Sandhill

FAQ

What am I investing in when I invest on Sandhill Markets?

When you make an investment on Sandhill Markets, you are purchasing the equivalent number of shares in a Special Purpose Vehicle (SPV) managed by Sandhill but owned by the investors and are protected against creditors in the event of bankruptcy. This SPV then purchases shares of the underlying company.

We do this for a few reasons.

Companies have a right to refuse sale of their shares; by selling representation of shares through a SPV, we can provide better liquidity to investors should they choose to divest.
This allows the company to just have one line on its cap table: the SPV. Companies like this for fundraising and regulatory reasons.

What is a holding period?

A holding period determines how long shares must be held before they can be sold or transferred in compliance with securities regulations. On Sandhill Markets, investments must be held for at least 12 months before transfer.

Investors should not be purchasing securities on Sandhill Markets for resale: they are generally illiquid and speculative and carry a higher degree of risk than registered securities.

Who can I sell my investment to?

This is coming in early 2024, subject to regulatory approval. You’ll be able to sell your investment to other accredited investors on the platform.

Will Sandhill Markets buy back my investment if I want to sell or does there have to be investor demand in order to liquidate?

There has to be investor demand to liquidate positions. Sandhill Markets will generally only list in-demand startups, but there is no guarantee of liquidity. You will have control over pricing, and can also adjust pricing to generate more demand.

If I hope to sell after a holding period, how is the price that I sell at determined and what fees are involved in that?

You set the price as the seller. Buyers then determine if they want to buy at that price. You’ll be able to see other listings in the marketplace, and set your price accordingly.

There will be no charge to list your interests on the platform: we will charge a competitive percentage-based fee to sellers on a successful sale. More details on this will be announced when we’re ready to launch the marketplace next year, subject to regulatory approval.

Can I see the investment documents/terms for an investment before committing to an investment?

Once the final terms are set you will have an opportunity to opt in or out of your investment, with no penalty for opting out.

If there's a liquidity event like an IPO, how will the shares be distributed to me?

In the event of an IPO or exit of the Startup, the SPV interests you hold will get paid out on the same schedule as other similarly-situated investors. Investment interests in your account will be replaced with a distribution of cash or publicly-listed shares, and you’ll receive a statement showing you the details. For IPOs where you receive shares (instead of cash), you will need to provide your brokerage account details so we can transfer your shares there.

What happens to my investment if Sandhill Markets no longer exists but the asset achieves liquidity?

Investments on the Sandhill Markets Platform are into LLCs that are managed by Sandhill or its affiliates but exist as separate, bankruptcy-remote entities. In the event of Sandhill shutting down, your investment would survive, and we would institute an orderly transition process to ensure that you maintain access.

Can I use a different entity, not myself individually, to invest in these secondaries?

You are able to invest via an entity so long as the entity passes KYC checks and meets US accreditation standards.

Can I fund my investment using a credit card?

While a credit card is used for membership payments, for investments we are only accept wires or ACH transfers.

Can I invest via a trust?

Yes, you can! Note that the trust must qualify as an accredited investor, either

Having more than $5,000,000 in investments and directed by a sophisticated investor, OR
Be a revocable trust and all grantors qualify as accredited investors.

Can I invest if I am not a US citizen?

Yes, you can invest if you are not in the United States.

Can I review the subscription documents before wiring the money?

Of course! Once you submit interest to any specific company we will share your unique investment link. In that link you will be able to review the subscription documents before signing and wiring.

Once you have signed, your subscription docs will remain on the Platform for you to review and download.

Can I invest through an IRA?

Yes! You’ll be able to select it as an investment option when setting up your investor profile.

Please check with your IRA provider to confirm whether private placements are available. If so, they should provide additional instructions and information you’ll use to fill out your investor profile.

What to expect with regard to taxes:

K-1s for investments made through your self-directed IRA will be sent to your IRA administrator.
Investment income and gains in your IRA account should be treated for tax purposes like any other IRA account of the same type (Traditional, Roth or SEP as the case may be).
There are circumstances in which the income produced by an investment in your IRA could trigger certain types of taxes. For example, funds that invest in limited liability companies may generate Unrelated Business Taxable Income (UBTI) and/or Unrelated Debt-Financed Income (UDFI) that would be taxable for your IRA. Your IRA administrator will provide you with appropriate tax forms for your IRA account.

What is the legal structure of my investment?

You will be an indirect holder of securities in the company. Investors will not invest directly into the company. Instead, Sandhill Markets will pool the capital into a “special purpose vehicle” (SPV), which will then invest into a company.
SPVs on Sydecar, our SPV provider, are formed as Series LLCs, a type of company that provides liability protection. Series LLCs are part of a master series structure in which a master LLC is registered, allowing for a large number of series LLCs to be established under the name of the master LLC without additional registration.