Aug. 14, 2021
Raising 100% of the money online: equity crowdfunding, it's major perks and downsides. By Christopher Lustrino, KingsCrowd.
Christopher Lustrino, Founder & CEO at KingsCrowd talks about his experience raising 100% of the funding for his company online. We discussed what are the major pros and cons of equity crowdfunding and how he maneuvered through them. Crhistopher also spoke about the repeat investor and their importance in any type of fundraising process and he explained how to stay in touch with your existing investors to make sure the next round will be easier to raise.
Christopher's LinkedIn: https://www.linkedin.com/in/chrislustrino/
KingsCrowd site: https://kingscrowd.com/
Fundraising Radio episode on CAFE - alternative to the standard SAFEs: https://www.fundraisingradio.com/Thibauld-Favre/
Transcript
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They're releasing to fundraising
video a podcast about
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fundraising for early-stage
startups, the major rule that we
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follow here is no bullshit on
this podcast.
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No music to relax.
You know, advertisements of our
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sponsors.
We only talk about fundraising
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here and nothing else.
So let's jump into the episode
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and today's guest speaker we
have Christopher Lustre.
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No founder and CEO at Kings
crowds.
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And this episode, we'll talk
about Equity crowdfunding.
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How is it different from normal
crowdfunding?
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How can crowd was Raising its
own money?
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And why did they decide to raise
all of their rounds through
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online funding?
So Christopher, let's get off by
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you.
Giving us some background on
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yourself and on King's crowd.
Sure thing Constantine.
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Great to be here.
Thanks, thanks for the
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opportunity.
You know, so, I circumscribed
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about three years ago now and my
My kind of for a or journey to
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starting Kings crowd, was having
started my career working for a
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management consulting, firm
learning about the traditional
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private Equity markets and some
of the challenges that existed
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there for those that don't know,
you know, private Equity Venture
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Capital, right?
Essentially.
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All they are are funds that are
raised which is basically a
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bunch of money in order to
invest in companies and body
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companies with the long-term
goal for any of those
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organizations.
To sell those companies for a
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whole lot more than they get in
on that.
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And basically, during my time
supporting and working on behalf
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of private Equity shops, I
learned about the challenges
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around doing private Equity due
diligence type work.
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I learned about how
non-transparent the private
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Equity markets could be and
worst of all, I learned that I
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couldn't partake in the private
Equity markets because up until
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about five years ago now, unless
you're an accredited investor
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which means, you know, you have
at least a million and a half.
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Citizen could your home or you
made a certain level of income,
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which only represents about 3%
of Oliveira United States
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economy.
You couldn't invest in private
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companies.
And the only thing available to
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you was companies on public
stock exchanges like Google and
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Facebook, but a lot of the
growth happens before those
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companies ever go public.
So it was really that, that was
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the inspiration to say why, why
can't I invest in the private
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markets?
Why Can't This be done better?
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And that's when I stumbled upon
the jobs Act Act, which is
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creating 2012 and fully enacted
by 2016, which tried to solve
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for both of those issues that
I'm talking about which are
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really around transparency.
And accesses the jobs act said,
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Hey what if we let everyone
invest in the private markets
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but in exchange for allowing to
raise capital from literally,
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anyone in the United States
companies will have to be a lot
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more transparent around things
like their financials and
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valuation.
And hey, by the way let's let
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everyday investors be able to
invest in these companies when
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Still really early days, the
potentially be able to partake
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in the type of upside that
Venture capitalists in private
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Equity shops, get to partake in
ended up running a Blog in its
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face for a few years then ended
up being acquired by one of the
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founders of Napster from way
back in the day.
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And at that time back in 2018 we
decided to build a first mover
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solution which would essentially
be the first Morning Star
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Bloomberg solution for what we
Define as the Online private
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market.
So we work on behalf of
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individual investors.
So, to be able to invest into
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private companies that are
listing on platforms like
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Republic .ko, we funder.com net
capital.com start engine.com and
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many, many more, essentially
trying to empower you to make
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good investment decisions when
it comes to investing in private
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companies.
Great quick question on that.
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By the way, are you working as
advisors?
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Or are you working as a more of
a fun where Opie's have to make
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a commitment and you just invest
on their behalf.
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So the You can think about is
really, you know, as information
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research provider we're very
much like a Bloomberg or a
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Morning Star, providing the
research that individual
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investors can purchase and
utilize to do their own due
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diligence before investing in a
private company.
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Gotcha, speaking of purchasing
this, maybe some of our
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listeners might be interested.
What?
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Prices are we talking about
here?
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Yeah, so our starting price here
is at $10 a month.
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Of course that's you know, if
you're looking for a One pick a
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month and and then being able to
look at some of our other
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various research and news and
then it goes as high as $50 a
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month for investors.
Nice.
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That's very interesting.
My brother might be interested
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in that.
So let me ask you a couple more
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questions on what?
Exactly you get for ten bucks
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per month.
So you said that it's going to
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be one big.
What is going to be included in
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this kind of research on the
companies and can be mostly
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about team on the background of
it or isn't about to Tech, or is
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it going to just like Really
everything at all.
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Or what kind of information can
one expect for ten dollars per
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month?
Yes.
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So you know basically what
you're going to get at $10 per
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month is first off, you'll have
the ability to sort and look
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through all of the companies
that kind of exists in this
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universe of the Online private
markets and look for certain
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criteria.
You care about be able to get a
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very simple profile on each
company and it's going to break
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down how much money.
They're raising.
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What their momentum looks like
valuation?
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Terms of the deal.
All It's of stuff on the deal
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but in terms of each month,
you'll receive two analysts
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reports.
So if you've ever bought into a
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public stock like Google or
Facebook, you may have read an
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analyst report that provides a
strong buyer by rating.
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Well, we have something very
similar for this market.
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So if you buy into our $10 a
month package, we will provide
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you to analysts reports per
month as well as some founder
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profiles.
Exclusive webinars, some
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Advanced companies search tools
but you basically get the basics
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for You need now.
If you go all the way up to the
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50 dollar a month plan, what we
do is we provide all of our
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analysts reports is probably
about 20 a month that come out
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in addition to our rating
report.
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So each and every company in
this universe, which is probably
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about almost 500 new companies a
month.
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Now, that raise Capital online,
you can actually get a
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quantitative rating on each and
every one of those companies.
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And so, that's part of the, you
know, fifty dollar a month plan,
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but that's really do.
Want to start drilling down and
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doing much larger scope,
diligence.
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And looking at way more deal,
flow things like that.
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Very cool.
I'm pretty sure my brother is
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going to get that 10 bucks
subscription, definitely sad to
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you most for this call.
All right, got distracted.
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Let's go back to discussing
raising money online.
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So you mentioned that he or
Kings crowd great since entire
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finding online.
Can you tell us a bit more about
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that?
What do you mean by saying it
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raise money online.
Great questions.
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So, Raised about a little over
two million dollars to date at
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this point from about 2100
investors nice.
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When I say that we've raised
Capital online allowing
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investors own a piece of our
company.
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I literally mean that we have
basically allowed for a certain
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number of shares to be sold
online.
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We've gone through something
called, filing a form.
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C with finra where we basically
put out some audited financials,
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we put in our evaluation
operating agreements some A
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doctor checks around the c-suite
and then what that information
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were able to list on a platform
called net capital.com.
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We also raised on a platform
called start engine.com.
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We've done about three total
raises to date online and
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collectively.
They raised a little over two
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million dollars and essentially
we provided common stock at a
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certain price valuation and
allowed people to buy in and
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own.
Those shares and literally own a
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piece of our company when it was
still worth, you know, south of
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10 million dollars.
Hours.
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So still very, very early days
with hopefully the potential of
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some real upside.
Mmm.
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Nice.
So 2100 investors.
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That's a hell lot of investors.
Can you tell us a bit more
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about?
You know.
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How do you utilize that huge
huge number of investors in your
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company?
Absolutely.
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So first off you know a there's
kind of this common
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misconception.
Wow that must be really hard to
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manage 2100.
Investors reality is it's all
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managed under one line item on
the cap table and the
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communications are controlled
through the platforms that we
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have utilized.
And so essentially I put
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together a quarterly update and
I send it to the platform.
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The platform sends it to our
2100 investors.
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If we get, you know, three to
five responses of quarter,
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typically just kind of
high-fiving us and saying hey
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that's fantastic.
How else can I help?
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There really is very little
laborious, you know,
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interactions that need to be
had.
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So for those who think it's
becomes this huge big problem,
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it absolutely does not and I
have had zero issues, nor do I
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really heard any Founders talk
about having an issue of
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Managing, so many investors.
And then, you know, the other
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thing that I would say is it's a
little bit like the public
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markets where we have, 20 100
investors.
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I bet you, you know, 2050 of
them represent about 30 or 40
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percent of our funding and then
about 50 of them, represent the
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other, you know, 50 60 percent
of her fucking.
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So it's always a game of, you
know, the big tricks, a little
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checks, but collectively, we
need them all in order to
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accomplish our goals, which I
think is, Is always really,
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really cool.
But in terms of how we use them,
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my gosh, there's so many
different things, you know, from
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a simple as, you know, having
them become customers and
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Advocates of her business and
believing many.
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Many of them are, I think nearly
all of them are, you know,
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subscribe to our newsletter
lists and things like that.
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Many are paid customers, and are
very much Advocates.
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We've had people tweet at us.
