICA) of 1940 but for sections 3(c)(1) or 3(c)(7) of the ICA.
  • An investment advisor registered under the Investment Advisors Act of 1940 (the “Advisers Act”) or the laws of any state.
  • Investment advisors described in section 203(I) (venture capital fund advisers) or section 203(m) (exempt reporting advisers) of the Advisers Act.
  • A trust with assets in excess of $5 million, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person.
  • A business in which all the equity owners are accredited investors.
  • An employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets over $5 million.
  • A bank, insurance company, registered investment company, business development company, small business investment company, or rural business development company.
  • A charitable organization, corporation, limited liability company or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets exceeding $5 million.
  • A “family office,” as defined in rule 202(a)(11)(G)-1 under the Advisers Act, if the family office has assets under management in excess of $5,000,000, was not formed for the specific purpose of acquiring the securities offered, and is directed by a person who has such knowledge and experience in financial and business matters that such family office is capable of evaluating the merits and risks of the prospective investment,
  • Any “family client,” as defined in rule 202(a)(11)(G)-1 under the Advisers Act, of a family office meeting the requirements above, whose investment in the issuer is directed by such family office,
  • Entities, including Indian tribes, governmental bodies, funds, and entities organized under the laws of foreign countries, that were not formed to invest in the securities offered and own investment exceeding $5 million.
  • A director, executive officer or general partner of the company selling the securities, or any director, executive officer, or general partner of a general partner of that issuer.

If you are a Non-Accredited Investor, Title III limits how much you can invest in regulation CF every year — not only in a single company or funding portal, but total. “A year” refers not to the calendar year, but rather begins on the date of the first investment (for example, July 1, 2023–June 30, 2024).

If either your annual income or net worth is less than $124,000, you may invest a maximum of $2,200, 5% of your annual income, or 5% of your net worth—whichever number is greater.

If your annual income and net worth are both at least $124,000, you may invest a maximum of 10% of your income or net worth, up to $124,000.

These limits are adjusted periodically by the SEC based on inflation.

You and your spouse may combine your incomes and assets for the purpose of determining how much you may invest, although if you do so, you will be treated as a single investor for purposes of determining how much either of you may invest.


Information The Issuer Will Disclose

Before you invest, the Issuer must provide you with a Form C (available on the site) with extensive information including:

  • Their name, address and website.
  • Their directors and officers.
  • The principal occupation and employment for the last three years of each director and officer.
  • The name of each person owning 20% or more of the Issuer’s voting securities.
  • The risk factors associated with the investment.
  • The Issuer’s business and business plan.
  • How the proceeds of the offering will be used.
  • The Issuer’s ownership and capital structure.
  • A description of how rights exercised by the Issuer’s principals could affect investors.
  • The compensation paid to HMx in the offering.
  • A description of the Issuer’s previous offerings, if any.
  • Whether they have previously failed to file any reports required by law.
  • Transactions with officers, directors and other “insiders.”
  • Whether the Issuer would be disqualified from offering securities under Title III under the “bad actor” rules if the effective date of those rules were different.
  • A discussion of their financial condition.
  • How they would deal with over-subscriptions.
  • Where on they will post annual reports, and when the annual reports will be available.
  • Financial information as described below.
  • Any “testing the waters” materials.
  • Any other information necessary to ensure the above statements, in light of the circumstances in which they were made, are not misleading.

The Issuer will have to disclose:

  • How much money they are trying to raise in the current offering (their Target Amount).
  • Whether this is their first offering using Title III (Reg CF) and how much they have raised using Title III in the last 12 months.

If the amount of the current offering and all other Title III offerings the Issuer made in the last 12 months equals $107,000 or less, the Issuer must provide their:

  • Total income, tax income and total tax, as reported on their federal tax return, certified by the principal executive officer of the issuer.
  • Financial statements certified by the Issuer’s principal executive officer or, if available, statements reviewed or audited by a public accountant independent of the Issuer.

