FREQUENTLY ASKED QUESTIONS
What is SmartCapital?
SmartCapital is an investment platform that allows anyone to invest in Venture Capital funds that SmartCapital creates. The first SmartCapital VC fund will contain about 30 startups. Unlike a typical VC fund, the 30 companies and the amounts of capital allocated to each company will be known to investors before they invest in the fund. Until SmartCapital, investing in VC funds has been limited to only very wealthy people and companies. Now, with SmartCapital, anyone has the ability to invest in VC funds.

Why Venture Capital (VC) funds?
Venture Capital is financing that investors provide to high growth companies, and if done well, can produce some of the highest returns available in investing. Allocating some portion of your portfolio to an investment in a VC funds may provide you with:
- a more stable level of investment growth relative to direct investment in a single startup;
- diversification of your portfolio, by investing in a startup asset class that is not dependent on a single company; and
- the opportunity for capital appreciation

How does SmartCapital work?
SmartCapital identifies revenue generating, accelerator backed companies that are raising money. If a company qualifies to be part of a SmartCapital fund, their valuation and amount they are raising is determined. After doing so for a large group of companies, SmartCapital announces the formation of a fund where investors can see the exact portfolio allocation before choosing to invest. Once the fund is fully subscribed, all of the companies are invested in at the same time.

How is SmartCapital different from other equity crowdfunding companies?
A lot of the equity crowdfunding companies are only available to accredited investors. Furthermore, the equity crowdfunding companies that allow non-accredited investors to invest only allow non-accredited investors to invest in one company at a time. At SmartCapital, we let anyone invest in diversified funds of many startups at a time.Status as an accredited investor is not relevant to the ability to invest in SmartCapital funds because both accredited and non-accredited investors can invest in SmartCapital funds. However, the amount of money an accredited and non-accredited investor can invest in SmartCapital Funds differs.

What are the benefits of investing with SmartCapital?
SmartCapital makes it easy to own a diversified fund of venture backed companies. SmartCapital enables people to browse information about each company in each fund; trransact entirely online including digital legal documentation, funds transfer, and ownership recordation; manage and track investments easily through an online portfolio; receive automated distributions and/or interest payments; and stay updated with regular financial reporting.

Who might benefit from an investment in a SmartCapital fund?
An investment in our shares may be beneficial for you if you
 - seek to diversify your personal portfolio with a startup-investment vehicle focused primarily on Venture Capital Fund shares;
 - seek to receive eventual returns from high-risk-high-reward long-term investments;
 - seek to preserve capital and are able to hold your investment for a time period consistent with our liquidity strategy.

On the other hand, we caution that an investment in our shares will not meet a person’s need if they
 - require immediate liquidity or guaranteed income; or
 - seek stable growth;
 - seek a short-term investment.

How does SmartCapital protect my information?
Your trust in us and the security of your information is core to our business and a top priority at SmartCapital. We adhere to best practices such as browser encryption, store all of our data on servers in secure facilities, and implement systematic processes and procedures for securing and storing data. Communication on the platform is encrypted via SSL during transit and bank level encryption is utilized for sensitive information. We limit access to your personal and financial information to only those employees with authorized access.

Who can help answer my questions about SmartCapital funds?
If you have more questions, you should contact us by email at investments@smartcapitalx.com or by mail at:
SmartCapital Management
1515 Walnut Street, Ste. 300
Boulder, CO 80304
Who can be an Investor? Am I eligible to invest on SmartCapital?
Currently, anyone in the United States, accredited or non-accredited, can invest in SmartCapital funds. We anticipate enabling international investors to invest in SmartCapital funds by the time the funds launch.

How can both accredited and non-accredited investors invest?
SmartCapital relies on Regulation A of Title IV (or “Regulation A+”) of the JOBS Act. A Regulation A+ offering allows private companies to raise up to $50 Million from the public. Like an IPO, Regulation A+ allows companies to offer shares to the general public and not just accredited investors.

What is the difference between an Accredited Investor and a Non-Accredited Investor?
 An accredited is an investor with a special status under financial regulation laws. Generally, accredited investors include high-net-worth individuals, banks, financial institutions and other large corporations, who have access to complex and higher-risk investments such as venture capital, hedge funds and angel investments. The intent of the classification is to protect non-accredited investors, who may be less capable of recovering from loss due to risky investments.

In the United States, to be considered an accredited investor, one must have a net worth of at least $1,000,000, excluding the value of one's primary residence, or have income at least $200,000 each year for the last two years (or $300,000 combined income if married) and have the expectation to make the same amount this year.

Is there a maximum investment amount? 
If you’re an non-accredited investor, then can invest a maximum of the greater of 10% of their net worth or 10% of their net income in a Reg A+ offering (per offering). If you’re an accredited investor, there is no maximum investment limit.

Is there a minimum investment amount?
Yes. The minimum investment is $1000 per fund. Furthermore, the minimum investment for your investment to be taxed as capital gains is $10,000. If you invest less than $10,000, your investment will be taxed as income.

