About Raising Funds On HMx

Target Amounts and Offering Deadlines

In addition to the information below, we recommend looking at the SEC's helpful guide to fundraising basics, intended to help guide founders through the regulatory process and in structuring their capital raises.

Promissory Notes are a type of Debt Security that require you, the Issuer, to pay an investor’s money back, plus interest at a specified rate, over a specified time period. Owning a promissory note does not make the investor an owner of the company; rather, they are a creditor.

Revenue Sharing Notes require you to pay a specified percentage of your revenue. For example, a revenue-sharing note might require that you pay investors 5% of your company’s 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 investors buy an Equity Security, such as the common stock of a corporation, they become a shareholder in the company. As a shareholder, they would generally have the right to share in any profit distributions made by the company.

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 of these types of securities 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. 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 — if and when you raise more money in the future. If you never raise 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.

Our Fees

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 representing a diverse group of companies in terms of:

• Entrepreneurs' experience level, gender, and ethnicity
• Hospitality industry segments
• 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.

COMPANY EVALUATION

• 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.

OFFERING REVIEW

Issuers applying to run Growth Offerings (raises over $250,000 and up to $5 million) 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.

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

ADDITIONAL CRITERIA

• 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.

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

DISQUALIFICATION OF ISSUERS

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.