RPF0402-Nathan_Rose_Interview
00:00:00.000 | Welcome to Radical Personal Finance, the show dedicated to providing you with the knowledge,
00:00:05.760 | skills, insight, and encouragement you need to live a rich and meaningful life now while
00:00:10.960 | building a plan for financial freedom in ten years or less.
00:00:14.140 | My name is Joshua Sheets and I'm your host and today we have Nathan Rose on the line.
00:00:18.680 | Nathan has recently completed a book called Equity Crowdfunding, the Complete Guide for
00:00:22.920 | Startups and Growing Companies.
00:00:25.320 | Nathan, welcome to the show.
00:00:26.320 | It's great to be here, Joshua, and thanks for having me.
00:00:29.160 | I'm excited about this topic because I love the world we live in where more and more money
00:00:36.160 | is not the limiting factor to the success of a product or of a company.
00:00:40.760 | And crowdfunding has certainly presented one tremendous technology to be able to help entrepreneurs
00:00:47.580 | capitalize projects.
00:00:49.480 | So I'm very excited about talking to you and hearing about some of the ideas in your book.
00:00:54.200 | But start with a little bit of a personal introduction.
00:00:56.320 | How did you get interested in this subject?
00:00:59.280 | So I began my career as an investment banker.
00:01:02.640 | Don't hold that against me.
00:01:04.080 | I was helping out startups and even past the startup phase, in fact, early stage companies
00:01:11.720 | do initial public offerings onto the stock market.
00:01:16.000 | And when I saw the emergence of equity crowdfunding as being a similar skill set, it's an offer
00:01:21.800 | of shares to the public, so you've got to do the same things about explaining business
00:01:26.480 | models and explaining why a company is a good idea to invest in.
00:01:31.240 | And at the same time, I wanted to branch off away from my corporate career and start my
00:01:35.360 | own thing.
00:01:36.360 | It just seemed the perfect fit for my skill set and a really new interesting trend that
00:01:40.680 | I saw in the world of finance.
00:01:42.640 | So you work as a consultant or what's your actual business now?
00:01:46.240 | Yeah, I'm an agency or a consultancy, I suppose you'd call it, where I will help startups
00:01:52.080 | and growing companies to fund through equity crowdfunding.
00:01:56.520 | So a typical client might come to me and say, hey, we need 500k or a million.
00:02:01.960 | And we've heard about this thing called equity crowdfunding, but they need to be stepped
00:02:05.720 | through it, whether it's really right for them.
00:02:08.560 | And if they decided it is right for them, things like valuation, choosing a platform,
00:02:13.720 | coming up with a marketing strategy and what happens afterwards.
00:02:16.880 | So the book's really just an outgrowth of the services that I provide to clients one
00:02:20.800 | on one.
00:02:21.800 | Great.
00:02:22.800 | So it's a way of helping the marketplace with some information and also establishing your
00:02:26.000 | brand which will lead to personal services.
00:02:28.160 | Awesome.
00:02:29.160 | So I'm going to lob you a softball here to start off with.
00:02:34.880 | I think everybody thinks that crowdfunding is easy and it's great.
00:02:39.160 | After all, you just come up with a great idea and make a video and then it gets shared a
00:02:43.120 | million times on Facebook and you raise $20 million and you're done.
00:02:46.800 | I know from a little bit of study it's not quite that way.
00:02:50.520 | So who should consider using crowdfunding and who should stay away?
00:02:58.680 | So I'd like to take a step back before we even get into that and just explain the difference
00:03:02.560 | between the crowdfunding in general and equity crowdfunding.
00:03:07.120 | So crowdfunding as most people think of it is the Kickstarters and Indiegogos where you're,
00:03:13.400 | if it's a business, pre-ordering a product or offering your customers the chance to pre-order
00:03:18.080 | a product.
00:03:20.480 | And most people are familiar with that.
00:03:21.760 | We've all heard the stories of Oculus Rift and these big success stories, which are not
00:03:28.120 | typical by the way, as you've already alluded to.
00:03:30.720 | And then equity crowdfunding where instead of giving people a chance to pre-order a product,
00:03:35.240 | you're instead offering shares in that company.
00:03:38.480 | And this has some similarities with the other type of Kickstarter Indiegogo crowdfunding,
00:03:43.920 | but also some really important differences.
00:03:47.160 | Your question was about how easy or how difficult it is.
00:03:51.480 | And it is difficult.
00:03:52.760 | There is time involved and the part that the public see where it just seems to be a video
00:03:58.640 | and a couple of pages of copy and the money just pouring on in, there's a lot of preparation
00:04:04.400 | that goes into that.
00:04:06.600 | You've got to connect with an existing crowd.
00:04:08.480 | It's not the case that there's just all these people hanging out on the internet waiting
00:04:14.760 | to hand you this money.
00:04:15.960 | You've got to find them and you've got to convince them as to why your idea is worth
00:04:20.120 | funding.
00:04:21.120 | I appreciate you making the distinction because I didn't read the book prior to the interview
00:04:26.080 | and so I was heading us in completely the wrong direction, in the direction of crowdfunding
00:04:30.280 | instead of equity crowdfunding.
00:04:31.560 | So that makes it even more important to clarify.
00:04:37.040 | So I'll just ask, now that you've clearly identified and appreciated that distinction,
00:04:43.320 | who then should be considering using the equity crowdfunding process?
00:04:48.480 | Well, it's an alternative to angel funding and venture funding.