How often will I receive distributions?
We do not expect to declare any distributions until the proceeds from our public offering are invested and generating cash flow from distributions of Venture Capital Fund or other assets. Once we begin to make distributions, we expect that SmartCapital Management will declare and make them on a quarterly basis, or less frequently as determined by the SmartCapital Management, in arrears. Any distributions we make will be at the discretion of SmartCapital Management, and will be based on, among other factors, our present and reasonably projected future cash flow, U.S. federal income and excise taxes on our undistributed taxable income and gains. SmartCapital Management will set the rate of distributions as is appropriate, and may change significantly over time. SmartCapital Funds, which invest in Venture Capital Fund shares, should not be considered as a source of steady returns. Please see the specific fund offering circular, and specifically the “Description of Our Common Shares — Distributions” and “U.S. Federal Income Tax Considerations” section for more details (www.SmartCapitalX.com/oc).

Any distributions that we make will directly impact our NAV, by reducing the amount of our assets. Over the course of your investment, your distributions plus the change in NAV per share (either positive or negative) will produce your total return.

What is the SmartCapital fund waitlist?
SmartCapital Platform may “Waitlist” investors who, after qualification of the Company Offering by the Staff but before closure of the investment process for such Company Offering, have expressed a desire to invest in the Company Offering. SmartCapital Offerings are reliant upon Regulation A, which allows qualified purchases to invest up to fifty million ($50,000,000) in any twelve month period under a Tier 2 Offering pursuant to Rule 251. Some fund offerings may have lower maximum investment subscriptions set by the SmartCapital Managers. Because SmartCapital allows unlimited redemption during the “Introductory Period”, it is possible for shares to become free during the introductory period, reducing the aggregate investment below the maximum investment allowable for the Offering. The expressed interest of investment including the waitlist may exceed the maximum investment allowable for the Fund. The total actual investment may NOT exceed the maximum investment allowable for the Fund.

If and when shares are made available through redemption during the Introductory Period, these shares will be offered to Waitlist Investors on a first-come-first-serve basis. Such a “waitlist” will be created and maintained in order to ensure that investors who have expressed interest early on will have an opportunity to invest in SmartCapital Funds. SmartCapital Management will set a deadline for Waitlist Investors to complete the various steps that constitute an investment in the Offering. The Waitlist Investor’s status on the Waitlist is rendered forfeit if the investor fails to complete the investment prior to the deadline. SmartCapital Management may then allow other Waitlist investors to invest.

Waitlist investors may from time to time not be granted redemption during the Introductory Period due to insufficient time between investment and the close of the Introductory Period. For this reason, Waitlist Investors are required to acknowledge this limitation during the investment process.

How is investing in a SmartCapital fund different than investing in a typical VC fund?
With typical VC funds, investors provide venture capitalists money to invest at their discretion over a period of a few years. The investor has no choice in what they invest in and how much money is invested in each company. With SmartCapital, once a fund is fully subscribed, all of the companies are invested in at the same time in one day. The companies and investment amounts in each company is known to investors before they invest.

Are SmartCapital funds risky?
Yes. We consider SmartCapital funds as high-risk-high-reward long-term investments. If we are unable to effectively manage the impact of these risks, we may not meet our investment objectives, and therefore, you should purchase these securities only if you can afford a complete loss of your investment.
Will the distributions I receive be taxable as ordinary income?
Unless your investment is held in a qualified tax-exempt account or we designate certain distributions as capital gain dividends, distributions that you receive generally will be taxed as ordinary income to the extent they are from current or accumulated earnings and profits. The portion of your distribution in excess of current and accumulated earnings and profits is considered a return of capital for U.S. federal income tax purposes and will reduce the tax basis of your investment, rather than result in current tax, until your basis is reduced to zero. Return of capital distributions made to you in excess of your tax basis in our common shares will be treated as sales proceeds from the sale of our common shares for U.S. federal income tax purposes. Distributions we designate as capital gain dividends will generally be taxable at long-term capital gains rates for U.S. federal income tax purposes. However, because each investor’s tax considerations are different, we recommend that you consult with your tax advisor. You also should review the section of the offering circular entitled “U.S. Federal Income Tax Considerations,” including for a discussion of the special rules applicable to distributions in redemption of shares and liquidating distributions (www.SmartCapitalX.com/oc).

Are there tax write-offs if I lose money on an investment?
We cannot provide tax advice, and we encourage you to talk with your accountant or tax advisor before making an investment.

When will I get my detailed tax information?
Your IRS Form 1099DIV tax information, if required, will be provided by January 31 of the year following each taxable year.

What are the tax implications of an investment on SmartCapital?
We cannot provide tax advice, and we encourage you to talk with your accountant or tax advisor before making an investment.

May I make an investment through my IRA or other tax-deferred retirement account?
No. We do not currently accept investments through IRAs or other tax-deferred retirement accounts. However, we may make this available in the future.
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1515 Walnut Street, Suite 300
Boulder, CO 80302
SmartCapital Portal, LLC (“SmartCapital”) operates a website at SmartCapitalX.com (the “Site”). By using this website, you accept our Terms of Use and Privacy Policy. Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. All investments involve risk and may result in partial or total loss. While the data we use from third parties is believed to be reliable, we cannot ensure the accuracy or completeness of data provided by investors or other third parties. Neither SmartCapital nor any of its affiliates provide tax advice and do not represent in any manner that the outcomes described herein will result in any particular tax consequence. Prospective investors should confer with their personal tax advisors regarding the tax consequences based on their particular circumstances. Neither SmartCapital nor any of its affiliates assume responsibility for the tax consequences for any investor of any investment. Full Disclosure.

SmartCapitalX, Inc. is preparing and will file an offering circular under Regulation A, Tier II. 

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