If the amount of the current offering and all other Title III offerings the Issuer made in the last 12 months exceeds $107,000 but is no more than $535,000, the Issuer must provide their:

  • Financial statements that have been reviewed by a public accountant independent of the Issuer or, if available, statements audited by a public accountant.

If the amount of the current offering and any other Title III offerings the Issuer made in the last 12 months exceeds $535,000 but is no more than $1,070,000, the Issuer must provide their:

  • Financial statements that have been reviewed by a public accountant independent of the Issuer, provided this is the Issuer’s first Title III offering.
  • Financial statements that have been audited by a public accountant independent of the Issuer if this is not the Issuer’s first Title III offering.

Regardless of whether the Issuer has made Title III offerings in the past, if the amount of the current offering and any other Title III offerings the Issuer made in the last 12 months exceeds $1,070,000, they must provide:

  • Financial statements that have been audited by a public accountant independent of the Issuer if this is not the Issuer’s first Title III offering.

All financial statements must be prepared in accordance with U.S. “generally accepted accounting principles.”  Financial statement reviews must be conducted in accordance with the Statements on Standards for Accounting and Review Services issued by the Accounting and Review Services Committee of the AICPA.  Financial statement audits must be conducted in accordance with either (i) auditing standards of the AICPA, or (ii) the standards of the Public Company Accounting Oversight Board.

How To Invest With HMx

1. Register with HMx Invest.

You will be asked to establish login credentials, provide some information about yourself, review and confirm compliance with our Terms of Use and Privacy Policy, and consent to electronic delivery of all documents. (We have the right to reject or revoke your registration to HMx for any reason, including a violation of our Terms of Use or Privacy Policy.) Due to FINRA regulations, this account will be entirely separate from any other account you may have with HMx.

2. Browse investment opportunities.

Under Title III, the entire investment process happens online, through the site. We will never send you paper, call you on the phone (except in some emergencies), or ask to meet with you. 

Investment opportunities are available to view at When you click on an opportunity that interests you, you will be able to see all the information available about the Issuer.

3. Make an investment commitment.

Once you decide to invest, click on the “INVEST” button. We will ask for more information, arrange for you to pay for your investment, and ask you to sign one or more documents with the Issuer. For example, you might be asked to sign something called an “Investment Agreement.” 

Having done all that, you will be deemed to have made an “investment commitment,” but you’ll still have a chance to cancel.

Once we receive your investment commitment, we will notify you of:

  • The dollar amount of your commitment.
  • The price of the securities you’ve committed to buy.
  • The name of the Issuer.
  • The date and time by which you may cancel your commitment.

4. Pay for your investment.

You will pay for your securities by a direct transfer from your bank account (an ACH transfer), which will be free to you.

When you invest, your money will be held in an account administered by a qualified third-party financial institution until the offering is completed. We, as a funding portal, are prohibited from holding your money. If the Issuer is successful in raising the target offering amount by the deadline, the bank will release the investors’ money to the Issuer. We will notify you by email and the investment process will be complete. 

Before your investment is final, we will send you a notice disclosing, among other things:

  • The date of the transaction.
  • The type of security/securities you are buying.
  • The price and number of securities you are buying, as well as the number of securities sold by the issuer in the entire transaction and the price(s) at which the securities were sold.
  • If you are buying a debt security, the interest rate and the yield to maturity are calculated from the price paid and the maturity date.
  • If you are buying a callable security, the first date that the security can be called by the Issuer.
  • The source, form and amount of any compensation HMx, as the funding portal, expects to receive in the transaction.

Target Amounts and Deadlines

For each offering, the Issuer will disclose a Target Amount meaning the minimum amount the Issuer is trying to raise and an “offering deadline.” If the Issuer doesn’t raise the Target Amount before the offering deadline, the offering will be canceled and any investors who have made investment commitments will receive their money back.  

If the Issuer reaches the target offering amount before the offering deadline, it may close the offering early as long as (1) the offering has remained open for at least 21 days, and (2) we give notice to investors.