00:04:54.900 | So the types of companies that that will suit are ones which are past the idea phase, so
00:05:00.760 | they've at least got some users and ideally revenue.
00:05:04.160 | Not necessarily profitable, but they have a proven business that's got customers and
00:05:09.280 | money coming through the door.
00:05:10.880 | They're looking to raise at least 30 to 50 thousand US dollars, up to a maximum, which
00:05:18.880 | depends where you are, but if we're talking about America here, it's going to be capped
00:05:23.520 | at a million US dollars.
00:05:25.920 | So in order to justify those sorts of numbers, raising a million dollars, your business has
00:05:30.480 | to have a justification, I suppose, for being worth a lot more than that, because if you're
00:05:36.680 | offering up a piece of your company for a million dollars, then your company, for you
00:05:41.520 | to retain some share in it, needs to be worth, say, at least three or four million.
00:05:46.640 | So that should give you a bit of an idea about what your company's stage should be at before
00:05:52.160 | looking at doing this, and the types of businesses that it'll suit.
00:05:56.720 | Because it's an offer over the internet, it's going to suit much better companies that have
00:06:01.720 | some kind of reach beyond their own neighbourhood.
00:06:05.360 | So it's not so useful for the corner store, very localised businesses who don't gain much
00:06:11.880 | benefit out of a nationwide or global audience.
00:06:16.840 | It's much more suitable for scalable businesses in the fintech or medtech area, and also for
00:06:25.760 | businesses with a broader reach with consumer items.
00:06:29.840 | So think food or drink, cosmetics, clothing, that kind of thing.
00:06:35.800 | So you can think of it in two camps.
00:06:37.320 | The really scalable businesses on one hand, which some people think of as unicorns, a
00:06:42.520 | word in startup parlance which means a company with a chance of being worth a billion dollars
00:06:47.140 | one day, and the local businesses with a crowd, as I call them in the book, which have got
00:06:53.480 | a natural group of people around them, some existing users.
00:06:58.680 | What's the benefit for the entrepreneur of going this route instead of working with individual
00:07:02.120 | private investors?
00:07:04.760 | I think the big one is being able to do two of the things at the same time, which are
00:07:11.520 | core to the mission, I suppose, of an early stage company.
00:07:16.840 | So early stage companies are often trying to get attention, marketing exposure, and
00:07:21.320 | also to raise funds.
00:07:22.560 | And those two things have always been considered to be separate activities.
00:07:27.320 | But equity crowdfunding, because you're promoting your business in a very public forum, doing
00:07:32.800 | a lot of outreach effort at the same time, you're gaining both marketing exposure and
00:07:38.720 | equity money at the same time.
00:07:43.200 | Other reasons, there's some strings attached always when you take money from a VC or from
00:07:50.360 | an angel investor, they're probably going to have a say in the direction of your business,
00:07:56.640 | which a lot of entrepreneurs don't like.
00:07:59.120 | If they are very much enamoured with the idea of retaining independence and full control
00:08:05.840 | of their culture, then bringing in this VC investor is going to screw with that.
00:08:11.800 | They're going to have their own way of doing things.
00:08:14.360 | But by getting money from lots of very small investors, none of whom have a very large
00:08:21.800 | say or much of a seat at the table, you can raise this money without really altering your
00:08:26.840 | culture too much.
00:08:29.480 | Tell me your, I'm sure you've got one company or one experience that you go to, it's like
00:08:34.760 | this was a beautiful scenario.
00:08:38.400 | Tell me that story of the company.
00:08:41.480 | In the UK, and I use this as an example because the UK market is much more advanced than the
00:08:47.120 | US.
00:08:48.120 | I'm going to interrupt you, is that because of the legislation changes that took so long
00:08:51.680 | in the US to make?
00:08:52.680 | That's exactly right.
00:08:53.680 | Okay, we'll come back to that later, I just wanted to clarify.
00:08:58.240 | In the UK, it's been going for about five years and it's now worth about 15% of the
00:09:04.320 | early stage angel VC seed investment market.
00:09:09.120 | But this company, the specific company was Monzo, which is a challenger bank, which are
00:09:15.920 | doing banking without physical branches, doing everything through the smartphone and through
00:09:19.720 | internet technology.
00:09:20.720 | And they raised their one million pounds, which is about one and a half million US dollars
00:09:26.880 | in just 96, not hours, not minutes, but seconds, 96 seconds they raised that money.
00:09:34.080 | And the reason they were able to do that, and it's a nice headline, but they put a lot
00:09:38.200 | of time and preparation into getting that result so that once they hit the go live button,
00:09:45.000 | people were already queuing up to invest in it.
00:09:48.480 | But the reason that they were so successful was having this community engagement at the
00:09:57.000 | core of everything they did and everything they do for the whole time that they were
00:10:01.520 | a business.
00:10:02.520 | So this engaged community building that, it's why crowdfunding succeeds in both the rewards
00:10:07.960 | and in the equity side.
00:10:11.160 | That was a great manifestation of it.
00:10:12.720 | They had so many people who were fed up with banks.
00:10:14.920 | I don't know about you, but I don't know too many people who are big fans of the way that
00:10:19.120 | banks do things.
00:10:21.600 | So when you can say that there's a better way and a more user friendly way of doing
00:10:24.560 | things, people were keen on that and they could see that the opportunity was there and
00:10:30.880 | they blew it out of the park right away.
00:10:34.840 | How long had they been in business before their equity crowdfunding approach?
00:10:40.400 | At the time it was about a year.
00:10:42.160 | And what did they need the money for?