We had one guy who he's a CMO at
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another company, and he had a
little left over budget from a
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project.
So, he actually, Lee spent money
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from that budget.
It was just going to be lost.
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He's like this is going to be
lost in a bit of money.
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He's like I'm just going to use
that money and buy you guys some
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stickers for with the king's
crown logo that I passed around
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to people that have been.
It's just so cool to see that
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kind of ambassadorship and
wanting to be a part of her
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brand.
You know and then we've gone so
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far as having advisors and
individuals become employees
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that initially started out as
just kind of these you know,
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line name checks going into her
deal.
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Nice, very cold.
There is one phrase that you
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said that try to my a which has
a responsibility to the
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quarterly updates.
You said three to five responses
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per quarter it.
Yeah.
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It's been extremely extremely
low, you know, it's mostly
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congratulations and things like
that.
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It's just, we don't get much.
Basically, people are happy to
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be kept in the know.
We tell them about what's going
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well where there's challenges,
what the opportunities are and
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people are happy with that.
There's really you know, there's
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not a lot of Questions being
asked.
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And the way that I think a lot
of these investors look at it,
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this is a passive investment for
the long term and so that
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they're not, you know, hounding
on you, when are you going to
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IPO?
They kind of recognize the
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reality what they're getting
into, which is a long game.
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So it's been really nice to see
and it's been great, you know,
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to have an investor base that
isn't challenging to deal with
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00:11:23,900 --> 00:11:26,100
and in fact is really an
advocate of her business.
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All right?
So let's talk a little more
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00:11:29,100 --> 00:11:32,600
about that involvement
engagement specifically, The
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00:11:32,600 --> 00:11:36,400
high engagement rate of those
investors is probably one of the
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key factors of some Founders
choosing Equity crowdfunding
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over normal.
Qualifying from VC.
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I mean over normal funding from
VCS and angels' you know this
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00:11:47,000 --> 00:11:51,300
ability to reach out to 2nd on
2100 investors and ask for help.
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And then yet the help
immediately because I mean there
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are 20 100 people that you're
talking to.
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Have you ever done this kind of
Target Outreach to those
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00:12:00,200 --> 00:12:03,600
investors of yours asking for
Specific help saying like here
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is the immediate problem that
we're having, it's a massive
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problem.
We need your help.
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Have you ever done something
like that?
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00:12:09,900 --> 00:12:13,800
Hmm, it's a great question.
One of the things we did in
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fact, do was during our last
round of funding.
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It was an accredited only round
of funding, but it was still
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online.
Nonetheless, we can only raise
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her grade investors.
And so, we kind of reached out,
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we said, listen, we're raising,
you know, at the moment is an
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accredited only round on the
same platform that we've
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utilizing a The capital, you
know, if you want to partake,
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please just fill out the short
survey and we sent out to survey
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to all of our investors.
And, you know, we ended up
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getting at least a couple
hundred responses of.
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Yes, I want to invest a bunch of
them were not accredited and
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they let us know.
And then we, you know, put them
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on a list for hey, for future
raises will definitely reach
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out, but many of them were.
And I have to tell you, I mean,
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00:12:53,300 --> 00:12:57,700
they really stepped up where we
were getting 10 25, and 50 k
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00:12:57,700 --> 00:13:00,800
checks from folks that, you
know, I never talk to you before
256
00:13:01,300 --> 00:13:03,400
you would just Invested, you
know, maybe five hundred
257
00:13:03,400 --> 00:13:06,100
thousand dollars in the first
round of funding, but then
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watched us for a most two years
and saw the progress we made in
259
00:13:08,900 --> 00:13:12,100
said, hey I want to be a part of
this, which was really, really
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00:13:12,100 --> 00:13:13,800
cool.
Hmm.
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00:13:14,200 --> 00:13:16,400
Right.
That sounds.
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00:13:16,400 --> 00:13:19,900
Very cool actually using those
investors to just keep praising,
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00:13:19,900 --> 00:13:23,300
that's pretty good.
Alright, let's talk a little
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00:13:23,300 --> 00:13:27,500
more about the quote-unquote
normal investors and how they
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00:13:27,500 --> 00:13:30,900
react to the fact that your East
100 percent of your funding
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00:13:30,900 --> 00:13:34,500
online.
And have you ever encountered VC
267
00:13:34,500 --> 00:13:37,100
square like old-school?
I've interviewed a few of those
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00:13:37,100 --> 00:13:39,300
who are like.
Yeah, crowd funny is for people
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00:13:39,300 --> 00:13:41,300
who can raise money in a normal
way.
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00:13:41,700 --> 00:13:45,300
And we, of course, had a pretty
good debate about that stuff,
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00:13:45,400 --> 00:13:48,900
but I think they're wrong.
Anyways, that that aside have
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00:13:48,900 --> 00:13:52,200
you ever met those investors and
was the major issue for them,
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00:13:52,200 --> 00:13:56,700
you know?
Absolutely, we have and what's
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00:13:56,700 --> 00:13:59,900
the issue for them?
You know, being stuck in the
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00:13:59,900 --> 00:14:02,500
past, right?
There's not very many Good
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00:14:02,500 --> 00:14:07,100
answers to that.
It's definitely a short-sighted
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00:14:07,500 --> 00:14:11,100
and and you know part of saying
hey it's short-sighted, I mean I
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00:14:11,100 --> 00:14:14,300
can't tell you the innumerable
companies who have raised on
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00:14:14,300 --> 00:14:18,600
these platforms that are y.
Combinator backed that are 500
280
00:14:18,600 --> 00:14:22,600
startups back that are Kleiner
Perkins back that are Andreessen
281
00:14:22,600 --> 00:14:26,000
Horowitz back and then companies
go in the reverse direction.
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00:14:26,000 --> 00:14:28,800
There's one recently and I, you
know, have to get you the name,
283
00:14:29,200 --> 00:14:31,700
but they raised on Republic few
months later they raised.
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00:14:31,900 --> 00:14:34,900
Huge up around from Andreessen
Horowitz.
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00:14:34,900 --> 00:14:38,700
There was another company on
Republic recently Alto Ira, you
286
00:14:38,708 --> 00:14:42,500
know, I think they raised at a
30 million dollar valuation on
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00:14:42,500 --> 00:14:45,000
alto Ira, or was a cap of 30
million.
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00:14:45,800 --> 00:14:48,900
And then a couple months later
raised, a 17 million dollar
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00:14:48,900 --> 00:14:52,800
series a from several notable
VCS at a 90 million dollar
290
00:14:52,800 --> 00:14:54,800
valuation.
So, talk about being a happy
291
00:14:54,800 --> 00:14:58,700
investor for just a few months.
So the reality is, you know,
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00:14:58,900 --> 00:15:01,600
it's becoming mainstream a lot
of companies.
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00:15:01,800 --> 00:15:04,300
In the ecosystem of seed and
series a companies.
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00:15:04,300 --> 00:15:06,800
Now have some sort of crowd
funding that have been a part of
295
00:15:06,808 --> 00:15:10,100
them, and I think that, you
know, the the forward-thinking
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00:15:10,100 --> 00:15:12,700
BC's recognize that.
Listen this is just another part
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00:15:12,700 --> 00:15:15,800
of the capital stack, it has its
role in the market and there's
298
00:15:15,800 --> 00:15:18,800
absolutely no reason to look
down on it.
299
00:15:18,800 --> 00:15:21,400
If you can effectively raise
from your customer base it's
300
00:15:21,400 --> 00:15:25,300
just another signal that perhaps
This Thing Really Works.
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00:15:26,000 --> 00:15:29,600
Absolutely if that should be
hundred percent of logic for
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00:15:29,600 --> 00:15:32,600
those investors.
And by the way speaking In of
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00:15:33,000 --> 00:15:36,200
reason, from your customer base
I've interviewed founder of a
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00:15:36,200 --> 00:15:41,900
company that is doing coffee,
which is like safe, but online.
305
00:15:42,700 --> 00:15:45,000
Check it out.
I'll leave an interior Link in
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00:15:45,000 --> 00:15:47,700
the description to this episode.
So people you are curious about
307
00:15:47,900 --> 00:15:51,000
raising money specifically from
your customers as definitely
308
00:15:51,000 --> 00:15:53,500
interview for you.
Anyways, back to our discussion,
309
00:15:53,900 --> 00:15:57,900
back, to something you
mentioned, which is more of a
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00:15:57,900 --> 00:16:01,400
financial scrutiny, while your
race from the public you've
311
00:16:01,400 --> 00:16:03,100
mentioned.
That you yourself had to file
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00:16:03,100 --> 00:16:06,100
through finra, which I didn't
even know you had to do for
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00:16:06,100 --> 00:16:10,300
crowdfunding, why?
Exactly did that happen to every
314
00:16:10,300 --> 00:16:13,600
every single company do all of
them have to file through finra
315
00:16:13,600 --> 00:16:16,700
when they go public through
crowdfunding chemical me
316
00:16:16,700 --> 00:16:18,500
campaign.
Yeah, exactly, right.
317
00:16:18,500 --> 00:16:22,800
So, essentially, you know, the,
the agreement was okay, you can
318
00:16:22,800 --> 00:16:26,000
raise capital on mine, but if
you're going to raise Capital
319
00:16:26,000 --> 00:16:28,600
online, you essentially have to
give us something back right?
320
00:16:28,600 --> 00:16:32,700
Which is transparency.