The notice must:

  • Specify the new deadline, which must be at least five days after the date of our notice.
  • Notify investors that they may cancel their investment commitment for any reason up to 48 hours before the new deadline.
  • Notify investors as to whether the issuer will continue accepting investment commitments during the 48-hour period before the new deadline.

If an Issuer intends to accept investments over the Target Amount, they must disclose the maximum amount they will accept and how they will handle these “over-subscriptions.” For example, the Issuer might allocate securities on a first-come-first-served basis or pro rata among all investors who make investment commitments. If the Issuer intends to accept investments over the Target Amount, they will still be subject to the maximums set by our platform: $250,000 for Seed Offerings and $5 million for Growth Offerings.

Your Right To Cancel Your Investment

You can cancel your investment commitment at any time and for any reason, up to 48 hours before the offering deadline, by following the prompts on the site.

If there is a “material” (important) change in the offering after you’ve made your investment commitment, then (1) the Issuer must notify you of the change and (2) your commitment will automatically be canceled — unless you reconfirm your commitment within five business days — and you will be asked to make a new commitment based on the new information.  

After You Invest

The Issuer is generally required to file annual reports with the SEC and post them on its own website within 120 days after the end of the fiscal year. The annual report will typically include:

  • The same types of information included on the Form C you saw when you invested.
  • Updated financial statements certified by the principal executive officer of the Issuer. The financial statements don’t have to be reviewed or audited by a public accountant, but if the Issuer does happen to have reviewed or audited financial statements, they must provide them.

Updated disclosures about the Issuer’s financial condition.

  • The Issuer may stop filing annual reports upon the earlier of the following occurrences:
  • They’ve filed at least one annual report and have fewer than 300 shareholders of record.
  • They’ve filed at least three annual reports and have total assets no greater than $10,000.
  • The Issuer or someone else buys all the securities issued in the Title III offering.
  • The Issuer registers its securities and is required to file reports under the Securities Exchange Act of 1934.
  • The Issuer is dissolved under state law.

At best, you will have current information about the Issuer once per year. If the Issuer stops providing annual reports, you won’t have current financial information about the Issuer at all.

Resale Restrictions

Once you buy a security, you may not sell or otherwise transfer the security for one year, except for sales or transfers:

  • Back to the Issuer.
  • To an accredited investor.
  • As part of an offering registered with the SEC.
  • To a family member, to a trust you control, to a trust created for the benefit of a family member, or in connection with death or divorce. (The term “family member” includes a child, stepchild, grandchild, parent, stepparent, grandparent, spouse or spousal equivalent, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of the purchaser, and includes adoptive relationships.)


Risks Of Investing

Many of the Securities listed on our Platform are speculative and involve significant risks, including the risk that you could lose some or all of your money. There are four main risk factors, listed below in no particular order, to consider when investing with HMx.

Risks Common to Small Businesses

Most small companies are managed by their founders, who are often very strong in one area — for example, they might be an extremely effective salesperson or a terrific baker — but lack experience or skills in other critical areas. It might be a long time before (1) a startup can afford to hire professional management or (2) the founder recognizes the need for professional management. In the meantime, the company and its investors could suffer.

Small companies have very limited access to capital, a situation that Title III Funding Portals hope to improve but cannot fix entirely. Often these companies cannot qualify for bank loans, leaving them to live off the credit card debt incurred by the founder. Capital is the oxygen of any business, and without it a business will eventually suffocate and fail.

Most small businesses sell only one or two products or services, making them vulnerable to changes in technology and/or customer preferences.

Large companies typically have in place strict accounting controls to prevent theft and embezzlement. Smaller companies typically lack these controls, exposing themselves to additional risk.

Many small businesses cannot afford the technology that a larger business would use to operate more efficiently.

Many small businesses experience frequent shortfalls in cash flow. If a business doesn’t have enough money to meet payroll, it might not make payments on obligations to its investors, either.

A small business is likely to be vulnerable to competition, whether in the form of another small business or a national chain.