00:10:45.640 | So in their case, it was maybe even less about the money and more about the brand exposure.
00:10:50.960 | I think specifically they needed it for getting their proper banking license.
00:10:56.540 | They needed it for sales and marketing, which pretty much every startup has some need for,
00:11:01.320 | and continued programming and product development too.
00:11:06.480 | But they could have easily tapped a VC on the shoulder and said, "Hey, we need a million
00:11:10.840 | pounds," and they would have gotten the check cut out for them.
00:11:13.480 | But for them, that wouldn't have been as beneficial because then only one person is engaged with
00:11:19.400 | driving the business forward.
00:11:20.520 | And instead they got hundreds and thousands of people on board instead.
00:11:24.960 | And what immediately stuck out to me is I don't know what the financial terms were of
00:11:30.960 | the investors in that company, but if they wanted exposure, the headline that you just
00:11:36.600 | touted of, "We raised a million pounds in 96 seconds," that was probably worth untold
00:11:43.000 | multiples of a million pounds in terms of publicity and the business press, et cetera.
00:11:48.040 | So it's almost a strategy, perhaps a radical strategy, for a company to offer terms that
00:11:57.080 | are too good to be true in exchange for building a story like that, 96 seconds to a million
00:12:01.800 | pounds.
00:12:02.800 | Yeah, yeah.
00:12:03.800 | I mean, it's a marketing exercise.
00:12:06.600 | A lot of the companies I talk to say that for them it's first and foremost a marketing
00:12:10.840 | exercise and not a funding exercise as much.
00:12:14.200 | The funding is an interesting angle, and of course if you offer most early stage businesses
00:12:18.360 | a chance to fund, they're going to take it.
00:12:19.880 | But the marketing exposure can, as you say, Josh, be just as valuable, if not more so.
00:12:26.120 | I never would have thought of that.
00:12:28.200 | Amazing.
00:12:29.200 | So tell me a horror story.
00:12:30.200 | A horror story, okay.
00:12:32.480 | So there's one example in my new book which has a company which did two campaigns, one
00:12:40.640 | successful and one later on that failed.
00:12:44.240 | The reason that the one failed was they just took on too much at the time.
00:12:50.960 | Their business was failing, their creditors were knocking on the door, and they needed
00:12:57.240 | to change a few other things around with their business.
00:12:59.640 | So to try to get themselves out of their hole, they thought they'd try another equity crowdfunding
00:13:05.760 | round.
00:13:07.000 | I think the lesson is that for one thing it's going to be really hard when your business
00:13:10.960 | is in trouble to tell a positive story.
00:13:15.000 | Businesses like to see the money used for things like marketing and product development,
00:13:21.600 | not repaying creditors.
00:13:23.600 | But the other problem that this company had was they were trying to do a major product
00:13:29.680 | relaunch at the same time, and because their focus was split between the product relaunch
00:13:36.360 | and the funding campaign, they were able to do neither really successfully.
00:13:43.280 | It was a tough spot they were in because they couldn't delay the funding round because they
00:13:46.960 | needed the money, and they couldn't delay the product relaunch because that needed to
00:13:51.720 | happen at the same time.
00:13:52.800 | So they found themselves just too stretched on resources to do either exercise properly,
00:13:58.400 | and as a result the company went out of business.
00:14:01.120 | It doesn't get much more horrible than that.
00:14:04.040 | I don't want to say anything because I'm so guilty of splitting my attention.
00:14:09.800 | I know I'm not supposed to, but stories like that are just a warning bell for me myself
00:14:15.760 | with my propensity to want to do everything all at once.
00:14:18.640 | Chase some shiny objects.
00:14:20.640 | Indeed.
00:14:21.640 | I have an international audience, but the majority of the audience is based in the United
00:14:25.000 | States.
00:14:27.280 | I know that there have been major frustrations among many investors with how long it took
00:14:33.040 | to make some legislative changes and how equity crowdfunding seemed to be accepted in many
00:14:38.500 | other places, but it was only within a year ago, 2015 sometime, I think.
00:14:46.320 | So tell us what happened and what the current situation is in the United States, please.
00:14:52.920 | You're right that there was frustration for a lot of time because the law was actually
00:14:56.300 | changed back in 2012, but it took the Securities and Exchange Commission until November last
00:15:03.640 | year before they decided how they were going to implement this change in the law.
00:15:10.560 | And the rules came into force allowing retail equity crowdfunding, and I'll explain what
00:15:16.900 | that means in a minute, but these rules came into force in May of this year, 2016, and
00:15:24.920 | it allows any company to raise up to a million US dollars in any 12-month period, marketing
00:15:33.160 | to the general public.
00:15:35.300 | When I said retail equity crowdfunding before, this is the big change because it's always
00:15:39.580 | been possible for a startup to seek funding from an accredited or a high net worth investor,
00:15:47.140 | people who meet a certain wealth test, which is out of reach for most people.
00:15:52.180 | But equity crowdfunding in its purest sense means being able to market to any adult resident
00:15:58.260 | who has money in the bank and willing to invest.
00:16:02.620 | So that came into force in May, and already since then, in the six months as we're recording
00:16:07.300 | this show, we've seen portals spring up offering this service.
00:16:15.940 | These equity crowdfunding deals are displayed on portals, on websites, so you can actually
00:16:23.020 | see these startups and look at their video, look at their business plan before deciding
00:16:27.140 | to invest in them.