So, in order to To prevent
321
00:16:33,500 --> 00:16:36,300
Founders coming into this space
and trying to screw over
322
00:16:36,300 --> 00:16:39,000
investors in order to prevent
fraud.
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00:16:40,000 --> 00:16:43,400
Essentially said, listen you
have to provide, you know,
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00:16:43,500 --> 00:16:46,200
audited financials if you're
looking at forget the exact
325
00:16:46,200 --> 00:16:49,900
number if it's over 250,000.
Now number has changed because
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00:16:49,900 --> 00:16:53,000
under regulation crowdfunding
you can now raise five million
327
00:16:53,000 --> 00:16:54,900
dollars per year from the
general public.
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00:16:55,400 --> 00:16:57,600
So once you're above a certain
threshold of how much money you
329
00:16:57,608 --> 00:17:00,700
want to raise, it has to be
audited prior to that amount,
330
00:17:00,700 --> 00:17:03,700
you just have to have a review.
Financials either way, you have
331
00:17:03,700 --> 00:17:07,599
to have accountants put together
financials and do some review or
332
00:17:07,599 --> 00:17:10,900
audit on those financials.
You have to disclose the terms
333
00:17:10,900 --> 00:17:12,500
of the deal.
How much money you're trying to
334
00:17:12,500 --> 00:17:16,200
raise the time period?
You're trying to raise within in
335
00:17:16,200 --> 00:17:19,800
many ways you could think of it
as a supermini IPO because you
336
00:17:19,800 --> 00:17:22,500
are essentially going public.
You're allowing individual
337
00:17:22,500 --> 00:17:25,800
investors partake in investing
your deal while there's no, you
338
00:17:25,800 --> 00:17:28,800
know, secondary liquid Market at
the moment, eventually, that
339
00:17:28,800 --> 00:17:30,500
will be something that exists as
well.
340
00:17:30,500 --> 00:17:34,300
So, in order to, Raised from
this much broader basic Capital.
341
00:17:35,100 --> 00:17:37,100
You have to give something back
to investors which is
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00:17:37,108 --> 00:17:38,800
transparency around your
business.
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00:17:40,000 --> 00:17:43,100
Right?
So it's a meanie a pill as you
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00:17:43,100 --> 00:17:46,600
said, so which is probably the
case and it takes quite some
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00:17:46,600 --> 00:17:49,400
time to prepare for it.
So who do you think should be
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00:17:50,100 --> 00:17:52,200
basically doing it?
Instead of raising from angels
347
00:17:52,200 --> 00:17:55,100
and VCS where you can just reach
out to Bruce and come there
348
00:17:55,100 --> 00:17:56,200
they're going to give you a
check.
349
00:17:56,200 --> 00:17:57,500
You're going to give them a
piece of paper.
350
00:17:57,500 --> 00:18:01,100
They're going to sign in them.
Off you go who should choose
351
00:18:01,100 --> 00:18:03,500
Equity.
Crowdfunding over the simple.
352
00:18:03,500 --> 00:18:07,900
Old-school fundraising, you
know, to be honest and I know
353
00:18:07,900 --> 00:18:09,300
that I'm biased on this.
This.
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00:18:09,300 --> 00:18:13,400
But in so many ways, I say
seriously, this is good for
355
00:18:13,400 --> 00:18:15,800
everyone.
And the reason I say that is
356
00:18:15,800 --> 00:18:18,700
that if you think about, you
know, friends and family around.
357
00:18:19,100 --> 00:18:22,100
There's so many folks who say,
Hey listen, my friends and
358
00:18:22,108 --> 00:18:26,100
family don't have a lot of
money, you know, in my case nor
359
00:18:26,100 --> 00:18:28,800
did really my friends and family
have all that much money either
360
00:18:28,800 --> 00:18:32,200
but the nice thing is suddenly
it becomes approachable right
361
00:18:32,200 --> 00:18:35,800
where instead of saying well I
need a 25 or 50 k check by and
362
00:18:35,800 --> 00:18:37,700
he'd say I need a hundred dollar
buy it.
363
00:18:37,800 --> 00:18:40,600
I can't tell you how many
Friends from high school, I had
364
00:18:40,600 --> 00:18:44,000
part A and how many, you know,
family members I partake.
365
00:18:44,000 --> 00:18:47,600
And how many former colleagues I
had partake and investing in our
366
00:18:47,600 --> 00:18:49,800
first round of funding and they
really were the ones that helped
367
00:18:49,800 --> 00:18:52,000
me get off the ground.
Again, collectively raise about
368
00:18:52,000 --> 00:18:55,400
100 Grand and it was from a
little over 80 folks, right?
369
00:18:55,400 --> 00:18:58,600
So each one of them was around a
thousand dollar check many were
370
00:18:58,600 --> 00:19:01,200
a hundred dollars if you were
two three, four, five thousand
371
00:19:01,200 --> 00:19:04,400
dollars but there was no major
checks in that round of funding
372
00:19:04,500 --> 00:19:06,000
there.
What it did is it, you know, it
373
00:19:06,000 --> 00:19:09,400
provided the necessary funding
to take the steps to prove that
374
00:19:09,400 --> 00:19:12,100
we really had something to then
go and raise a more meaningful
375
00:19:12,100 --> 00:19:15,600
round of funding down the road.
But the beauty of doing it
376
00:19:15,600 --> 00:19:18,300
online, is that everyone can be
an investor.
377
00:19:18,500 --> 00:19:21,600
I've had Angel groups and best.
I've had my curvy season-best.
378
00:19:21,600 --> 00:19:26,400
I've had very wealthy, very
successful individuals invest,
379
00:19:26,400 --> 00:19:30,100
you know, really large checks
and everything in between.
380
00:19:30,300 --> 00:19:33,800
And so, the reality is, if you
do this, right, everyone can
381
00:19:33,800 --> 00:19:36,300
partake in these rounds of
funding and why not go set the
382
00:19:36,300 --> 00:19:38,700
terms and raise money on your
own terms.
383
00:19:39,500 --> 00:19:41,500
Able to cast the widest Network
possible.
384
00:19:42,100 --> 00:19:45,700
So, for me, it makes all the
sense in the world to do it, you
385
00:19:45,700 --> 00:19:51,300
know, at any stage of the game
and you know, we see a ton a ton
386
00:19:51,400 --> 00:19:55,000
of companies raising, you know,
precede seed and now even series
387
00:19:55,000 --> 00:19:57,600
a and I think it's really
becoming an effective tool to
388
00:19:57,600 --> 00:20:01,000
do.
So, mmm, nice, that's actually
389
00:20:01,000 --> 00:20:03,300
great argument.
If you have a decent personal
390
00:20:03,300 --> 00:20:07,100
network of not extremely
wealthy, people who cannot be a
391
00:20:07,108 --> 00:20:08,900
great investors or even close to
that.
392
00:20:09,400 --> 00:20:11,800
Yeah, Equity crowdfunding is
actually really great place to
393
00:20:11,800 --> 00:20:14,500
start.
That's very, very good and
394
00:20:14,500 --> 00:20:18,800
strong argument towards Equity
crowdfunding good workers, while
395
00:20:18,800 --> 00:20:21,300
you were answering that.
By the way, I was thinking about
396
00:20:21,900 --> 00:20:23,400
what my next question is going
to be.
397
00:20:23,600 --> 00:20:26,300
And I was thinking that, you
know, mostly we discuss how
398
00:20:26,300 --> 00:20:29,600
people fundraise, but we never
really speak about how they
399
00:20:29,600 --> 00:20:31,500
spend their money that they
raced.
400
00:20:31,500 --> 00:20:35,900
So let's talk about that for a
little bit after you reach that
401
00:20:35,900 --> 00:20:38,000
initial round from friends and
family through equity
402
00:20:38,000 --> 00:20:41,700
crowdfunding Were the first
couple steps that you took.
403
00:20:42,500 --> 00:20:46,700
Yeah, I think, you know, the big
things that we did was focus on
404
00:20:46,700 --> 00:20:50,000
product development and finding
product Market fit.
405
00:20:50,000 --> 00:20:54,200
So for us, you know, we had a
true MVP out in Market when we
406
00:20:54,200 --> 00:20:55,700
went to race at first round of
funding.
407
00:20:55,700 --> 00:20:58,700
And it was funny, people would
say all the time like, well, you
408
00:20:58,700 --> 00:21:01,200
know, you say, you want to be
this data and analytics
409
00:21:01,200 --> 00:21:03,200
platform, but this practically
looks like a block.
410
00:21:03,200 --> 00:21:05,500
I'm like, it doesn't practically
look like that.
411
00:21:05,500 --> 00:21:08,700
It is that for now.
I have no technical
412
00:21:08,700 --> 00:21:09,600
capabilities.
Mobility.
413
00:21:09,700 --> 00:21:12,000
And until I have that, I'm not
going to be able to build those
414
00:21:12,000 --> 00:21:14,000
tools.
What I'm showing here is that
415
00:21:14,000 --> 00:21:16,100
people are willing to pay for
some research, right?
416
00:21:16,100 --> 00:21:19,100
So I started with what I knew,
which was basically qualitative
417
00:21:19,100 --> 00:21:22,100
research until I raise enough
money.
