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Why a worked example, and what it isn't
This walkthrough reads two record cards side by side, for "Sponsor One" and "Sponsor Two". Neither is a real sponsor. Sponsor One's card uses the example figures printed on the methodology page; Sponsor Two's are invented to show a different state of the record. The numbers and letters exist only to demonstrate the reading skill, not to score anything real.
The two cards
Sponsor One has 235 programs in SEC fundraising filings since 2009. Its card reads A, with the sentence: 3 of 72 counted outcomes were losses, all more than five years ago. 69 reported programs.
Line on the card | Sponsor One | Sponsor Two |
|---|---|---|
Programs found in SEC fundraising filings (Form D) | 235 | 24 |
Sold, result reported by the sponsor | 69 | 2 |
Sold, result not reported by the sponsor | 3 | 1 |
Sold according to the sponsor, not yet verified by us | 5 | 0 |
Moved into a REIT instead of sold | 2 | 0 |
Lost investors' money, or capital at documented risk | 3 | 0 |
Older than 7 years, confirmed still operating | 4 | 0 |
Older than 7 years, no public outcome found | 69 | 0 |
Younger than 7 years, still operating | 80 | 21 |
Sponsor Two has 24 programs since 2020. Its card reads C, with the sentence: No documented loss found in searched sources. The sponsor published a result for 2 of 3 documented sales; a letter above C needs 3.
Reading the losses first
The rules are read in order, and losses come first. Sponsor One has three loss programs. Three is not "at least three and half or more of counted outcomes", because 3 of 72 is far below half, so F does not apply. D needs two losses in the last three years or more than 1 in 10; all three are older than five years and 3 of 72 is about 1 in 24, so D does not apply either. Sponsor Two has no loss on record at all, which the card states as "no documented loss found in searched sources" and names the sources searched.
Neither card stops here. The three losses on Sponsor One's card each link to the document that put them there: in this example, the sponsor's own performance table, where each appears beside a negative yearly return.
Reading the reported results second
Sponsor One sold 69 programs and printed a result for each of them, in its own brochures and press releases. That is ten or more reported programs, its losses are no more than 1 in 20 of counted outcomes and all more than five years old, and it has more than 20 counted outcomes. The first rule that fits is A.
Sponsor Two sold three programs. It published a number for two of them; the third is known only from a broker's listing marked "sold". Two reported programs is fewer than three, so the first rule that fits is C. Sponsor Two is not NR, because three documented sales are enough to rate a sponsor even when the sponsor has published fewer than three results. That is what the sentence beside its letter says, in the same words as the rules table.
What the two cards do and do not say
The A and the C describe two histories, not two offerings. Sponsor One has a long record with three old losses it disclosed itself; Sponsor Two has a short record that is mostly still running. If Sponsor Two publishes one more result, its letter would move to B, and the change would be dated on its page with the document. If Sponsor One recorded a new loss this year, its letter would move to C until that loss is three years old.
Neither card ranks the two sponsors by how much money their programs returned. A program whose reported result was a modest gain and one whose reported result was a large multiple count the same on the card, as a finished program whose result the sponsor was willing to print.
What this worked example does not tell you
This walkthrough does not disclose, and cannot substitute for, an actual offering's Form D filing [1], its sponsor's private placement memorandum, or a real sponsor's record card with its documents. Every real comparison starts over from those primary sources.
[1]: https://www.sec.gov/resources-small-businesses/capital-raising-building-blocks/what-form-d
Frequently asked questions
If two sponsors share the same letter, are they equivalent?
No. The letter is the first rule that fits two counts. Two sponsors can share a letter with very different counts behind it: ten reported programs and one old loss, or thirty reported programs and none. Read the record card, not just the letter.
Why would a sponsor show NR instead of a letter?
NR means the sponsor has fewer than three counted outcomes and fewer than three documented sales, so there is too little finished history to decide a letter. It is not a failing grade, and any loss found is still printed on the card.
Does a sponsor's Grade apply to the offering I am comparing?
No. The Grade is sponsor-level. It counts programs that already finished; the offering in front of you is still running and sits on the card as a younger program still operating. Its property, debt and fees are in its own documents.