00:16:29.320 | And to give you a couple of concrete examples of ones that your listeners can check out,
00:16:35.120 | the largest is WeFunder, W-E, Funder, and they've done a few pretty interesting deals
00:16:43.280 | so far, and they're the largest.
00:16:45.880 | And another one that I always draw people's attention to is Republic, and Republic has
00:16:50.960 | actually spun out of AngelList, which is a company that a lot of people are familiar
00:16:55.640 | with for early stage funding, but AngelList was restricted to sophisticated and high net
00:17:02.080 | worth investors, but this new arm of theirs, Republic, is doing equity crowdfunding to
00:17:08.640 | anyone.
00:17:09.640 | So check those two out if you want to see a bit of a sense of what this is all about
00:17:14.800 | and the types of companies that are using it.
00:17:19.120 | And do you have any measure of the numbers as far as now that, as we record this in November
00:17:25.520 | 2016, in the last six months, do you have any guess of how many companies have been
00:17:31.200 | funded and what the dollars are?
00:17:32.880 | It's really difficult to say because there are so many platforms and tracking all of
00:17:38.120 | them, well, that's probably another book in itself.
00:17:42.480 | But what we have seen is a few companies now raise that maximum of a million dollars.
00:17:49.920 | So there was some concern before the rules came into force that it was going to be too
00:17:55.440 | onerous for startups to afford, but that's proven not to be the case, that we've actually
00:17:59.800 | seen quite a few deals being done now without being able to put an actual dollar number
00:18:05.000 | on it.
00:18:07.800 | It's working, startups are using it, and investors are investing in it.
00:18:14.160 | Are you seeing new investors go, like for example, do you have any sense of people who
00:18:21.640 | have never invested in a private company before are going and starting to play around here?
00:18:27.280 | Is it filled with more experienced investors?
00:18:30.160 | Do you have any sense of who's participating at this point?
00:18:33.160 | Sure.
00:18:34.160 | Yeah, I mean, both are participating.
00:18:37.960 | You'll have larger angel type investors who hang out on these platforms and are screening
00:18:44.200 | through the companies that come on.
00:18:47.920 | But there's also, if a company is bringing their own crowd to a raise, then some of those
00:18:54.020 | crowd will naturally and inevitably be people who have invested in these types of companies
00:18:59.520 | for the first time.
00:19:01.420 | And because of that, I think the platforms are taking the investor education side of
00:19:07.160 | things very seriously.
00:19:08.160 | This is a whole new asset class that people haven't been able to invest in before.
00:19:12.880 | So you've got to, I think you've got to do more than just state the risks in a very legalistic
00:19:20.240 | disclaimer that's at the bottom of the page in the fine print that no one reads.
00:19:24.000 | But you've actually got to do things like run seminars, education sessions about what's
00:19:29.320 | involved in this early stage investing.
00:19:31.760 | Be clear about the opportunities, but be clear about the risks too.
00:19:35.960 | What's the median investment size that you would guess?
00:19:41.720 | I would say about a thousand dollars would be median, with a range from down to a hundred
00:19:49.240 | dollars in the US, all the way up to tens of thousands or even hundreds of thousands
00:19:55.240 | in some cases.
00:19:56.360 | But I'd say a thousand or maybe up to five thousand could be typical.
00:20:01.680 | My audience has a lot of people who are committed investors in various ways, some very mainstream,
00:20:08.040 | some very non-mainstream.
00:20:10.120 | But probably the primary interest of my audience would be as investors to start looking at
00:20:17.960 | companies and start looking at some of these platforms to see if they can get exposure
00:20:21.960 | to new and interesting opportunities.
00:20:25.640 | If you're going to lay out the landscape for an investor and make the case, the benefits,
00:20:29.840 | and also talk about some of the challenges, how would you approach this as an investor?
00:20:37.080 | So you've got to look at it as a high-risk asset class in most cases.
00:20:44.440 | The reality is that most of these companies are going to lose all the money that gets
00:20:48.240 | put into them.
00:20:49.480 | But like the math that goes into venture capitalists, they are hoping that the winners are going
00:20:56.800 | to make up for all the losers.
00:20:59.240 | And for a lot of people who are not from this venture capital background, this type of math
00:21:06.040 | where you go in expecting that nine out of ten companies to fail, but for that tenth
00:21:10.880 | one to make up for it, it's very different from most investors' approach to things.
00:21:16.040 | They're all about safety and getting that secure five percent return in the bank or
00:21:21.400 | in property or what have you, or in the stock market.
00:21:25.580 | So you should approach it with money that you can afford to lose.
00:21:31.220 | So it should be a small part of your portfolio, but nonetheless an interesting one.
00:21:36.920 | Because let's just use some numbers here, let's use some figures so we can get our teeth
00:21:44.980 | stuck into it.
00:21:45.980 | Let's say you've got a net worth of 500K.
00:21:49.440 | So you own your own house, you are looking around for things to invest in, and you put
00:21:56.140 | five percent of your net worth into this new asset class, these VC-like investments.
00:22:02.740 | So that would be $25,000.
00:22:06.980 | For that, at that median I talked about of $1,000 each, you could invest in 25 of these
00:22:12.660 | equity crowdfunded companies and see where it takes you.
00:22:18.900 | If you lose on all 25 of them, then it's not a complete disaster, and I would never tell
00:22:25.260 | or advise anyone to put all of their savings into these companies.
00:22:28.380 | But at the same time, it does add a new flavour to a portfolio.
00:22:34.500 | But I also think that this idea of the way it should work needs to be battle-tested and
00:22:42.840 | needs to be thought through.