418
00:21:22,100 --> 00:21:25,500
To hire some tech Talent we then
was able to take the steps to
419
00:21:25,500 --> 00:21:28,700
take it out of MVP form and
start to add in, you know,
420
00:21:28,700 --> 00:21:31,500
actual data capabilities and
collecting data from all of
421
00:21:31,500 --> 00:21:34,100
these marketplaces and we
started to evolve the brand
422
00:21:34,100 --> 00:21:36,200
forward towards what our actual
Vision was.
423
00:21:36,200 --> 00:21:40,100
So we spent a lot on product.
Getting folks to help us out on
424
00:21:40,108 --> 00:21:43,000
the product from and then the
other thing was just doing small
425
00:21:43,000 --> 00:21:46,100
marketing campaigns and going to
events and getting the word out
426
00:21:46,100 --> 00:21:48,300
there about us.
And it was not with the idea
427
00:21:48,300 --> 00:21:51,000
that okay we're going to blow up
and have 10 million users on our
428
00:21:51,000 --> 00:21:53,400
platform.
We wanted to do is prove that we
429
00:21:53,400 --> 00:21:56,000
could get people to pay for the
service and that they actually
430
00:21:56,000 --> 00:21:59,700
evaluate it and wanted it and we
were definitely able to get
431
00:21:59,700 --> 00:22:01,100
enough you know where we could
show.
432
00:22:01,100 --> 00:22:04,400
Hey at least a couple hundred or
a few hundred people wanting to
433
00:22:04,400 --> 00:22:07,300
pay for this thing when we had a
marketing budget of Navy, you
434
00:22:07,300 --> 00:22:08,800
know, ten thousand dollars or
less.
435
00:22:09,000 --> 00:22:11,100
And no one even knows what we
are just yet.
436
00:22:11,600 --> 00:22:14,400
And it was just to prove the
point that yes, there is a
437
00:22:14,400 --> 00:22:18,400
market for what we're building.
And yes, we're able to execute
438
00:22:18,400 --> 00:22:21,400
and build when we raise Capital.
Now, give us more Capital to
439
00:22:21,400 --> 00:22:23,100
really take this thing to the
next level.
440
00:22:23,800 --> 00:22:24,900
Uh-huh, perfect.
Yeah.
441
00:22:24,900 --> 00:22:28,900
I'm VP stages, the most fun, the
most exciting, and pretty
442
00:22:28,900 --> 00:22:32,100
friendly the artist stage of it,
congrats on pulling through
443
00:22:32,100 --> 00:22:33,400
this.
Um, all right.
444
00:22:33,400 --> 00:22:35,700
Moving on to the very last
question of today's episode,
445
00:22:35,700 --> 00:22:38,600
which is a call to action.
So Kris, what do you want to
446
00:22:38,600 --> 00:22:40,500
listen?
Do as soon as the app is always
447
00:22:40,500 --> 00:22:44,700
over, you know I think there's
depends on what party you are if
448
00:22:44,700 --> 00:22:49,100
you are investor then I really
encourage you to go look at
449
00:22:49,100 --> 00:22:53,700
platforms like we found her.com
seedinvest calm Republic that
450
00:22:53,700 --> 00:22:58,300
co-starred engine.com.
Net capital.com learn about this
451
00:22:58,300 --> 00:23:00,700
Market, check it out, get a feel
for it.
452
00:23:00,900 --> 00:23:03,800
Obviously come to us we would
love to have you love for you to
453
00:23:03,800 --> 00:23:06,900
utilize their product.
We provide really robust due.
454
00:23:06,900 --> 00:23:10,300
Diligence research tools.
Make your, you know, Discovery
455
00:23:10,300 --> 00:23:12,900
and due diligence process way
more efficient than looking
456
00:23:12,900 --> 00:23:14,100
across.
These zillion different
457
00:23:14,100 --> 00:23:17,500
marketplaces but just start to
orient yourself to this space
458
00:23:17,700 --> 00:23:20,000
and think about.
Can I make a small allocation of
459
00:23:20,008 --> 00:23:24,500
My overall Investment Portfolio
focused on this new market where
460
00:23:24,500 --> 00:23:27,300
I can invest in these really
early stage deals and a
461
00:23:27,300 --> 00:23:29,300
Founders?
I would say, you know, think
462
00:23:29,300 --> 00:23:32,900
really critically about your
capital-raising strategy don't
463
00:23:32,900 --> 00:23:36,300
think that this isn't something
that should be a part of it and
464
00:23:36,300 --> 00:23:38,900
start considering your options.
So again, go to those markets
465
00:23:39,000 --> 00:23:42,600
Places as well even more.
So for you and get a sense of
466
00:23:42,600 --> 00:23:45,000
the types of companies that are
raising, the valuations are
467
00:23:45,000 --> 00:23:47,900
raising at how much money,
they're raising, get comfort
468
00:23:47,900 --> 00:23:49,400
with it.
And then really think
469
00:23:49,400 --> 00:23:51,800
strategically about if you want
to start reaching out to them
470
00:23:52,700 --> 00:23:55,400
to, you know, ask if they would
allow you to raise capital on
471
00:23:55,400 --> 00:23:58,600
their platform and certainly, if
you're looking for intros or
472
00:23:58,600 --> 00:24:01,400
want to learn more about those
platforms have questions, please
473
00:24:01,400 --> 00:24:05,300
do reach out to me at
chris@chrisderose.com I'm always
474
00:24:05,300 --> 00:24:08,800
more than happy to help if I can
perfect great culture.
475
00:24:09,000 --> 00:24:10,500
Action.
Michael Jackson's.
476
00:24:10,500 --> 00:24:12,900
Give me check out the
description of this episode.
477
00:24:12,900 --> 00:24:16,700
Bunch of Link's is going to be
there such as a link to the
478
00:24:16,700 --> 00:24:20,400
episode about coffee which is an
alternative to the standard
479
00:24:20,400 --> 00:24:24,400
safe.
So yes, a lot of stuff about
480
00:24:24,400 --> 00:24:29,400
Equity crowdfunding is going to
be there and my next call to
481
00:24:29,400 --> 00:24:32,100
action I have to for this one.
Unfortunately, my next call to
482
00:24:32,100 --> 00:24:35,100
action is actually check out the
next episode because the next
483
00:24:35,100 --> 00:24:38,400
episode is going to be an
educational episode again with
484
00:24:38,400 --> 00:24:40,500
Chris.
About Equity crowdfunding
485
00:24:40,500 --> 00:24:43,100
specifically how you do is,
we're going to do step-by-step
486
00:24:43,100 --> 00:24:47,600
guides on how to approach it and
who should actually approach it.
487
00:24:47,600 --> 00:24:51,000
So yes, do that.
Check out the next episode is
488
00:24:51,000 --> 00:24:54,600
going to be marked with
something like educational.
489
00:24:55,000 --> 00:24:58,400
So go check it out.
If you're curious about Equity
490
00:24:58,400 --> 00:25:01,600
crowdfunding about online
profile in general, it's going
491
00:25:01,600 --> 00:25:02,900
to be good.
00:00:05,200 --> 00:00:07,800
They're releasing to fundraising
video a podcast about
2
00:00:07,800 --> 00:00:11,400
fundraising for early-stage
startups, the major rule that we
3
00:00:11,400 --> 00:00:14,600
follow here is no bullshit on
this podcast.
4
00:00:14,600 --> 00:00:17,100
No music to relax.
You know, advertisements of our
5
00:00:17,100 --> 00:00:19,600
sponsors.
We only talk about fundraising
6
00:00:19,600 --> 00:00:22,900
here and nothing else.
So let's jump into the episode
7
00:00:23,400 --> 00:00:26,000
and today's guest speaker we
have Christopher Lustre.
8
00:00:26,000 --> 00:00:29,000
No founder and CEO at Kings
crowds.
9
00:00:30,600 --> 00:00:33,300
And this episode, we'll talk
about Equity crowdfunding.
10
00:00:33,300 --> 00:00:35,700
How is it different from normal
crowdfunding?
11
00:00:36,600 --> 00:00:39,700
How can crowd was Raising its
own money?
12
00:00:39,700 --> 00:00:43,500
And why did they decide to raise
all of their rounds through
13
00:00:43,500 --> 00:00:46,400
online funding?
So Christopher, let's get off by
14
00:00:46,400 --> 00:00:47,500
you.
Giving us some background on
15
00:00:47,508 --> 00:00:51,200
yourself and on King's crowd.
Sure thing Constantine.
16
00:00:51,200 --> 00:00:53,200
Great to be here.
Thanks, thanks for the
17
00:00:53,200 --> 00:00:57,200
opportunity.
You know, so, I circumscribed
18
00:00:57,200 --> 00:01:02,100
about three years ago now and my
My kind of for a or journey to
19
00:01:02,100 --> 00:01:05,800
starting Kings crowd, was having
started my career working for a
20
00:01:05,800 --> 00:01:08,900
management consulting, firm
learning about the traditional
21
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private Equity markets and some
of the challenges that existed
22
00:01:12,600 --> 00:01:16,000
there for those that don't know,
you know, private Equity Venture
23
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Capital, right?
Essentially.
24
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All they are are funds that are
raised which is basically a
25
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bunch of money in order to
invest in companies and body
26
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companies with the long-term
goal for any of those
27
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organizations.
To sell those companies for a
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whole lot more than they get in
on that.
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And basically, during my time
supporting and working on behalf
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of private Equity shops, I
learned about the challenges
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00:01:42,000 --> 00:01:44,900
around doing private Equity due
diligence type work.