Risks Common with Technology Companies

We know technology will continue to advance, but it is extremely difficult to predict in exactly what direction. Most new technologies never achieve commercial success.

Competition in the technology industry is intense.

A few companies — Google, Apple, Amazon, and Facebook — dominate the industry. When one of these companies announces that it intends to invest in a given technology, the announcement itself can destroy smaller companies.

Technology changes rapidly. Nokia, now almost forgotten, was the powerhouse of telephone handset manufacturers not long ago. MySpace was a promising company until Facebook took over the space. Within the last 12 months Zoom has lapped all its competition in the video conferencing space. One after another technology companies rise and fall. While a technology company might find quick success, it can just as quickly become obsolete.

Risks Common with the Types of Businesses Listed on HMx (and Title III Issuers In General)

Most of the time, the securities you buy on HMx will not give you the right to participate in the management of the company. Furthermore, if the founders or other key personnel of the issuer were to leave the company or become unable to work, the company (and your investment) could suffer substantially. Thus, you should not invest unless you are comfortable relying on the company’s management team. You will almost never have the right to oust management, no matter what you think of them.

The issuer might need to raise more capital in the future to fund new product development, expand its operations, buy property and equipment, hire new team members, market its products and services, pay overhead, and general administrative expenses, or a variety of other reasons. There is no assurance that additional capital will be available when needed, or that it will be available on terms that are not adverse to your interests as an investor. If the company is unable to obtain additional funding when needed, it could be forced to delay its business plan or even cease operations altogether. 

Changes in economic conditions could hurt an issuer’s businesses: Factors like global or national economic recessions, changes in interest rates, changes in credit markets, changes in capital market conditions, declining employment, decreases in real estate values, changes in tax policy, changes in political conditions, and wars and other crises, among other factors, hurt businesses generally and small, local businesses in particular. These events are generally unpredictable.

The securities sold on HMx will not be registered with the SEC or the securities regulator of any State. Hence, neither the companies nor their securities will be subject to the same degree of regulation and scrutiny as if they were registered. 

The law prohibits you from selling your securities (except in certain very limited circumstances) for one year after you acquire them. Even after that one-year period, a host of Federal and State securities laws may limit or restrict your ability to sell your securities. Even if you are permitted to sell, you will likely have difficulty finding a buyer because there will be no established market. Given these factors, you should be prepared to hold your investment (your promissory note) for its full term.

Title III does not require us or the issuer to provide you with all the information that would be required in some other kinds of securities offerings, such as a public offering of shares (for example, publicly traded firms must generally provide investors with quarterly and annual financial statements that have been audited by an independent accounting firm). Although Title III does require extensive information, as described above, it is possible that you would make a different decision if you had more information.

Companies that issue securities using Title III are required to provide some information to investors for at least one year following the offering. However, this information is far more limited than the information that would be required of a publicly-reporting company; and the company is allowed to stop providing annual information in certain circumstances.

It is possible that our systems would be “hacked,” leading to the theft or disclosure of confidential information you have provided to us. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until they are launched against a target, we and our vendors may be unable to anticipate these techniques or to implement adequate preventative measures.

A company might not buy enough insurance to guard against the risks of its business, whether because it doesn’t know enough about insurance, because it can’t afford adequate insurance, or some combination of the two. Also, there are some kinds of risks that are simply impossible to insure against, at least at a reasonable cost. Therefore, any company could incur an uninsured loss that could damage its business.

Before we allow a company on our platform, we run certain background checks, including criminal background checks. However, there is no way to know for certain that someone is honest, and even generally honest people sometimes do dishonest things in desperate situations – for example, when their company is on the line, or they’re going through a divorce or other stressful life event. It is possible that the management of a company, or an employee, would steal from or otherwise cheat the company, and you.

Issuers might provide financial projections reflecting what they believe are reasonable assumptions concerning their businesses. However, the nature of business is that financial projections are rarely accurate, not because issuers intend to mislead investors but because so many things can change, and business is so difficult to predict.

