Equity crowdfunding and democratization of wealth; These are the two reasons that sit at the core of why I started this blog. I passionately believe that the financial system can only begin to truly build trust with the American people if it can first learn to include all Americans in it.
That is why equity crowdfunding platforms such as Republic are so transformative in nature, because for the first time ever startup investing is no longer reserved for a handful of wealthy individuals. I am not saying that people should just be handed things in life and not have to work for it. What I am saying is that we should lower the barriers to entry and enable all people to invest in one of the best asset classes out there for growth.
Through education, nurturing, innovation and a powerful investing platform, Republic is one of a handful of companies focused on changing the game of investing for all Americans. Check out my discussion with Ken below and learn more about how he and his team are changing the game…
CL: From neuroscience to law to starting up, your background is pretty remarkable. Most recently you spent time at AngelList, and are now in-fact published on their website as a way to invest in startups if you aren’t accredited. So why leave AngelList to build Republic and how has your connection to AngelList influenced your building of Republic?
KN: I came to AngelList after a prior career in securities law and traditional finance, including at a law firm, an asset management firm in New York, and in academia. However, the mission of marketplace investing, that I can say is a lifelong passion.
Over the years, AngelList it became more focused on institutional investors and closing the hottest deals in Silicon Valley quickly. In doing that, it had moved a bit further away from giving access to the individual investors, away from the democratization mission. So when Title III came about - which AngelList played a role in shaping but ultimately decided not to pursue - I saw an opportunity that aligns with my personal interest.
Our economy is becoming more of a shared economy by the day, and entrepreneurship should be no exception. I think everyone can and should be an investor. It’s time we help entrepreneurs with different backgrounds have an opportunity to pursue their ideas to change the world. And everyone should be able to participate in startups’ upside potential. And that is what really excited me about pursuing Republic’s retail investment crowdfunding model.
CL: For those that don’t know how do you define Republic as a business?
KN: Republic is an investment platform for retail investors. Everyone - regardless of his or her net worth or income - can invest as little as $20 or even $10 into startups we curate, using credit card or debit card or even self-directed IRA funds.
CL: In May of 2016, when Title III went live and startups became accessible to the everyday man or women there was a lot of concern. And yet after a little more than a years the market seems to be tame. Is that a good outcome, and what can we do to increase growth at a responsible level?
KN: The growth of this investment class has been within our expectation. 95%+ of the American public have never made an investment in a private company, so we are talking about changing consumer behavior in a meaningful way. So we look at it as a long term process that won’t happen overnight.
Building awareness and participation is the name of the game. Our outreach approach involves multiple prongs, from PR to social media, to TV and radio initiatives. Overtime, we also hope that more influencers will evangelize for the space as a whole. Equity crowdfunding is not just about ROI; it’s also a new form of social engagement, a way of being a more involved citizen of the world.
I have no doubt that equity crowdfunding will be a large and impactful sector within the financial services ecosystem in the long run.
CL: In these early days, what types of investors are coming to the platform?
KN: Our investor base covers a large spectrum, from millennials in tech to college students to professionals in middle America to multimillionaires, and a handful of billionaires as well.
Our platform represents the tapestry of American society. The reality is, our investors all invest for different reasons, but what we’ve seen validates our belief that investing is a vote for the type of future people want to see or want their kids to see.
CL: There are so many equity crowdfunding platforms out there, from Republic, to WeFunder, StartEngine, and SeedInvest. In many ways you are all going after a similar market. What do you think is your differentiator to those platforms?
KN: The industry is so new, so everyone has a different approach and we’re all quite friendly with one another.
Republic focuses on tech startups, on startups with diverse teams, and on founders pursuing a mission beyond just making money.
A typical company on Republic is tech-enabled, mission driven, and often with a diverse team. That is our lens and that has been working well for us and will continue to be our more mission. Please look out for our new products in the blockchain/ICO market space, coming soon.
CL: What are you doing to provide a broad depth of startups to potential investors to drive investor adoption while also ensuring a certain level of quality investments on the platform?
KN: The balance between launching new deals and making sure that each one has the ability to close a full round is always going to be a challenge. We are proud to say to date that we have closed every deal we have launched, thanks to our very measured approach in selecting deals.
Less than 5% of all applicants that apply to Republic are approved to raise on our platform. Over time, there is no doubt the deal volume will grow, but we do take pride in our robust screening process.
If you visit our Republic.co, and don’t see a deal you want just yet, I’d suggest reading the founder stories of behind the companies actively fundraising just for fun. I think you will be impressed and hopefully inspired, and the process may help you develop your investment skills. What motivates the founder is also as important as the business fundamentals when evaluating a startup for investment purposes.