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00:01:45,200 --> 00:01:47,500
I learned about how
non-transparent the private
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Equity markets could be and
worst of all, I learned that I
34
00:01:50,500 --> 00:01:53,400
couldn't partake in the private
Equity markets because up until
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00:01:53,400 --> 00:01:57,800
about five years ago now, unless
you're an accredited investor
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00:01:57,800 --> 00:01:59,800
which means, you know, you have
at least a million and a half.
37
00:02:00,000 --> 00:02:02,800
Citizen could your home or you
made a certain level of income,
38
00:02:03,100 --> 00:02:07,200
which only represents about 3%
of Oliveira United States
39
00:02:07,200 --> 00:02:09,900
economy.
You couldn't invest in private
40
00:02:09,900 --> 00:02:11,500
companies.
And the only thing available to
41
00:02:11,500 --> 00:02:14,500
you was companies on public
stock exchanges like Google and
42
00:02:14,500 --> 00:02:17,600
Facebook, but a lot of the
growth happens before those
43
00:02:17,600 --> 00:02:20,800
companies ever go public.
So it was really that, that was
44
00:02:20,800 --> 00:02:26,200
the inspiration to say why, why
can't I invest in the private
45
00:02:26,200 --> 00:02:27,900
markets?
Why Can't This be done better?
46
00:02:28,200 --> 00:02:30,400
And that's when I stumbled upon
the jobs Act Act, which is
47
00:02:30,400 --> 00:02:34,400
creating 2012 and fully enacted
by 2016, which tried to solve
48
00:02:34,400 --> 00:02:36,800
for both of those issues that
I'm talking about which are
49
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really around transparency.
And accesses the jobs act said,
50
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Hey what if we let everyone
invest in the private markets
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but in exchange for allowing to
raise capital from literally,
52
00:02:47,900 --> 00:02:50,700
anyone in the United States
companies will have to be a lot
53
00:02:50,700 --> 00:02:53,100
more transparent around things
like their financials and
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valuation.
And hey, by the way let's let
55
00:02:56,500 --> 00:02:59,800
everyday investors be able to
invest in these companies when
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00:03:00,000 --> 00:03:03,000
Still really early days, the
potentially be able to partake
57
00:03:03,000 --> 00:03:05,800
in the type of upside that
Venture capitalists in private
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00:03:05,800 --> 00:03:09,600
Equity shops, get to partake in
ended up running a Blog in its
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00:03:09,600 --> 00:03:12,700
face for a few years then ended
up being acquired by one of the
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founders of Napster from way
back in the day.
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And at that time back in 2018 we
decided to build a first mover
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solution which would essentially
be the first Morning Star
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Bloomberg solution for what we
Define as the Online private
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market.
So we work on behalf of
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individual investors.
So, to be able to invest into
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private companies that are
listing on platforms like
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00:03:34,600 --> 00:03:40,800
Republic .ko, we funder.com net
capital.com start engine.com and
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00:03:40,800 --> 00:03:43,800
many, many more, essentially
trying to empower you to make
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00:03:43,800 --> 00:03:46,700
good investment decisions when
it comes to investing in private
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companies.
Great quick question on that.
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By the way, are you working as
advisors?
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00:03:52,200 --> 00:03:56,400
Or are you working as a more of
a fun where Opie's have to make
73
00:03:56,400 --> 00:03:59,000
a commitment and you just invest
on their behalf.
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00:03:59,400 --> 00:04:03,300
So the You can think about is
really, you know, as information
75
00:04:03,300 --> 00:04:07,300
research provider we're very
much like a Bloomberg or a
76
00:04:07,300 --> 00:04:10,400
Morning Star, providing the
research that individual
77
00:04:10,400 --> 00:04:13,600
investors can purchase and
utilize to do their own due
78
00:04:13,600 --> 00:04:16,000
diligence before investing in a
private company.
79
00:04:16,700 --> 00:04:20,700
Gotcha, speaking of purchasing
this, maybe some of our
80
00:04:20,700 --> 00:04:22,400
listeners might be interested.
What?
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00:04:22,400 --> 00:04:23,700
Prices are we talking about
here?
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00:04:24,300 --> 00:04:27,900
Yeah, so our starting price here
is at $10 a month.
83
00:04:28,100 --> 00:04:30,300
Of course that's you know, if
you're looking for a One pick a
84
00:04:30,308 --> 00:04:33,600
month and and then being able to
look at some of our other
85
00:04:33,600 --> 00:04:37,200
various research and news and
then it goes as high as $50 a
86
00:04:37,200 --> 00:04:39,900
month for investors.
Nice.
87
00:04:39,900 --> 00:04:42,100
That's very interesting.
My brother might be interested
88
00:04:42,100 --> 00:04:43,600
in that.
So let me ask you a couple more
89
00:04:43,600 --> 00:04:47,100
questions on what?
Exactly you get for ten bucks
90
00:04:47,100 --> 00:04:49,100
per month.
So you said that it's going to
91
00:04:49,108 --> 00:04:52,300
be one big.
What is going to be included in
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00:04:52,300 --> 00:04:55,200
this kind of research on the
companies and can be mostly
93
00:04:55,200 --> 00:04:59,200
about team on the background of
it or isn't about to Tech, or is
94
00:04:59,200 --> 00:05:01,100
it going to just like Really
everything at all.
95
00:05:01,100 --> 00:05:05,000
Or what kind of information can
one expect for ten dollars per
96
00:05:05,000 --> 00:05:06,500
month?
Yes.
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00:05:06,500 --> 00:05:09,000
So you know basically what
you're going to get at $10 per
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00:05:09,000 --> 00:05:13,100
month is first off, you'll have
the ability to sort and look
99
00:05:13,100 --> 00:05:15,500
through all of the companies
that kind of exists in this
100
00:05:15,500 --> 00:05:19,200
universe of the Online private
markets and look for certain
101
00:05:19,200 --> 00:05:21,300
criteria.
You care about be able to get a
102
00:05:21,308 --> 00:05:23,800
very simple profile on each
company and it's going to break
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00:05:23,800 --> 00:05:25,900
down how much money.
They're raising.
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00:05:26,100 --> 00:05:28,400
What their momentum looks like
valuation?
105
00:05:28,400 --> 00:05:30,700
Terms of the deal.
All It's of stuff on the deal
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00:05:30,700 --> 00:05:35,400
but in terms of each month,
you'll receive two analysts
107
00:05:35,400 --> 00:05:37,600
reports.
So if you've ever bought into a
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00:05:37,600 --> 00:05:40,200
public stock like Google or
Facebook, you may have read an
109
00:05:40,200 --> 00:05:43,400
analyst report that provides a
strong buyer by rating.
110
00:05:43,400 --> 00:05:45,700
Well, we have something very
similar for this market.
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00:05:45,700 --> 00:05:49,000
So if you buy into our $10 a
month package, we will provide
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00:05:49,000 --> 00:05:52,900
you to analysts reports per
month as well as some founder
113
00:05:52,900 --> 00:05:55,900
profiles.
Exclusive webinars, some
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00:05:55,900 --> 00:05:59,600
Advanced companies search tools
but you basically get the basics
115
00:05:59,600 --> 00:06:01,700
for You need now.
If you go all the way up to the
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00:06:01,700 --> 00:06:05,400
50 dollar a month plan, what we
do is we provide all of our
117
00:06:05,400 --> 00:06:09,400
analysts reports is probably
about 20 a month that come out
118
00:06:09,800 --> 00:06:11,900
in addition to our rating
report.
119
00:06:11,900 --> 00:06:15,600
So each and every company in
this universe, which is probably
120
00:06:15,600 --> 00:06:18,400
about almost 500 new companies a
month.
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00:06:18,400 --> 00:06:21,600
Now, that raise Capital online,
you can actually get a
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00:06:21,608 --> 00:06:25,000
quantitative rating on each and
every one of those companies.
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00:06:25,700 --> 00:06:28,700
And so, that's part of the, you
know, fifty dollar a month plan,
124
00:06:28,800 --> 00:06:31,100
but that's really do.
Want to start drilling down and
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doing much larger scope,
diligence.
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00:06:33,100 --> 00:06:35,600
And looking at way more deal,
flow things like that.
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00:06:36,600 --> 00:06:38,700
Very cool.
I'm pretty sure my brother is
128
00:06:38,700 --> 00:06:42,500
going to get that 10 bucks
subscription, definitely sad to
129
00:06:42,500 --> 00:06:45,400
you most for this call.
All right, got distracted.
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00:06:45,400 --> 00:06:48,000
Let's go back to discussing
raising money online.
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00:06:48,000 --> 00:06:52,400
So you mentioned that he or
Kings crowd great since entire
132
00:06:52,400 --> 00:06:54,700
finding online.
Can you tell us a bit more about
133
00:06:54,700 --> 00:06:56,300
that?
What do you mean by saying it
134
00:06:56,400 --> 00:06:59,300
raise money online.
Great questions.
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00:06:59,300 --> 00:07:03,300
So, Raised about a little over
two million dollars to date at
136
00:07:03,300 --> 00:07:07,300
this point from about 2100
investors nice.
137
00:07:07,300 --> 00:07:10,800
When I say that we've raised
Capital online allowing
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00:07:10,800 --> 00:07:12,400
investors own a piece of our
company.