00:22:44.540 | It's a nice idea in theory, but does the math actually add up?
00:22:49.260 | You get more winners to make up for all these losers.
00:22:52.940 | So I think you should look at the reputation of the platform itself and what track record
00:22:57.660 | have they got for providing a place where high-quality companies are to be found.
00:23:07.220 | Because like in any marketplace, especially one like this where there's a lot of change
00:23:11.140 | and a lot of new players sprouting up, there are going to be platforms where there's a
00:23:17.100 | larger investor audience, and those will probably be where the higher-quality companies tend
00:23:24.060 | to congregate.
00:23:26.460 | So there are all kinds of things which I can get into more, if you like, about how to look
00:23:31.460 | at these companies and test whether they at least have a chance of being scalable and
00:23:37.780 | providing the good math that I'm talking about here.
00:23:40.940 | But don't just assume that because there's this idea that one in 20 will succeed that
00:23:46.980 | that's necessarily going to be the case.
00:23:49.980 | Yeah, this is brand new to me.
00:23:52.620 | I was aware of the term, and I didn't connect it.
00:23:58.580 | I'm aware that this exists, but you're the first person I've ever spoken to who is involved
00:24:03.860 | in equity crowdfunding.
00:24:05.860 | It's been one of those things that is on my radar screen, but I've never looked into.
00:24:11.740 | So I'm thinking about it in terms of my audience.
00:24:13.540 | OK, maybe this is a great new opportunity.
00:24:17.180 | And I think it is, because one of my frustrations has been the accreditor investing rules, where
00:24:22.220 | I've often wondered, are these rules actually helpful in protecting the general public?
00:24:28.140 | Because Joe Q Public is a horrible investor.
00:24:31.980 | Or are these accredited investor rules in the United States a way of preserving the
00:24:37.720 | juiciest and most profitable of investment opportunities for the well-connected wealthy
00:24:43.900 | elite?
00:24:44.900 | I've never fully satisfied that question in my mind.
00:24:49.020 | I'm curious.
00:24:50.020 | I'll interrupt myself.
00:24:51.380 | Do you have an opinion on that question?
00:24:54.180 | Well, I will say this, that we don't really regulate people's ability to walk into a casino
00:25:04.220 | with their whole life savings and put the entire sum of their wealth on the spin of
00:25:09.460 | a roulette ball.
00:25:11.380 | So when you look at these companies that are providing real jobs and producing real products
00:25:17.660 | and services, and we regulate that more than a genuine chance or a genuine gamble, that
00:25:26.420 | seems to me to be wrong.
00:25:28.260 | Especially at a time where we've got unprecedented disruption happening in the world, where startups
00:25:34.420 | are a much hotter thing than they used to be 15 years ago.
00:25:39.220 | The ability for startups to quickly get into new markets and challenge existing incumbents.
00:25:47.420 | The idea is more important than scale these days.
00:25:50.420 | So I mean, I think it is a good change.
00:25:55.380 | As you say, it's not going to be for everyone.
00:25:58.700 | But I don't think the idea of a blanket ban just to keep everyone out of it is the right
00:26:04.660 | way to go.
00:26:05.660 | So that's the approach that governments around the world have been taking, too.
00:26:08.100 | That we should be encouraging innovation and we should allow people the option, if they
00:26:13.340 | want to, to invest in this new asset class alongside the angels and the wealthy elite,
00:26:18.140 | as you call them.
00:26:19.140 | Right.
00:26:20.140 | Yeah, I'm presuppositionally committed to liberty.
00:26:23.740 | So anything I can do to remove regulation and expose anything to the market, I'll do
00:26:31.180 | that.
00:26:32.180 | And it's only, and I, instead of starting with saying, well, liberty is dangerous, I
00:26:35.820 | start with saying, well, let's start with liberty.
00:26:38.380 | And we need very compelling, overwhelming evidence to start imposing restrictions.
00:26:43.860 | So I'm happy about this change.
00:26:46.380 | But it also is going to be meeting a marketplace of people who are relatively ill-equipped.
00:26:51.780 | I come from a background of working as a professional financial advisor, and I've seen firsthand
00:26:57.020 | just how ill-equipped the average person is to deal in well-regulated, well-researched,
00:27:03.740 | very efficient financial markets.
00:27:06.100 | Now we move into something like this, and immediately I think, how on earth would I
00:27:09.420 | advise somebody to do it?
00:27:12.260 | Let me give a few examples from my audience.
00:27:13.660 | I pulled up the front page of wefunder.com, and here would be just some examples of the
00:27:18.340 | companies that are listed right on the front page.
00:27:22.620 | Vet Pronto, which does on-demand house call veterinarians.
00:27:27.580 | Great idea.
00:27:28.580 | I just think, how would I know even how to approach that as an investor?
00:27:32.620 | How would I know how to work that out?
00:27:34.100 | I'd love to see that, but how would we test the market, et cetera?
00:27:37.620 | Liquid Piston, the first wholly new combustion engine or cycle in 85 plus years.
00:27:43.140 | Airbits, decentralized data security platform to thwart hackers.
00:27:47.460 | Barrows Intense, an award-winning ginger liqueur, handmade in Brooklyn.
00:27:51.900 | Maestro Conference, a mission-driven technology platform for leaders making global impact.
00:27:57.340 | Mobodexter, back-end software platform makes it easy to launch any IoT company.
00:28:03.100 | Paint Blue Brewing Company, the only craft microbrewery in Mobile, Alabama.