CL: How are you sourcing deals, and what are the typical companies that are coming to you for investment?
KN: We have a unique position within tech in that we’re a sister of company of AngelList and Product Hunt. Our network also extends to Techstars, 500 Startups and other accelerators and a range of VCs, which are excellent deal sources.
In addition to our network we do outreach to promising founders and startups that we think could be a good fit with our platform. Inbound applications are typically very early stage companies with little to no traction.
CL: One concern I have is that the cost of investing in an equity crowdfunding round is inherently more expensive and cumbersome than an angel or VC raise. Do you think that could lead to a lower quality of startup raising on your platform?
KN: No, and I say that because crowdfunding does a terrific job of reaching certain cohorts of startups really well. For instance, there is one group of startups that are so early stage they aren’t even ready to raise from traditional institutional investors, so we provide an outlet for them.
In many ways we are developing a market for super early stage “diamonds in the rough” and it will be interesting to see what VC involvement looks like as this develops. And then there is a whole suite of startups that are already venture backed that look to crowdfunding not for money, but for marketing and branding value. Crowdfunding is unique in its ability to convert customers into investors and brand ambassadors.
CL: What other types of services do you want to provide to companies that raise on the site to help them become stalwart startups that actually go on to raise larger rounds?
KN: To provide perspective, we are talking about an industry that is just over a year old, and Republic is even younger than that. As companies raising on Republic prepare for their next stage of growth, they can count on the Republic team’s support, both in terms of product and operational experience as well as our industry network.
CL: What is the monetization strategy for Republic and how do you think about the value of the platform being the portfolio rather than the transaction cost?
KN: Our monetization strategy is twofold in that we invest an equity interest in each deal - similar to AngelList - and we also receive a cash commission - similar to Kickstarter. Overtime, the companies raised on Republic also make up our portfolio of investments.
CL: Do you think we need updates to Title III to unlock more growth of the non-accredited investment market, and if so what does that look like?
KN: There is always room for improvement, but the law is working as is. It can always be better, but truthfully the biggest challenge we face is how to get more people to learn about this investment class.
We as an organization need to be thinking about ways to engage everyday investors from the perspective of being responsible citizens, an appeal beyond ROI. The pain point is less about regulators and more about doing our job well to convince a change in behavior amongst our growing group of investors.
CL: Many P2P lenders have moved to institutional capital due to its scaling capabilities and cost effectiveness. Do you see Republic pursuing similar institutional capital in the future?
KN: The focus, mission and purpose of Republic is true democratization of investing. To that end, we want everyday folks, be it teachers, florists, engineers, or doctors, participating. That mission drives Republic and it has been and will continue to keep our team working day and night.
At the same time, I have no doubt institutional capital will be a significant component of investment crowdfunding. That will help startups fundraise more easily, especially more mature startups. However, even when institutional funds are involved, we will always make sure that there is allocation reserved for non-accredited retail investors. That at its core is what we are about, and providing fair access to retail investors is something that will never change.
The Minute Rundown with Ken Nguyen
CL: If you could model yourself after one founder who would it be and why?
K: In the humblest way possible, I don’t think I can model myself after any one founder and I don’t think anyone should model his or her self after anyone else. I’d suggest you read whatever book or podcast you can and take from it what is most helpful, but at the end of the day we all have our unique strengths and drives and roles in this world. You need to find what works for you and just do it, and I think that will bring about the best outcome for yourself. That’s my approach. Don’t model, but rather extract information that I can use to improve on who I am.
CL: If you could provide one tip to someone considering starting up what would it be and why?
K: I’d say be mentally and physically prepared to give it your all. I was lucky in that I had a long prior career to Republic where I had always worked 60 to 80+ hour work weeks. Even so, the first year of Republic has tested my limits. To deal with that level of demand on your mind and body, you need a motivation beyond just making money.
There will always be low points and challenges. The only thing you can do is keep on going, and surrounding yourself with team members and people to share your mission.
From speaking with Ken, I can say he sits in the top tier echelon of truly special entrepreneurs with a combination of hustle, intelligence, passion and focus to build a game changing company. I am incredibly bullish on equity crowdfunding especially after year one of non-accredited investing has proved it can succeed without irresponsibility.
Not is the time for growth and proliferation. Now is when we start to invest in education and building awareness because this is a real opportunity to balance the scales of wealth in the US. Not to mention that equity crowdfunding platforms like Republic are proving to be terrific platforms for investing in diverse sets of founders.
Republic is the epitomy of Simple.Innovative.Change and I am personally honored to have you a part of the SIC family. Thanks Ken and the whole republic team for investing in Simple.Innovative.Change