Many companies limit the liability of management, making it difficult or impossible for investors to sue managers successfully if they make mistakes or conduct themselves improperly (not all liability can be waived, however). You should assume that you will never be able to sue the management of any company, even if they make decisions you believe are plainly wrong.

Changes in laws or regulations, including but not limited to zoning laws, environmental laws, tax laws, consumer protection laws, securities laws, antitrust laws, and health care laws, could adversely affect many companies.

Investors are in somewhat of a conflict of interest with HMx. In most cases, we make money as soon as you invest. You, on the other hand, make money only if your investments turn out to be successful. Or to put it a different way, at least in the short term it is in our interest to have you invest as much as possible in as many companies as possible, even if they all fail and you lose your money.  

In many ways your interests and the interests of company management will coincide: You both want the company to be as successful as possible. However, your interests might be in conflict in other important areas, including these:

You might want the company to distribute money, while the company might prefer to reinvest it back into the business.

You might wish the company would be sold so you can realize a profit from your investment, while management might want to continue operating the business.

You would like to keep the compensation of managers low, while managers want to make as much as they can. 

Because of the limits imposed by law, you might invest only a few hundred or a few thousand dollars in a given company. At that level of investment, you might decide that it’s not worthwhile for you to hire lawyers and other advisors to evaluate the company. Yet if you don’t hire advisors, you are in many respects “flying blind” and more likely to make a poor decision.

We have lawyers who represent us, and most HMx issuers. None of these lawyers represents you personally. If you want your interests to be represented, you will have to hire your own lawyer at your own cost.

If the company needs more capital in the future and sells stock to raise that capital, the new investors might have rights superior to yours. For example, they might have the right to be paid before you are, to receive larger distributions, to have a greater voice in management, or otherwise.

Companies listed on HMx will not be subject to the corporate governance requirements of the national securities exchanges:  Any company whose securities are listed on a national stock exchange (for example, the New York Stock Exchange) is subject to a number of rules about corporate governance that are intended to protect investors.  For example, the major U.S. stock exchanges require listed companies to have an audit committee made up entirely of independent members of the board of directors (i.e., directors with no material outside relationships with the company or management), which is responsible for monitoring the company’s compliance with the law. Companies listed on our platform typically will not be required to implement these and other stockholder protections. 

Risks Associated with Debt Securities

As a creditor of the company, the most you can hope to receive is your money back plus interest. You cannot receive more than that even if the company turns into the next Facebook. Conversely, if the company loses enough value, you could lose some or all your money.

Typically, when you buy a debt security on HMx, while you will have a higher priority than holders of the equity securities in the company, you will have a lower priority than some other lenders, like banks or leasing companies. In the event of bankruptcy, they would have the right to be paid first, up to the value of the assets in which they have security interests, while you would only be paid from the excess, if any.

Lack of Security:  Sometimes when you buy a debt security on our Platform, it will be secured by property, like an interest in real estate or equity. Other times it will not. 

Lack of Guaranty:  Sometimes when you buy a debt security on our Platform, it will be guaranteed by the owner of the business, or by someone else. Other times it will not. 

Issuers typically will not have third party credit ratings:  Credit rating agencies, notably Moody’s and Standard & Poor’s, assign credit ratings to debt issuers. These ratings are intended to help investors gauge the ability of the issuer to repay the loan. Companies on our Platform generally will not be rated by either Moody’s or Standard & Poor’s, leaving investors with no objective measure by which to judge the company’s creditworthiness.

Interest Rate Might Not Adequately Compensate You for Risk:  Theoretically, the interest rate paid by a company should compensate the creditor for the level of risk the creditor is assuming. That’s why consumers generally pay one interest rate, large corporations pay a lower interest rate, and the Federal government (which can print money if necessary) pays the lowest rate of all. However, the chances are very high that when you lend money to a company on the Platform (buying a promissory note is the same as lending money), the interest rate might not compensate you adequately for the level of risk.