00:28:07.660 | Hawaii Cider Company, Hawaii's first locally grown, locally produced cider company.
00:28:13.420 | Nice, frozen cocktails.
00:28:15.500 | I see a lot of frozen cocktails from superstar DJs in Grosso, Axwell, and Alesso.
00:28:21.900 | Here's a smart electric bicycle one, a scale that scans your body in 3D.
00:28:26.580 | Bloomery, and more award-winning farm-fresh liqueurs.
00:28:31.100 | Here's breweries.
00:28:32.100 | I won't keep reading, but monkey rum?
00:28:34.500 | I guess alcohol.
00:28:35.500 | I'm sensing a theme here of who's working well right now.
00:28:40.740 | Right.
00:28:41.740 | Yeah.
00:28:42.740 | Yeah.
00:28:43.740 | I mean, those sorts of, well, yeah, alcohol.
00:28:47.100 | Everyone knows what alcohol is and they understand the business.
00:28:49.980 | So I guess when you're weighing that up against some new combustion engine, then it's a little
00:28:55.620 | easier for the average person to understand.
00:28:57.260 | Yeah.
00:28:58.260 | I just wonder where to start because generally as an investor, you want to invest in what
00:29:01.300 | you know, but I don't know how you get there here.
00:29:06.580 | Well, I mean, take a step back, though.
00:29:10.900 | What is the average person's 401k invested in?
00:29:14.260 | It's in stocks and bonds.
00:29:16.460 | Agreed.
00:29:17.460 | I bet that most people don't have a clue about all these companies and their portfolios either.
00:29:26.860 | So yeah, we sort of look at this new asset class and we say we don't really understand
00:29:33.740 | these companies.
00:29:34.740 | But the status quo in many cases, we don't really understand either.
00:29:38.220 | So I think you've got to take a diversified approach to it like you do with all asset
00:29:43.700 | classes that you kind of acknowledge your ignorance in a way and you say, well, I'm
00:29:50.660 | going to take a portion, not all, of my portfolio and put it into these companies that seem
00:29:59.420 | like they might have potential, do my background on each of them.
00:30:03.980 | But, you know, there's no products out there or easy way to invest, for example, in an
00:30:10.100 | ETF or through a financial advisor who's going to do this for you.
00:30:13.740 | It's direct investing.
00:30:14.860 | So, you know, really it's making people more responsible for their own financial education.
00:30:23.060 | You can't really, if you want to play in this space, you can't just turn this over to somebody.
00:30:27.960 | You've got to make your own choices.
00:30:29.780 | And that in itself, I think, is a pretty interesting development because you have this seen as
00:30:35.540 | a force for people increasing their financial education and taking more responsibility for
00:30:40.860 | the companies in which their own money is being put.
00:30:45.820 | What are the financial disclosure methodology?
00:30:52.820 | I'm sitting here as we're talking.
00:30:55.060 | So here's one I clicked on called Invest in Tampon Tribe.
00:31:00.020 | Company here is manufacturing organic 100% cotton tampon and pad subscription services.
00:31:05.080 | So this is like a fascinating type of business model to me because among the crunchy people,
00:31:11.980 | of which my wife and I are crunchy people in some ways, among the crunchy people, the
00:31:16.600 | use of cloth related feminine hygiene products is much more, is well known and most people
00:31:22.840 | are aware of it.
00:31:24.220 | But yet this faces all the same problems in the marketplace.
00:31:28.860 | Cloth diapers have been around forever and yet pampers and huggies and whatnot still
00:31:33.660 | have a much bigger market share.
00:31:37.780 | So I've thought about this marketplace.
00:31:39.420 | I'm aware of it.
00:31:40.420 | I have, weirdly enough, I have information on how this works because I know the people.
00:31:47.020 | But I immediately come and think, "Okay, what's going to be different about this company?
00:31:50.860 | How am I going to prove that they're going to be able to execute?"
00:31:55.860 | I'm looking at all their sales material here.
00:31:58.040 | It's not about the product.
00:31:59.040 | It's going to be about the execution because the product, anybody could rip off this product
00:32:02.940 | and create something exactly similar.
00:32:06.260 | So how would, what do they have to submit and how do I assess that as a potential investor
00:32:11.500 | in order to know if this is a good investment for me?
00:32:13.980 | Well, they'll need to prepare a business plan.
00:32:19.040 | So you'll be reading through that and when you're reading business plans, there's no
00:32:24.740 | other way to do it than to read it and see if it makes sense to you.
00:32:29.260 | And look at the valuation they're asking for and look at what similar companies have been
00:32:36.140 | funded for.
00:32:37.780 | So again, when you're making these direct investments, this is your job.
00:32:41.600 | It's not the job of the ETF manager and it's not the job of your financial advisor.
00:32:46.380 | You've actually got to engage your own brain to decide whether it's a good company to invest
00:32:50.940 | in or not.
00:32:52.020 | And for these small amounts, it's hard work.
00:32:55.220 | And you've got to choose between this one and the dozen or so others that you've already
00:33:00.340 | mentioned that are on their site.
00:33:02.500 | So how do you do that in an efficient way?
00:33:04.500 | And I think one way to do that is look at who the other investors are in the offer.
00:33:11.260 | So in many cases, and on many crowdfunding sites, you can see if they've got a, what
00:33:17.740 | they call a lead investor.
00:33:19.080 | So this is someone who has invested in these types of businesses before.
00:33:24.100 | They've worked with this company to decide on what the valuation should be.
