There are some interesting characteristics of the arrangement between FC and the investors. Obviously it's a free market, and if FC is the best way a VC/accredited investor can get access to a startup they want to invest it, then maybe it's worth the cost, but IMO FC is taking a pretty big cut (from the VC) for their due diligence, making an introduction and pooling money. Personally, I discount the "due dilligence" aspect because a VC that doesn't do their own due diligence isn't a VC, and isn't someone you want investing in your company.

They do make things pretty easy on the startup. Having gone through a Reg D/504, it does take time to deal with the EDGAR and state-specific filing requirements, but it's not exactly rocket science either, and personally I found it fun to learn the system and successfully close a round on my own.

There are some interesting terms attached... In particular:
- They vote all the shares on behalf of the investors,
- They take up to 30% of the profits as carried interest,
- They can resell on secondary markets if they become available,
- And they can fully withhold their shares from an offer they don't like. For comparison, YC Series AA term sheet requires consent of 50% of the preferred to sell, and they can participate pro-rata. TechStars Series AA term sheet simply allows the preferred to participate pro-rata.
- No mention of if their standard liquidation preference is participating, or anti-dilution clauses, neither of which [a startup] would typically want in a Series AA, but that's irrelevant to the SEC.

Quoting their letter to the SEC:

- FC Management manages the investment funds of which it is the manager. FC Management exercises any management rights negotiated with the start-up company (for example advisory board status, rights to review books and records, access to board materials, and/or access to management).

- FC Management has the ability to vote the investment fund's shares in any matter requiring a vote of the start-up company's shareholders. FC Management has the ability, subject to the terms of its agreement with the start-up company and applicable federal and state securities laws, to offer or sell its securities
in the start-up company in the secondary market (if such a market exists or develops), or to offer or
sell those securities back to the start-up company or to other existing investors in the start-up company.

- If the start-up company is the subject of a tender offer, FC Management has the right to decide whether or
not to tender the shares owned by the investment fund.

Upon the liquidation of such a fund,the proceeds of the fund would be disbursed as follows:

(1)first any remaining out-of-pocket third-party expenses of the investment fund, to the extent not already paid out of the administrative fee, would be paid;

(2) second, the capital contributions of each of the investors in the investment fund would be repaid; and then

(3) third, any remaining profits of the investment fund would be distributed on a pro-rata basis, with a percentage to be paid on a pro-rata basis to the investors who had made capital contributions to the investment fund, and the remaining percentage to be paid to FC Management, Inc. in return for its role
in organizing and managing the investment fund. The amount of this "carried interest" to be earned by FC Management would be disclosed to all investors in the fund at the time of the organization of the fund. We anticipate that amount of carried interest in most cases would be 20% or less of the profits of the investment fund, but in no event would the amount of carried interest exceed 30%.