Risks Associated with Equity Securities

Equity Comes Last in the Capital Stack:  The holders of the equity interests stand to profit most if the company does well, but stand last in line to be paid when the company dissolves. Everyone – the bank, the holders of debt securities, even ordinary trade creditors – has the right to be paid first. You might buy equity hoping the company will be the next Facebook, but face the risk that it will be the next Theranos.

In Most Cases, You Will Be A Minority Investor: Investors will typically be “minority” owners of companies on the Platform, meaning that other parties will have complete voting and managerial control over the company. As a minority stockholder, you typically will not have the right or ability to influence the direction of the company. You will generally be a passive investor. In some cases, this may mean that your securities are treated less preferentially than those of larger security holders.

Possible Tax Cost:  Many of the companies on the Platform will be limited liability companies. In almost every case these limited liability companies will be taxed as partnerships, with the result that their taxable income will “flow through” and be reported on the tax returns of the equity owners. It is therefore possible that you would be required to report taxable income of a given company on your personal tax return, and pay tax on it, even if the company doesn’t distribute any money to you. To put it differently, your taxable income from a limited liability company is not limited to the distributions you receive.

Your Interest Might Be Diluted:  As an equity owner, your interest will be “diluted” immediately, in the sense that (1) the “book value” of the company is very likely to be lower than the price you are paying, and (2) the founder of the company, and possibly others, bought their stock at a lower price than you are buying yours. Your interest could be further “diluted” in the future if the company sells stock at a lower price than you paid. 
Future Investors Might Have Superior Rights:  If the company needs more capital in the future and sells stock to raise that capital, the new investors might have rights superior to yours. For example, they might have the right to be paid before you are, to receive larger distributions, to have a greater voice in management, or otherwise.
Dilution of Voting Rights:  Even if you have any voting rights to begin with (and many of the equity securities offered on the Platform will have no voting rights), these rights will be diluted if the company issues additional equity securities.

Risks Associated with Revenue-Sharing Notes
You Have a Limited Upside:  Although a revenue-sharing note has more upside than a standard note, the upside is still limited. 

Revenue is Uncertain:  The amount and timing of a company’s revenues can be extremely hard to predict. For example, the management of an Issuer might make decisions they believe will lead to a higher value for the company, but also lead to lower revenue, at least in the short term. In fact, companies like Facebook have achieved extremely high valuations before they achieved significant revenue.

Arbitrary Terms:  The terms of your revenue-sharing notes – for example, whether your maximum payout is 1.5 times your investment, 2.0 times your investment, or something else – were likely set by management on an arbitrary basis, without regard to traditional measures of value like profitability.
Conflicts with Management:  As the holder of a revenue-sharing note your interests could conflict with the interests of management in terms of the timing of revenue recognition.

Other Risks of Debt Securities Apply:  All the risks listed above for debt securities also apply to revenue-sharing notes.

Risks Associated with SAFEs
You Don’t Know What You’re Getting:  You don’t know what your SAFE is worth when you buy it. Indeed, this is why SAFEs were invented in the first place – to avoid the need to place a valuation on a small company.

No Fixed Maturity Date:  Unlike a debt instrument (e.g., a promissory note), there is no maturity date with most SAFES, i.e., no date upon which the SAFE must be repaid.

The SAFE Might Never Convert:  The typical SAFE converts to equity only if the company is sold or raises more equity. If neither of those things happens you could own your SAFE indefinitely. 

SAFEs Don’t Pay Interest: The typical SAFE doesn’t pay interest. 

SAFEs are not Appropriate for all Issuers:  SAFEs were developed in Silicon Valley for a particular kind of company that is common in Silicon Valley:  a company expected to experience rapid growth and multiple rounds of financing with an exit (a sale of the company or a public offering) in the not-too-distant future. Of all the companies formed in the U.S. every year, only a small percentage fit that profile. Consequently, SAFEs are not always appropriate.

Other Risks of Equity Securities Apply:  All the risks listed above for equity securities also apply to SAFEs.