This is one to watch.
Earlier in the week, a new equity crowdfunding portal called Republic.co launched.
And today I have an exclusive interview with one of Republic’s founders, Kendrick Nguyen.
Before we get to that, I want to explain why investors should pay attention to this one.
First, a little background. Republic is a spinoff of AngelList.
AngelList is (arguably) the premier early-stage investment site for accredited investors. (To be “accredited,” the SEC requires $200K-plus income or $1 million-plus net worth.)
AngelList regularly offers investors access to top-tier Silicon Valley deals. I’ve seen it firsthand and have invested in deals alongside VC firms such as Benchmark, Lowercase Capital, Homebrew and more. Those firms are among the best in the world. (You can see some of my AngelList portfolio here.)
AngelList has done so well that last year an investment firm from China put together a $400 million fund to invest through the platform! It’s the largest “seed fund” in history.
Republic’s co-founders were both part of the team that built AngelList. Kendrick Nguyen served as general counsel. Paul Menchov was head of fundraising infrastructure. They were heavily involved in building many of the core functions at AngelList.
A Piece for the Crowd
Republic’s team is well-suited to launch an ambitious project like this – it’s the same people who were instrumental in the legal and structural innovations that helped catapult AngelList toward the stratosphere.
These founders are dedicated to making equity crowdfunding simple for startups and solving any issues that could deter a startup from using ECF.
Startups that raise money on AngelList (and elsewhere) now have the option to also list their deals on Republic… and do it in a way that encourages co-investment with professional investors and angels (and future investments too).
They’re making it easy for startups to set aside parts of their rounds for friends, family, customers and you – “the crowd” – to invest.
Republic has introduced a new legal product, called Crowd Safe, to help solve ownership structure issues. For startups, it’s important not to have too many owners listed on their “cap tables.” Crowd Safe resolves these issues, and I believe it will be key in attracting top-quality startup deals.
Interview With Kendrick Nguyen, Republic Co-Founder
Adam: You managed to put together a nice group of deals for the launch. How were reactions from the startups you talked with?
Kendrick: Thank you. Most were enthusiastic about a new way to get financing and engage supporters. Pre-seed investing is a bet on the team, and I’m incredibly proud of the founders we’re working with. Mission-driven, experienced and accomplished entrepreneurs hustling to make a difference. We hope these messages click with the investing public.
Adam: Early on, critics of equity crowdfunding said raising money this way might hurt a startup’s chance of raising venture capital funding down the road. How are you addressing this?
Kendrick: That would possibly be the case only if the startup ends up with a messy cap table, requiring thousands of consents for future corporate action. There are a few mechanisms to resolve that. Our Crowd Safe is one of them. Title III fundraising is a complex process, and having the right tools to navigate is crucial.
Adam: How big do you think the equity crowdfunding market can get?
Kendrick: I think it will exceed $1 billion in a couple years and may eclipse traditional angels in the aggregate a few years out. The issue right now is awareness and participation. It takes a bit of time to get the message to the masses.
Adam: What’s your fee structure look like?
Kendrick: Republic charges a 5% cash commission on each successful round, plus 2% of the securities issued in the round, on identical terms.
Adam: One of the reasons I like equity crowdfunding is that it lets startups turn their customers into investors and vice versa. How important is it for a company that wants to raise money this way to have an existing customer base?
Kendrick: Having an existing customer base will make fundraising easier for founders, but it’s not necessary. Having a product or vision that appeals to people and having the discipline to execute the right campaign, both pre- and post-launch, are both necessary and sufficient to have a successful crowdfunding campaign.
You can sign up for Republic here and start investing with as little as $20.
Finally, here’s a quick look at one of Republic’s first deals.
Farm from a Box
Sectors: Clean tech, agriculture, sustainability
Minimum investment: $50
Terms: $5 million valuation cap with 20% discount
Farm from a Box is just that, everything you need to set up a 2-acre farm in one package. It’s efficient, off-grid, solar-powered and tech-enabled. The company says the kit can grow enough food for 150 people, and it plans to sell its product for $60,000.
Have a great weekend.
Founder, Early Investing
P.S. Watch your inbox next week for the launch of our new ECF research service, First Stage Investor. We’ve been hard at work putting together educational material, investment recommendations and more. Stay tuned…