00:33:28.860 | And they've put their own money behind that.
00:33:31.220 | So you as a member of the crowd can follow along and invest with the angels.
00:33:37.300 | I mean, I think in investing there's always a certain degree of outsourcing of the mental
00:33:43.260 | work that we end up doing.
00:33:46.060 | And this has some negative implications, but I think it can also have some positive ones
00:33:50.020 | that if you can look at a company and say, hey, this company is being backed by this
00:33:55.740 | really smart guy or woman who has got in there, got their hands dirty on the business model
00:34:02.420 | and decided to back it with their own funds, then the crowd is then following a more rational
00:34:08.460 | decision than would be otherwise the case.
00:34:12.620 | So look, the other disclosure requirements, they will be required, I think, in the US
00:34:20.900 | to disclose what they ultimately do spend the money on.
00:34:24.780 | So they'll be saying in their business plan as a forecast, we think we'll spend it on
00:34:28.940 | X, Y, and Z.
00:34:29.940 | Well, in 12 months time, they'll need to report back on whether they have spent it on X, Y,
00:34:34.900 | and Z.
00:34:35.900 | So there's some accountability there as well.
00:34:38.460 | What is the secondary market like?
00:34:41.660 | Major benefit to investing in publicly traded stocks is, yeah, I might not have a great
00:34:46.340 | inside advantage, but this is a healthy market where at any point in time I can click sell
00:34:51.380 | and you can sell any publicly traded stock with a click of the mouse at some price.
00:34:56.020 | What's the secondary market like for an investment that I make in a company like this?
00:35:02.260 | In a word, there's not one.
00:35:04.620 | People are looking to invest at the same terms as angel investors do, which is that your
00:35:10.100 | money is going to be locked up for three, five, maybe even seven or so years until there's
00:35:16.700 | what they call a liquidity event where the company is sold or ends up being big enough
00:35:23.500 | to justify listing on the public market.
00:35:26.380 | There have been some attempts to set up a secondary market for equity crowdfunded companies,
00:35:31.060 | but the problem you get is that there's no market that develops.
00:35:36.380 | And in fact, even some companies that do full scale IPOs at the low end end up suffering
00:35:41.940 | from this low liquidity problem that even though ostensibly they're on the market, if
00:35:49.420 | your company is only worth $20 million or something, there's just not going to be that
00:35:54.900 | amount of people who are willing to meet to buy and sell frequently for a reasonable price
00:36:01.940 | to be discovered.
00:36:02.940 | And it would be even more so the case for equity crowdfunding, which is an even earlier
00:36:07.660 | stage of development.
00:36:09.940 | So you'd end up, if there was one, a price which is very one off and not really a true
00:36:15.900 | reflection of the company.
00:36:17.220 | If there was a transaction, it would probably be someone who invested their money and then
00:36:22.980 | needs to get out for some reason.
00:36:26.620 | They're selling under duress and then that makes all the other investors panic and that's
00:36:29.860 | just not a good thing for the company that's raising.
00:36:33.980 | So yeah, really there's no secondary market.
00:36:37.620 | Every asset class has different characteristics.
00:36:41.300 | One benefit of the stock market is it's highly liquid.
00:36:45.060 | There are disadvantages to the stock market as well.
00:36:48.340 | And one disadvantage of equity crowdfunding and to these private companies is you don't
00:36:52.740 | really get liquidity.
00:36:54.900 | Which goes back to the question of looking for a unicorn and the one out of ten or one
00:36:59.900 | out of twenty expectation of success.
00:37:02.660 | It's just a completely different mindset where you recognize that the vast majority of my
00:37:06.900 | investments are going to become worthless.
00:37:11.380 | It's much more akin to taking an educated gamble than it is to making an educated investment.
00:37:17.300 | Of course, I don't want to completely mischaracterize it, but there are so many forces that can
00:37:24.380 | play and many of these companies are going to lack what they call a moat.
00:37:32.060 | When I'm reading this, I'm just looking at these companies that are here.
00:37:35.860 | There's nothing particularly unique about having an award-winning barrel-aged rum company
00:37:42.540 | or there's nothing particularly unique about this farm fresh liqueur.
00:37:47.940 | It just simply has a brand and it's all a matter of the skill of even this tampon tribe
00:37:53.940 | company.
00:37:54.940 | This is all going to be a matter of branding and the ability to negotiate the channels
00:38:01.300 | of sales to go quickly and make substantial increases through applying marketing expertise.
00:38:07.780 | It's not product related in other words.
00:38:10.420 | At least with many of these companies, it's going to be based upon the experience and
00:38:14.700 | ability of the company founders to generate PR and buzz for their product.
00:38:21.460 | Exactly right.
00:38:22.460 | For those types of companies you've just mentioned, you do as an investor have the option to find
00:38:28.900 | such a company on the stock market if liquidity is important to you and buy that type of more
00:38:35.140 | advanced company.
00:38:36.420 | But you're not getting in at that really early stage where there is the potential for that
00:38:41.820 | much more upside.
00:38:43.980 | You could go ahead and buy stock in Empire Bush or in InBev, but you're going to face
00:38:51.180 | the problem that it's going to be very hard for that company to increase in value by two
00:38:55.700 | times or ten times or twenty times because they're already all over the world.
00:39:00.860 | But yeah, it's just a different game you're playing for sure.
00:39:04.100 | Because in a larger market, if you're trying to play a trend, there are many ways to play
00:39:10.980 | a trend, but generally if you're playing a trend, you're investing in such a way that
00:39:15.540 | you want to follow the trend and then sell out.