139
00:07:12,400 --> 00:07:15,600
I literally mean that we have
basically allowed for a certain
140
00:07:15,600 --> 00:07:18,600
number of shares to be sold
online.
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00:07:18,700 --> 00:07:20,800
We've gone through something
called, filing a form.
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00:07:20,800 --> 00:07:25,400
C with finra where we basically
put out some audited financials,
143
00:07:26,000 --> 00:07:29,900
we put in our evaluation
operating agreements some A
144
00:07:29,900 --> 00:07:33,300
doctor checks around the c-suite
and then what that information
145
00:07:33,300 --> 00:07:36,100
were able to list on a platform
called net capital.com.
146
00:07:36,300 --> 00:07:39,000
We also raised on a platform
called start engine.com.
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00:07:39,600 --> 00:07:43,300
We've done about three total
raises to date online and
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00:07:43,300 --> 00:07:45,000
collectively.
They raised a little over two
149
00:07:45,000 --> 00:07:49,100
million dollars and essentially
we provided common stock at a
150
00:07:49,100 --> 00:07:53,100
certain price valuation and
allowed people to buy in and
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00:07:53,100 --> 00:07:55,700
own.
Those shares and literally own a
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00:07:55,700 --> 00:07:58,900
piece of our company when it was
still worth, you know, south of
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00:07:58,900 --> 00:08:00,100
10 million dollars.
Hours.
154
00:08:00,500 --> 00:08:03,800
So still very, very early days
with hopefully the potential of
155
00:08:03,808 --> 00:08:06,300
some real upside.
Mmm.
156
00:08:06,800 --> 00:08:10,000
Nice.
So 2100 investors.
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00:08:10,000 --> 00:08:12,800
That's a hell lot of investors.
Can you tell us a bit more
158
00:08:12,800 --> 00:08:13,800
about?
You know.
159
00:08:13,800 --> 00:08:18,300
How do you utilize that huge
huge number of investors in your
160
00:08:18,300 --> 00:08:21,100
company?
Absolutely.
161
00:08:21,200 --> 00:08:23,900
So first off you know a there's
kind of this common
162
00:08:23,900 --> 00:08:26,100
misconception.
Wow that must be really hard to
163
00:08:26,100 --> 00:08:29,200
manage 2100.
Investors reality is it's all
164
00:08:29,200 --> 00:08:31,900
managed under one line item on
the cap table and the
165
00:08:31,907 --> 00:08:34,200
communications are controlled
through the platforms that we
166
00:08:34,200 --> 00:08:36,700
have utilized.
And so essentially I put
167
00:08:36,700 --> 00:08:40,400
together a quarterly update and
I send it to the platform.
168
00:08:40,400 --> 00:08:42,799
The platform sends it to our
2100 investors.
169
00:08:43,100 --> 00:08:45,900
If we get, you know, three to
five responses of quarter,
170
00:08:45,900 --> 00:08:48,300
typically just kind of
high-fiving us and saying hey
171
00:08:48,300 --> 00:08:50,100
that's fantastic.
How else can I help?
172
00:08:50,800 --> 00:08:54,100
There really is very little
laborious, you know,
173
00:08:54,100 --> 00:08:55,800
interactions that need to be
had.
174
00:08:55,800 --> 00:08:59,000
So for those who think it's
becomes this huge big problem,
175
00:08:59,000 --> 00:09:02,100
it absolutely does not and I
have had zero issues, nor do I
176
00:09:02,100 --> 00:09:05,100
really heard any Founders talk
about having an issue of
177
00:09:05,200 --> 00:09:08,800
Managing, so many investors.
And then, you know, the other
178
00:09:08,800 --> 00:09:10,900
thing that I would say is it's a
little bit like the public
179
00:09:10,900 --> 00:09:13,900
markets where we have, 20 100
investors.
180
00:09:13,900 --> 00:09:22,400
I bet you, you know, 2050 of
them represent about 30 or 40
181
00:09:22,400 --> 00:09:25,600
percent of our funding and then
about 50 of them, represent the
182
00:09:25,600 --> 00:09:28,100
other, you know, 50 60 percent
of her fucking.
183
00:09:28,800 --> 00:09:30,900
So it's always a game of, you
know, the big tricks, a little
184
00:09:30,900 --> 00:09:33,700
checks, but collectively, we
need them all in order to
185
00:09:33,700 --> 00:09:35,700
accomplish our goals, which I
think is, Is always really,
186
00:09:35,700 --> 00:09:37,500
really cool.
But in terms of how we use them,
187
00:09:37,500 --> 00:09:40,900
my gosh, there's so many
different things, you know, from
188
00:09:40,900 --> 00:09:44,800
a simple as, you know, having
them become customers and
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Advocates of her business and
believing many.
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Many of them are, I think nearly
all of them are, you know,
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subscribe to our newsletter
lists and things like that.
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Many are paid customers, and are
very much Advocates.
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We've had people tweet at us.
We had one guy who he's a CMO at
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another company, and he had a
little left over budget from a
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project.
So, he actually, Lee spent money
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from that budget.
It was just going to be lost.
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He's like this is going to be
lost in a bit of money.
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He's like I'm just going to use
that money and buy you guys some
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stickers for with the king's
crown logo that I passed around
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to people that have been.
It's just so cool to see that
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kind of ambassadorship and
wanting to be a part of her
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brand.
You know and then we've gone so
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far as having advisors and
individuals become employees
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that initially started out as
just kind of these you know,
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line name checks going into her
deal.
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Nice, very cold.
There is one phrase that you
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said that try to my a which has
a responsibility to the
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quarterly updates.
You said three to five responses
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per quarter it.
Yeah.
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It's been extremely extremely
low, you know, it's mostly
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congratulations and things like
that.
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It's just, we don't get much.
Basically, people are happy to
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be kept in the know.
We tell them about what's going
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well where there's challenges,
what the opportunities are and
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people are happy with that.
There's really you know, there's
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not a lot of Questions being
asked.
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And the way that I think a lot
of these investors look at it,
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this is a passive investment for
the long term and so that
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they're not, you know, hounding
on you, when are you going to
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IPO?
They kind of recognize the
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reality what they're getting
into, which is a long game.
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So it's been really nice to see
and it's been great, you know,
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to have an investor base that
isn't challenging to deal with
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and in fact is really an
advocate of her business.
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All right?
So let's talk a little more
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about that involvement
engagement specifically, The
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high engagement rate of those
investors is probably one of the
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key factors of some Founders
choosing Equity crowdfunding
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over normal.
Qualifying from VC.
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I mean over normal funding from
VCS and angels' you know this
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ability to reach out to 2nd on
2100 investors and ask for help.
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And then yet the help
immediately because I mean there
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are 20 100 people that you're
talking to.
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Have you ever done this kind of
Target Outreach to those
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00:12:00,200 --> 00:12:03,600
investors of yours asking for
Specific help saying like here
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is the immediate problem that
we're having, it's a massive
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problem.
We need your help.
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Have you ever done something
like that?
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Hmm, it's a great question.
One of the things we did in
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fact, do was during our last
round of funding.
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It was an accredited only round
of funding, but it was still
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online.
Nonetheless, we can only raise
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her grade investors.
And so, we kind of reached out,
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we said, listen, we're raising,
you know, at the moment is an
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accredited only round on the
same platform that we've
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utilizing a The capital, you
know, if you want to partake,
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please just fill out the short
survey and we sent out to survey
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to all of our investors.
And, you know, we ended up
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getting at least a couple
hundred responses of.
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Yes, I want to invest a bunch of
them were not accredited and
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they let us know.
And then we, you know, put them
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on a list for hey, for future
raises will definitely reach
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out, but many of them were.
And I have to tell you, I mean,
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they really stepped up where we
were getting 10 25, and 50 k
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checks from folks that, you
know, I never talk to you before
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00:13:01,300 --> 00:13:03,400
you would just Invested, you
know, maybe five hundred
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00:13:03,400 --> 00:13:06,100
thousand dollars in the first
round of funding, but then
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watched us for a most two years
and saw the progress we made in
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said, hey I want to be a part of
this, which was really, really
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cool.
Hmm.
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Right.
That sounds.
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Very cool actually using those
investors to just keep praising,
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that's pretty good.
Alright, let's talk a little
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more about the quote-unquote
normal investors and how they
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00:13:27,500 --> 00:13:30,900
react to the fact that your East
100 percent of your funding
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00:13:30,900 --> 00:13:34,500
online.
And have you ever encountered VC
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square like old-school?
I've interviewed a few of those
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00:13:37,100 --> 00:13:39,300
who are like.
Yeah, crowd funny is for people
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who can raise money in a normal
way.
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00:13:41,700 --> 00:13:45,300
And we, of course, had a pretty
good debate about that stuff,
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but I think they're wrong.
Anyways, that that aside have
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you ever met those investors and
was the major issue for them,
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00:13:52,200 --> 00:13:56,700
you know?
Absolutely, we have and what's
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the issue for them?
You know, being stuck in the
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past, right?
There's not very many Good
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00:14:02,500 --> 00:14:07,100
answers to that.
It's definitely a short-sighted
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00:14:07,500 --> 00:14:11,100
and and you know part of saying
hey it's short-sighted, I mean I
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can't tell you the innumerable
companies who have raised on
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these platforms that are y.
Combinator backed that are 500
280
00:14:18,600 --> 00:14:22,600
startups back that are Kleiner
Perkins back that are Andreessen
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00:14:22,600 --> 00:14:26,000
Horowitz back and then companies
go in the reverse direction.
