Everything starts with an idea. What gave a nudge for republic? And why did you focus on crowdfunding?
Having spent many years in the venture space as an attorney, most recently with AngelList, I witnessed the lack of women and minority founders receiving capital toward their early stage companies. A lot of groups are underrepresented in startup funding; whether it is due to the ounders’ age, gender, ethnicity, or geography, these factors all play a disproportionate role in venture capitalists’ decision making; subsequently some socially important markets are neglected altogether. Spurred on by Congress passing the Jumpstart Our Business Startups (“JOBS”) Act in 2012, which made equity crowdfunding portals possible, Paul Menchov, my co-founder and I, decided to create an online platform where everyone and anyone can invest in innovative, mission-driven startups.
Can you tell us how long Republic has been operating and how it works?
Republic applied to be a Title III equity crowdfunding portal with the Securities and Exchange Commission in April of 2016 and quickly received credentials. We have been operating since May of 2016 when we launched our first campaign Youngry;. As an equity crowdfunding portal, we host startups (“issuers”) who raise money from the “crowd” which can be anyone; friends, family, customers, or people who see the issuer’s deal page on Republic.co. The beautiful thing about equity crowdfunding is that it opens up the ability for anyone (over 18 years of age) to make an investment in an early stage private company; something previously reserved for less than 3% of Americans who are considered “accredited investors”; additionally, it allows startups to raise capital and build their brand through a truly national (and international) campaign.
What makes Republic different from other crowdfunding platforms?
I think 3 things make Republic unique in our industry: 1. The way we source startups to raise; our team take a holistic approach to determining which companies we host, we look for companies that are mission driven, have diverse teams, and leverage technology leverage to drive positive change. We like to joke that becoming an issuer on Republic is like getting into a great college, we have had over 400 companies apply, to date, to raise money on Republic.co, but have only accepted and launched 14 companies so far. 2. Republic’s team and the support they provide; our team is comprised of seasoned venture capitalists, computer programmers, designers, attorneys, consultants and experienced advisors; this allows us to offer a great deal of guidance and support to companies who raise on Republic; allowing them to have a partner in filing their legal disclosures, creating their deal pages and then running their campaigns. 3. Our partners; with services such as iDisclose, we have found ways to make the regulatory requirements of crowdfunding easier to meet while substantially reducing costs; allowing for companies who raise on Republic to actually have the money to grow their business rather than going toward the set up and running of the campaign.
What has Republic done in its first year?
We have successfully funded all 11 of the startups who have completed offerings on our platform, (we have a 100% success rate so far and are looking forward to our 3 current issuers to continue that trend!), we have created a community of investors and founders who interact on our website and in the real world, and we have laid the foundation for some real innovation. We recently began accepting credit cards as a form of payment. We are always looking for ways to make the process smoother for both our issuers and their investors.
Tell us about one of your biggest successes?
We’re currently partnering with the Draper family and Sony to launch Meet the Drapers a new television show. On Meet the Drapers, startups will pitch to Bill, Tim and Jesse Draper, who may invest in them; at the same time as the episode airs, these companies have equity crowdfunding campaigns live on Republic, allowing viewers at home to invest in them too. We can’t wait to see the show premier in the fall!
Regarding specific campaigns, I am particularly proud of Pearachute. Pearachute is an application that helps parents find and then book activities for their children, created by Chicagoan Desiree Vargas Wrigley. Desiree put so much time and passion into her campaign that she raised 495% of her original goal. To see 321 investors come together to support an idea they believed in was a great example of why equity crowdfunding is so cool; now watching Desiree take the money she raised and using it to expand her business into new cities creates for other founders to start the crowdfunding process.
What are the risks involved in investing through Republic, because investors would want to know the risks involved in investing in a company on the platform?
Like all investments, equity crowdfunding has risks. Investors generally receive a Crowd Safe, a “simple agreement for future equity”; the Crowd Safe does not represent a current equity stake in the company; instead, the terms of the Crowd Safe have to be met in order for investors’ to receive their equity stake. Generally, this is not until the company they invested in raises more money, goes public or is acquired. We encourage all of our users to evaluate the companies on our platform thoughtfully. One great feature about equity crowdfunding is that if a startup sets a financial goal and doesn’t meet the minimum threshold for raising funds, the crowd gets their money back, you won’t get locked into an investment without enough of the crowd signing on too; it’s a real strength in numbers protection.
Any person can invest in Republic if he/she is over 18, regardless if he/she is located in the United States. How do you deal with finding investors from all over the globe?
We have had tremendous interest from international investors who can very easily invest in Republic, many of them find Republic the same way American investors do, by researching alternative investment or through the press Republic has received over the last year.
What does your fee structure look like?
We do not charge investors anything. For startups raising on Republic.co, we receive a 5% cash commission on the gross amount of dollars raised; additionally, we take the equivalent of 2% of total securities sold in the form of a Crowd Safe, not 2% of the company’s equity, so that we have a vested interested in the company just like the investors . We have worked hard to reduce fees startups have to pay to prepare for a campaign to meet their regulatory needs;
Recently, Republic has added ability to accept credit card payments for crowdfunded securities. Why did you include this new feature?
We understand that investing in a startup takes time, you want to evaluate the company, do your own research and decide whether the investment is right for you. Once you get to the stage of wanting to invest, we want to make it easy. While setting up a bank wire isn’t hard, consumers are accustomed to paying with their credit card online; so, we wanted to allow them to use a familiar form of payment. As mentioned before, we are planning on rolling out Bitcoin soon as well for those who are into cryptocurrencies.
What are the benefits for entrepreneurs to raise finance through Republic?
We recently posted about the pros and cons of equity crowdfunding vs. Venture capital. Startups who have raised on Republic have seen many benefits, I will highlight 3 big ones that might not be apparent; 1) while the money they raise helps grow their business, what can have a greater effect is the growth in users they receive; many of our startups saw their crowdfunding campaign act as a marketing campaign, greatly increasing traffic to their websites and upticks in their customers. 2) we introduce you to great people who can help you in the future; equity crowdfunding is putting your company on a stage, so our issuers find they attract new mentors and partners in the process. 3) your investors become your brand ambassadors; once a startup’s customers become investors, they become that much more inclined to advocate for the startup’s success.
What future do you see for Republic?
We look forward to hosting more great startups and growing our community; with Meet the Drapers in the fall and multiple companies preparing to launch, we are expecting an exciting and busy second half of the year. We believe as the industry matures this faster pace will become the norm and we are excited to show companies all of the time and effort we have put into making raising on our platform easy and fun.
What has been happening in the equity Crowdfunding market?
After a little over a year of the market saw over $42 million dollars of investments, and a lot of continued growth, indicating that in a few years this could be a multi-billion-dollar market. We encourage your readers to follow blogs such as http://crowdfundinsider.com/ for up to date info.
What advice can you give entrepreneurs who want to venture into the fintech sector in the future?
Creating a great product is a balance between providing a service people want / need and making it user friendly and intuitive; sometimes an outside perspective to confirm you are reaching a less sophisticated consumer is a great way to ground yourself and make something simpler, faster and better.
Is there any other important message you would like to pass across to readers?
To startups I say, if you are looking for a way to raise capital or expand your presence on the market, I encourage you to check out equity crowdfunding. To potential investors, equity crowdfunding is a great way to get into the startup investing space with a small commitment. I encourage everyone to check it out and just try it, investing takes less than a few minutes.