EnergyFunders Investing for Beginners

Investing in energy projects can be a great way to diversify your portfolio and support sustainable energy development. EnergyFunders offers a platform for investors to do just that.

You can start investing with as little as $5,000, making it accessible to a wide range of investors. This minimum investment requirement is lower than many other investment platforms.

EnergyFunders has a wide range of projects to choose from, allowing you to pick the ones that align with your investment goals and risk tolerance. From solar farms to wind turbines, there are many options to consider.

With EnergyFunders, you can expect to earn around 8-12% annual returns on your investment, although this can vary depending on the specific project. It's essential to carefully review the project details and risks before making a decision.

EnergyFunders was founded in 2013 by Philip Racusin, Roger Gingell, Michael Racusin, and Casey Minshew, and is now headed by CEO Laura Pommer.

The company was acquired in 2020 by Paleo Resources and is headquartered in Texas.

EnergyFunders is a fintech firm that offers direct equity crowdfunding investments in oil and gas with a focus on drilling opportunities open to accredited investors.

The platform allows investors to invest in oil and gas and drilling opportunities through their online platform.

The company has also partnered with crypto-mining experts to create mobile Bitcoin mining units at their natural gas well locations.

These units convert wellsite natural gas into Bitcoin.

Investors can expect to start receiving monthly distributions within six months of the close of the fund.

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EnergyFunders works with oil and gas operators to identify investments, using seasoned geologists, engineers, and operational advisors to vet projects.

Assets are selected based on geologic and engineering analysis, risk evaluations, project projections, and economic evaluations.

EnergyFunders focuses on low-risk, proven reserves, making it a more accessible option for investors.

You can sign up as an investor and log in to the EnergyFunders portal to choose from available deals, investing as either a General or Limited Partner.

The minimum investment for General Partners is $50,000, and there is no liability cap, while the minimum investment for a Limited Partner is $5,000, with liability capped at the member’s total investment amount.

EnergyFunders receives 10-20% carried interest on the investment returns, and doesn't charge a transaction fee or an annual AUM fee.

However, they reserve the right to deduct a pro-rata share of ongoing management expenses of the LP from each investor’s capital account.

Once your investment begins to generate cash, usually within six months of the close of each fund, EnergyFunders will pay out approximately 10% of net income in distributions each month.

This payout is a monthly distribution, and the remaining net income is retained for reinvestment opportunities.

EnergyFunders charges an annual management fee of 2% as well as a one-time origination fee based on the size of your investment, with investments of $5k to $99k having a 5% origination fee.

Before investing, you'll need to link your bank account and verify your accreditation status, providing documentation to demonstrate that you qualify as an accredited investor.

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Investing with EnergyFunders requires you to be an accredited investor, which means having a net worth exceeding $1 million (excluding your primary residence) or an earned income of over $200,000 for the prior two years ($300,000 for a married couple).

You'll also need to provide proof of your accreditation before investing. Licensed financial professionals can invest with EnergyFunders, even if they don't meet the other accreditation criteria.

EnergyFunders uses a Special Purpose Vehicle, a Limited Partnership, and investors receive units in the Partnership. You have the option to invest as either a Limited Partner or a General Partner, with General Partners exposed to theoretically unlimited liability but entitled to more generous tax treatment.

To invest with EnergyFunders, you'll need to meet certain criteria. Currently, only accredited investors can invest with EnergyFunders.

Accredited investors can be individuals or international investors, and they're typically classified based on their net worth or earned income. You'll need to have a net worth exceeding $1 million (excluding your primary residence) or an earned income of over $200,000 for the prior two years ($300,000 for a married couple).

Licensed financial professionals can also invest with EnergyFunders, even if they don't meet the other accreditation criteria.

EnergyFunders offers a unique type of investment in oil and natural gas drilling projects, known as "wellbore working interest".

This investment type differs from a royalty interest in a well, as investors are liable for ongoing drilling expenses and entitled to a share of the profits.

Investors typically contribute an additional 20-30% of the investment amount during the lifetime of the well.

You'll be buying into a Limited Partnership interest in the revenue from a single or series of natural gas or oil wells.

Investors receive quarterly distributions of whatever revenue the well earns, minus the carried interest, for the lifetime of the well.

Natural gas projects tend to pay back their investment amount sooner than oil wells, but also have a shorter overall lifespan.

Investing with EnergyFunders involves buying into a Limited Partnership interest in the revenue from a single or series of natural gas or oil wells.

You'll receive quarterly distributions of whatever revenue the well earns, less the carried interest, for the lifetime of the well. Natural gas projects typically payback their investment amount sooner than oil wells.

Investors have the option of investing as either Limited Partners or General Partners. As a Limited Partner, you'll be entitled to a share of the profits, but you'll also be liable for ongoing drilling expenses.

As a General Partner, you'll have the potential for more generous tax treatment, but you'll also be exposed to theoretically unlimited liability.

You can expect your money to be tied up in an EnergyFunders fund for approximately three to five years. This is because oil and gas drilling is a long-term investment, and it may take some time for the wells to start producing revenue.

EnergyFunders will pay out approximately 10% of net income in monthly distributions, starting when your investment begins to generate cash, usually within six months of the close of each fund. This is a good thing, as you'll start seeing returns on your investment relatively quickly.