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00:14:26,000 --> 00:14:28,800
There's one recently and I, you
know, have to get you the name,
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00:14:29,200 --> 00:14:31,700
but they raised on Republic few
months later they raised.
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00:14:31,900 --> 00:14:34,900
Huge up around from Andreessen
Horowitz.
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00:14:34,900 --> 00:14:38,700
There was another company on
Republic recently Alto Ira, you
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00:14:38,708 --> 00:14:42,500
know, I think they raised at a
30 million dollar valuation on
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00:14:42,500 --> 00:14:45,000
alto Ira, or was a cap of 30
million.
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00:14:45,800 --> 00:14:48,900
And then a couple months later
raised, a 17 million dollar
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00:14:48,900 --> 00:14:52,800
series a from several notable
VCS at a 90 million dollar
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00:14:52,800 --> 00:14:54,800
valuation.
So, talk about being a happy
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00:14:54,800 --> 00:14:58,700
investor for just a few months.
So the reality is, you know,
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it's becoming mainstream a lot
of companies.
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In the ecosystem of seed and
series a companies.
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Now have some sort of crowd
funding that have been a part of
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00:15:06,808 --> 00:15:10,100
them, and I think that, you
know, the the forward-thinking
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00:15:10,100 --> 00:15:12,700
BC's recognize that.
Listen this is just another part
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of the capital stack, it has its
role in the market and there's
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00:15:15,800 --> 00:15:18,800
absolutely no reason to look
down on it.
299
00:15:18,800 --> 00:15:21,400
If you can effectively raise
from your customer base it's
300
00:15:21,400 --> 00:15:25,300
just another signal that perhaps
This Thing Really Works.
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00:15:26,000 --> 00:15:29,600
Absolutely if that should be
hundred percent of logic for
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00:15:29,600 --> 00:15:32,600
those investors.
And by the way speaking In of
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reason, from your customer base
I've interviewed founder of a
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00:15:36,200 --> 00:15:41,900
company that is doing coffee,
which is like safe, but online.
305
00:15:42,700 --> 00:15:45,000
Check it out.
I'll leave an interior Link in
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00:15:45,000 --> 00:15:47,700
the description to this episode.
So people you are curious about
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00:15:47,900 --> 00:15:51,000
raising money specifically from
your customers as definitely
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00:15:51,000 --> 00:15:53,500
interview for you.
Anyways, back to our discussion,
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00:15:53,900 --> 00:15:57,900
back, to something you
mentioned, which is more of a
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00:15:57,900 --> 00:16:01,400
financial scrutiny, while your
race from the public you've
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00:16:01,400 --> 00:16:03,100
mentioned.
That you yourself had to file
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00:16:03,100 --> 00:16:06,100
through finra, which I didn't
even know you had to do for
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00:16:06,100 --> 00:16:10,300
crowdfunding, why?
Exactly did that happen to every
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00:16:10,300 --> 00:16:13,600
every single company do all of
them have to file through finra
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00:16:13,600 --> 00:16:16,700
when they go public through
crowdfunding chemical me
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00:16:16,700 --> 00:16:18,500
campaign.
Yeah, exactly, right.
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00:16:18,500 --> 00:16:22,800
So, essentially, you know, the,
the agreement was okay, you can
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00:16:22,800 --> 00:16:26,000
raise capital on mine, but if
you're going to raise Capital
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00:16:26,000 --> 00:16:28,600
online, you essentially have to
give us something back right?
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00:16:28,600 --> 00:16:32,700
Which is transparency.
So, in order to To prevent
321
00:16:33,500 --> 00:16:36,300
Founders coming into this space
and trying to screw over
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00:16:36,300 --> 00:16:39,000
investors in order to prevent
fraud.
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00:16:40,000 --> 00:16:43,400
Essentially said, listen you
have to provide, you know,
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00:16:43,500 --> 00:16:46,200
audited financials if you're
looking at forget the exact
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number if it's over 250,000.
Now number has changed because
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00:16:49,900 --> 00:16:53,000
under regulation crowdfunding
you can now raise five million
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00:16:53,000 --> 00:16:54,900
dollars per year from the
general public.
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00:16:55,400 --> 00:16:57,600
So once you're above a certain
threshold of how much money you
329
00:16:57,608 --> 00:17:00,700
want to raise, it has to be
audited prior to that amount,
330
00:17:00,700 --> 00:17:03,700
you just have to have a review.
Financials either way, you have
331
00:17:03,700 --> 00:17:07,599
to have accountants put together
financials and do some review or
332
00:17:07,599 --> 00:17:10,900
audit on those financials.
You have to disclose the terms
333
00:17:10,900 --> 00:17:12,500
of the deal.
How much money you're trying to
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00:17:12,500 --> 00:17:16,200
raise the time period?
You're trying to raise within in
335
00:17:16,200 --> 00:17:19,800
many ways you could think of it
as a supermini IPO because you
336
00:17:19,800 --> 00:17:22,500
are essentially going public.
You're allowing individual
337
00:17:22,500 --> 00:17:25,800
investors partake in investing
your deal while there's no, you
338
00:17:25,800 --> 00:17:28,800
know, secondary liquid Market at
the moment, eventually, that
339
00:17:28,800 --> 00:17:30,500
will be something that exists as
well.
340
00:17:30,500 --> 00:17:34,300
So, in order to, Raised from
this much broader basic Capital.
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00:17:35,100 --> 00:17:37,100
You have to give something back
to investors which is
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00:17:37,108 --> 00:17:38,800
transparency around your
business.
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00:17:40,000 --> 00:17:43,100
Right?
So it's a meanie a pill as you
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00:17:43,100 --> 00:17:46,600
said, so which is probably the
case and it takes quite some
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00:17:46,600 --> 00:17:49,400
time to prepare for it.
So who do you think should be
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00:17:50,100 --> 00:17:52,200
basically doing it?
Instead of raising from angels
347
00:17:52,200 --> 00:17:55,100
and VCS where you can just reach
out to Bruce and come there
348
00:17:55,100 --> 00:17:56,200
they're going to give you a
check.
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00:17:56,200 --> 00:17:57,500
You're going to give them a
piece of paper.
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00:17:57,500 --> 00:18:01,100
They're going to sign in them.
Off you go who should choose
351
00:18:01,100 --> 00:18:03,500
Equity.
Crowdfunding over the simple.
352
00:18:03,500 --> 00:18:07,900
Old-school fundraising, you
know, to be honest and I know
353
00:18:07,900 --> 00:18:09,300
that I'm biased on this.
This.
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00:18:09,300 --> 00:18:13,400
But in so many ways, I say
seriously, this is good for
355
00:18:13,400 --> 00:18:15,800
everyone.
And the reason I say that is
356
00:18:15,800 --> 00:18:18,700
that if you think about, you
know, friends and family around.
357
00:18:19,100 --> 00:18:22,100
There's so many folks who say,
Hey listen, my friends and
358
00:18:22,108 --> 00:18:26,100
family don't have a lot of
money, you know, in my case nor
359
00:18:26,100 --> 00:18:28,800
did really my friends and family
have all that much money either
360
00:18:28,800 --> 00:18:32,200
but the nice thing is suddenly
it becomes approachable right
361
00:18:32,200 --> 00:18:35,800
where instead of saying well I
need a 25 or 50 k check by and
362
00:18:35,800 --> 00:18:37,700
he'd say I need a hundred dollar
buy it.
363
00:18:37,800 --> 00:18:40,600
I can't tell you how many
Friends from high school, I had
364
00:18:40,600 --> 00:18:44,000
part A and how many, you know,
family members I partake.
365
00:18:44,000 --> 00:18:47,600
And how many former colleagues I
had partake and investing in our
366
00:18:47,600 --> 00:18:49,800
first round of funding and they
really were the ones that helped
367
00:18:49,800 --> 00:18:52,000
me get off the ground.
Again, collectively raise about
368
00:18:52,000 --> 00:18:55,400
100 Grand and it was from a
little over 80 folks, right?
369
00:18:55,400 --> 00:18:58,600
So each one of them was around a
thousand dollar check many were
370
00:18:58,600 --> 00:19:01,200
a hundred dollars if you were
two three, four, five thousand
371
00:19:01,200 --> 00:19:04,400
dollars but there was no major
checks in that round of funding
372
00:19:04,500 --> 00:19:06,000
there.
What it did is it, you know, it
373
00:19:06,000 --> 00:19:09,400
provided the necessary funding
to take the steps to prove that
374
00:19:09,400 --> 00:19:12,100
we really had something to then
go and raise a more meaningful
375
00:19:12,100 --> 00:19:15,600
round of funding down the road.
But the beauty of doing it
376
00:19:15,600 --> 00:19:18,300
online, is that everyone can be
an investor.
377
00:19:18,500 --> 00:19:21,600
I've had Angel groups and best.
I've had my curvy season-best.
378
00:19:21,600 --> 00:19:26,400
I've had very wealthy, very
successful individuals invest,
379
00:19:26,400 --> 00:19:30,100
you know, really large checks
and everything in between.
380
00:19:30,300 --> 00:19:33,800
And so, the reality is, if you
do this, right, everyone can
381
00:19:33,800 --> 00:19:36,300
partake in these rounds of
funding and why not go set the
382
00:19:36,300 --> 00:19:38,700
terms and raise money on your
own terms.