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The remaining net income will be retained for reinvestment opportunities, which means that EnergyFunders will use it to fund new projects and grow the fund. This can be beneficial in the long run, as it can lead to higher returns on your investment.

As the Fund approaches its target life of three to five years, EnergyFunders will stop reinvesting and begin distributing 100% of net income. This means that you'll start receiving the majority of the revenue generated by the wells.

At the end of the Fund life, EnergyFunders will liquidate the remaining investments and distribute the proceeds back to investors, net of expenses and fees. This is usually after three to five years, depending on the fund.

EnergyFunders charges an annual management fee of 2%, plus origination fees, which can range from 5% to 1% depending on the size of your investment. This is a standard fee structure for investment platforms like EnergyFunders.

You can expect to receive a pro-rata share of the revenue generated by the well, paid quarterly, minus the carried interest to EnergyFunders, which can be up to 20%. This is a good thing, as you'll have a direct stake in the success of the well.

Delays are common with oil and natural gas wells, especially early in the project, and it's not unusual for up to 6 months to elapse between an investment closing and the well to actually begin producing revenue. This is just something to keep in mind when investing with EnergyFunders.

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EnergyFunders takes safety seriously, partnering with expert operators who have a proven track record.

They carefully vet each potential oil investing project, presenting only the best to their members. This thorough approach ensures that investors have access to reliable and trustworthy opportunities.

Established in 2014, EnergyFunders has a solid foundation to draw from, with a focus on providing a secure and informed investing experience.

Here are some key facts about EnergyFunders' safety and management:

Safety is a top priority for any investment, and it's great to know that this platform takes it seriously. They only partner with expert operators who have a proven track record.

One of the ways they ensure safety is by carefully vetting each potential oil investing project. This means they thoroughly review each project to ensure it's a good fit for their members.

Established in 2014, this platform has had time to develop a reputation for being a reliable and trustworthy option. Their country of operation is the US only.

Here are some key facts about their safety measures:

By providing this level of transparency, they empower their members to make informed decisions about their investments. Assets managed by this platform total $15M.

EnergyFunders operates within a specific regulatory framework that's worth understanding. As an Exempt Reporting Adviser, they're not required to register with the SEC but still pay fees and participate in FINRA.

Their investments are offered under Reg D, which means they're only available to accredited investors. This is a crucial point to note, especially for those new to investing.

Most projects take 45 days for due diligence, which involves reviewing detailed drilling plans, financial projections, and legal documents. This thorough review process is essential for ensuring the investment's legitimacy.

A platform's review process, however, is never a substitute for your own due diligence. It's essential to remember that oil and gas well project investments are complex and require careful consideration.

EnergyFunders could improve by offering liquidity to non-accredited investors, as currently, only accredited investors can participate due to a high income or net worth requirement. This limits the platform's potential user base.

EnergyFunders' relatively short track record since its acquisition by Paleo Resources in 2020 may also be a concern for some investors. The company has been around since 2013, but the changes in management and board may impact its stability and reputation.

In comparison to other crowdfunding platforms, EnergyFunders stands out by partnering with tZERO to provide potential liquidity and a continuous trading environment. This sets it apart from other platforms that act as brokers, charging high placement fees regardless of well success.

One significant area where EnergyFunders can improve is by offering more liquidity to investors. Currently, investors can expect their principal investment to be tied up for approximately three to five years. However, the company is partnering with tZERO to provide investors with the opportunity for potential liquidity and a continuous trading environment.

EnergyFunders' requirement for investors to be accredited is another area that may be a barrier for some potential investors. To be accredited, investors typically need to have a solid income of over $200,000 for the past two years ($300,000 if they're married), or a net worth of over $1 million (excluding their primary residence). This means that non-accredited investors are currently locked out of investing with EnergyFunders.

The company's relatively short track record may also be a concern for some investors. EnergyFunders has been around since 2013, but was acquired by Paleo Resources in 2020, resulting in major changes to the company's board and management. While this isn't necessarily something to be concerned about, it's worth considering when evaluating the company's stability and long-term prospects.

Here are some key statistics on EnergyFunders' current offerings:

EnergyFunders' decision to defer revenue until the well produces is an interesting approach to aligning the company's interests with those of its investors. However, this also means that investors may be waiting a long time to see any returns on their investment.

Other crowdfunding platforms have some notable differences that set them apart. They often act as brokers, charging high placement fees of up to 15% regardless of the project's success.

This business model can be a significant drawback for creators, as they may end up losing a substantial portion of their funds to fees. Many crowdfunding platforms lack effective communication with their users, often failing to address concerns and issues based on feedback and ratings.

Inconsistent management is another issue that can plague crowdfunding platforms. C-level turnover is not uncommon, which can lead to a lack of stability and continuity in the platform's operations.

A key factor to consider when choosing a crowdfunding platform is its transaction volume. Unfortunately, many platforms lack a significant track record of closed deals and funds put into production.

EnergyFunders is a niche investment crowdfunding platform based in Houston, offering investments in oil and gas wells to accredited investors.

The platform is designed to provide a more accessible way for investors to participate in the oil and gas industry, which has traditionally required direct connections with well operators and high investment amounts.

EnergyFunders is following the lead of other investment crowdfunding platforms in reducing minimum investment requirements and opening up the investor pool to a wider audience.

This approach is particularly relevant in Texas and other areas of the South, where oil and gas investments are common.