383
00:19:39,500 --> 00:19:41,500
Able to cast the widest Network
possible.
384
00:19:42,100 --> 00:19:45,700
So, for me, it makes all the
sense in the world to do it, you
385
00:19:45,700 --> 00:19:51,300
know, at any stage of the game
and you know, we see a ton a ton
386
00:19:51,400 --> 00:19:55,000
of companies raising, you know,
precede seed and now even series
387
00:19:55,000 --> 00:19:57,600
a and I think it's really
becoming an effective tool to
388
00:19:57,600 --> 00:20:01,000
do.
So, mmm, nice, that's actually
389
00:20:01,000 --> 00:20:03,300
great argument.
If you have a decent personal
390
00:20:03,300 --> 00:20:07,100
network of not extremely
wealthy, people who cannot be a
391
00:20:07,108 --> 00:20:08,900
great investors or even close to
that.
392
00:20:09,400 --> 00:20:11,800
Yeah, Equity crowdfunding is
actually really great place to
393
00:20:11,800 --> 00:20:14,500
start.
That's very, very good and
394
00:20:14,500 --> 00:20:18,800
strong argument towards Equity
crowdfunding good workers, while
395
00:20:18,800 --> 00:20:21,300
you were answering that.
By the way, I was thinking about
396
00:20:21,900 --> 00:20:23,400
what my next question is going
to be.
397
00:20:23,600 --> 00:20:26,300
And I was thinking that, you
know, mostly we discuss how
398
00:20:26,300 --> 00:20:29,600
people fundraise, but we never
really speak about how they
399
00:20:29,600 --> 00:20:31,500
spend their money that they
raced.
400
00:20:31,500 --> 00:20:35,900
So let's talk about that for a
little bit after you reach that
401
00:20:35,900 --> 00:20:38,000
initial round from friends and
family through equity
402
00:20:38,000 --> 00:20:41,700
crowdfunding Were the first
couple steps that you took.
403
00:20:42,500 --> 00:20:46,700
Yeah, I think, you know, the big
things that we did was focus on
404
00:20:46,700 --> 00:20:50,000
product development and finding
product Market fit.
405
00:20:50,000 --> 00:20:54,200
So for us, you know, we had a
true MVP out in Market when we
406
00:20:54,200 --> 00:20:55,700
went to race at first round of
funding.
407
00:20:55,700 --> 00:20:58,700
And it was funny, people would
say all the time like, well, you
408
00:20:58,700 --> 00:21:01,200
know, you say, you want to be
this data and analytics
409
00:21:01,200 --> 00:21:03,200
platform, but this practically
looks like a block.
410
00:21:03,200 --> 00:21:05,500
I'm like, it doesn't practically
look like that.
411
00:21:05,500 --> 00:21:08,700
It is that for now.
I have no technical
412
00:21:08,700 --> 00:21:09,600
capabilities.
Mobility.
413
00:21:09,700 --> 00:21:12,000
And until I have that, I'm not
going to be able to build those
414
00:21:12,000 --> 00:21:14,000
tools.
What I'm showing here is that
415
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people are willing to pay for
some research, right?
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So I started with what I knew,
which was basically qualitative
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research until I raise enough
money.
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To hire some tech Talent we then
was able to take the steps to
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take it out of MVP form and
start to add in, you know,
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actual data capabilities and
collecting data from all of
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these marketplaces and we
started to evolve the brand
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forward towards what our actual
Vision was.
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So we spent a lot on product.
Getting folks to help us out on
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the product from and then the
other thing was just doing small
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00:21:43,000 --> 00:21:46,100
marketing campaigns and going to
events and getting the word out
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there about us.
And it was not with the idea
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that okay we're going to blow up
and have 10 million users on our
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platform.
We wanted to do is prove that we
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00:21:53,400 --> 00:21:56,000
could get people to pay for the
service and that they actually
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00:21:56,000 --> 00:21:59,700
evaluate it and wanted it and we
were definitely able to get
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enough you know where we could
show.
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Hey at least a couple hundred or
a few hundred people wanting to
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00:22:04,400 --> 00:22:07,300
pay for this thing when we had a
marketing budget of Navy, you
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00:22:07,300 --> 00:22:08,800
know, ten thousand dollars or
less.
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And no one even knows what we
are just yet.
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And it was just to prove the
point that yes, there is a
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00:22:14,400 --> 00:22:18,400
market for what we're building.
And yes, we're able to execute
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00:22:18,400 --> 00:22:21,400
and build when we raise Capital.
Now, give us more Capital to
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00:22:21,400 --> 00:22:23,100
really take this thing to the
next level.
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00:22:23,800 --> 00:22:24,900
Uh-huh, perfect.
Yeah.
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00:22:24,900 --> 00:22:28,900
I'm VP stages, the most fun, the
most exciting, and pretty
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00:22:28,900 --> 00:22:32,100
friendly the artist stage of it,
congrats on pulling through
443
00:22:32,100 --> 00:22:33,400
this.
Um, all right.
444
00:22:33,400 --> 00:22:35,700
Moving on to the very last
question of today's episode,
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00:22:35,700 --> 00:22:38,600
which is a call to action.
So Kris, what do you want to
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00:22:38,600 --> 00:22:40,500
listen?
Do as soon as the app is always
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00:22:40,500 --> 00:22:44,700
over, you know I think there's
depends on what party you are if
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00:22:44,700 --> 00:22:49,100
you are investor then I really
encourage you to go look at
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00:22:49,100 --> 00:22:53,700
platforms like we found her.com
seedinvest calm Republic that
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00:22:53,700 --> 00:22:58,300
co-starred engine.com.
Net capital.com learn about this
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00:22:58,300 --> 00:23:00,700
Market, check it out, get a feel
for it.
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00:23:00,900 --> 00:23:03,800
Obviously come to us we would
love to have you love for you to
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00:23:03,800 --> 00:23:06,900
utilize their product.
We provide really robust due.
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00:23:06,900 --> 00:23:10,300
Diligence research tools.
Make your, you know, Discovery
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00:23:10,300 --> 00:23:12,900
and due diligence process way
more efficient than looking
456
00:23:12,900 --> 00:23:14,100
across.
These zillion different
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00:23:14,100 --> 00:23:17,500
marketplaces but just start to
orient yourself to this space
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00:23:17,700 --> 00:23:20,000
and think about.
Can I make a small allocation of
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00:23:20,008 --> 00:23:24,500
My overall Investment Portfolio
focused on this new market where
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00:23:24,500 --> 00:23:27,300
I can invest in these really
early stage deals and a
461
00:23:27,300 --> 00:23:29,300
Founders?
I would say, you know, think
462
00:23:29,300 --> 00:23:32,900
really critically about your
capital-raising strategy don't
463
00:23:32,900 --> 00:23:36,300
think that this isn't something
that should be a part of it and
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00:23:36,300 --> 00:23:38,900
start considering your options.
So again, go to those markets
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00:23:39,000 --> 00:23:42,600
Places as well even more.
So for you and get a sense of
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00:23:42,600 --> 00:23:45,000
the types of companies that are
raising, the valuations are
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00:23:45,000 --> 00:23:47,900
raising at how much money,
they're raising, get comfort
468
00:23:47,900 --> 00:23:49,400
with it.
And then really think
469
00:23:49,400 --> 00:23:51,800
strategically about if you want
to start reaching out to them
470
00:23:52,700 --> 00:23:55,400
to, you know, ask if they would
allow you to raise capital on
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00:23:55,400 --> 00:23:58,600
their platform and certainly, if
you're looking for intros or
472
00:23:58,600 --> 00:24:01,400
want to learn more about those
platforms have questions, please
473
00:24:01,400 --> 00:24:05,300
do reach out to me at
chris@chrisderose.com I'm always
474
00:24:05,300 --> 00:24:08,800
more than happy to help if I can
perfect great culture.
475
00:24:09,000 --> 00:24:10,500
Action.
Michael Jackson's.
476
00:24:10,500 --> 00:24:12,900
Give me check out the
description of this episode.
477
00:24:12,900 --> 00:24:16,700
Bunch of Link's is going to be
there such as a link to the
478
00:24:16,700 --> 00:24:20,400
episode about coffee which is an
alternative to the standard
479
00:24:20,400 --> 00:24:24,400
safe.
So yes, a lot of stuff about
480
00:24:24,400 --> 00:24:29,400
Equity crowdfunding is going to
be there and my next call to
481
00:24:29,400 --> 00:24:32,100
action I have to for this one.
Unfortunately, my next call to
482
00:24:32,100 --> 00:24:35,100
action is actually check out the
next episode because the next
483
00:24:35,100 --> 00:24:38,400
episode is going to be an
educational episode again with
484
00:24:38,400 --> 00:24:40,500
Chris.
About Equity crowdfunding
485
00:24:40,500 --> 00:24:43,100
specifically how you do is,
we're going to do step-by-step
486
00:24:43,100 --> 00:24:47,600
guides on how to approach it and
who should actually approach it.
487
00:24:47,600 --> 00:24:51,000
So yes, do that.
Check out the next episode is
488
00:24:51,000 --> 00:24:54,600
going to be marked with
something like educational.
489
00:24:55,000 --> 00:24:58,400
So go check it out.
If you're curious about Equity
490
00:24:58,400 --> 00:25:01,600
crowdfunding about online
profile in general, it's going
491
00:25:01,600 --> 00:25:02,900
to be good.