00:39:17.260 | Well, you can't really do that here.
00:39:18.980 | So yes, I'm looking at this Tampon Tribe one just as an example.
00:39:24.580 | The trend is towards natural and organic.
00:39:27.700 | The trend is toward subscription services.
00:39:30.460 | That's one of the things they're trying to pursue.
00:39:34.380 | So yes, there are these trends, but that trend isn't going to connect over to my investment
00:39:38.900 | because all I care about is how many are we actually moving and I want to be able to sell
00:39:43.460 | out at the end of the trend.
00:39:45.140 | So fascinating.
00:39:47.580 | One question, Nathan, where my mind immediately went, are you aware of anybody who is building
00:39:53.460 | platforms for geographic localities with this type of approach yet?
00:40:01.540 | So you mean a region specific crowdfunding platform?
00:40:05.500 | Right.
00:40:06.500 | Because that's a huge, that to me seems like a better fit.
00:40:09.740 | I'm involved here in West Palm Beach, Florida where I live.
00:40:12.180 | I'm involved very loosely with a couple of the startup, with some of the local startup
00:40:17.180 | community and I see it as much more valuable to be able to use digital technology to connect
00:40:25.580 | people in a location because I don't have any trust or any real ability to personally
00:40:31.040 | vet somebody on WeFunder who's on the other side of the country.
00:40:35.220 | I'm stuck limited to their pretty pictures and their very carefully composed text.
00:40:40.080 | But if somebody were in my town and this were built upon some of that, whether it's Thousand
00:40:45.080 | Cups or some of the local startup communities, et cetera, this type of approach to me seems
00:40:50.260 | to have huge benefit in the local area because now we could take some businesses that need
00:40:55.380 | funding but because those businesses are based upon the local economy, which we can measure
00:41:03.180 | the pulse of based upon our local connections, to me that would seem to be a really powerful
00:41:08.220 | way to pull this together and I as an investor would love to see something like this.
00:41:15.020 | Am I off base or does that seem helpful to you?
00:41:19.960 | I think what you're saying is definitely an approach that some platforms are taking.
00:41:25.360 | Every platform has a different philosophy on a number of things, but one of those is
00:41:30.560 | geography.
00:41:31.560 | So some of them are trying to be global.
00:41:34.160 | Very difficult to do global given that you have to deal with the different securities
00:41:39.240 | regulation in every single country, which is why we don't have a Kickstarter or an Indiegogo
00:41:43.600 | with equity crowdfunding yet.
00:41:45.080 | We've just got lots of different nationwide markets.
00:41:50.640 | But yeah, as well, some of them are taking more of a community finance approach where
00:41:55.840 | it's more about funding things that are specific to the region and the US is a big place, so
00:42:01.200 | there's room to do that where you can connect more closely with the local startup incubators,
00:42:07.800 | with the chambers of commerce in the different cities that you're around.
00:42:12.000 | I mean, in Europe we see actually that the platforms which have been more successful
00:42:19.520 | have been the ones that have integrated themselves very tightly into the local area.
00:42:25.720 | Each country in Europe is a lot smaller and in total Europe is about the size of the US.
00:42:30.000 | So what there probably is an opportunity for are for platforms to develop in each of San
00:42:38.760 | Francisco or New York or in Florida or in Texas or all these places where entrepreneurialism
00:42:44.760 | is strong, but because if you're more on the ground and more able to plug into those existing
00:42:51.520 | networks it can work.
00:42:52.600 | But there will be also some who try to be nationwide.
00:42:55.200 | So yeah, it's one approach, but it's not the only approach.
00:42:59.320 | I think it's got exciting opportunities and of course somebody can swindle you face to
00:43:03.120 | face just as well as somebody can swindle you on the internet, but we still tend to
00:43:07.400 | trust more those who we can see and measure and touch with our hands and speak to with
00:43:12.560 | our voices and observe and kind of test the mettle of the man.
00:43:16.880 | So wow, how interesting.
00:43:20.240 | Nathan, what kind of questions should I be asking you that I haven't thought of?
00:43:27.080 | Oh, gee.
00:43:31.000 | You should, because your listeners are mostly interested in the investing side of it rather
00:43:37.320 | than the start-up side of it, maybe I can talk a little about how to look at an individual
00:43:44.080 | investment and decide some of the basics as to whether they've got the basics covered.
00:43:51.920 | So you should be looking for businesses which have scalability potential.
00:43:56.720 | I mean, it can be used to fund these very – like you called out, I think, the alcohol
00:44:07.600 | companies which don't really have a moat around them.
00:44:10.720 | So for me, I think equity crowdfunding is a very good way for those companies to fund,
00:44:15.840 | but it might not be such a good way for investors to invest.
00:44:19.720 | So I'd be looking for companies that do at least have some chance of 10x, 25x, 100x return.
00:44:26.080 | Because if they don't have that, then the math is never going to work, even if you're
00:44:30.280 | successful.
00:44:31.920 | And you should be looking for a platform with the investor protections in place.
00:44:37.760 | So there are things in the VC community called anti-dilution rights, where if you're an investor
00:44:45.280 | early on in a company, you want the ability to participate in follow-on funding rounds
00:44:55.480 | so that someone in the future doesn't come along and put more money in, reducing your
00:45:01.040 | stake from – to use round numbers.
00:45:03.280 | Let's say you put in a stake early that gave you 5%, and then two years later you think
00:45:09.240 | you've made a lot of money, but one of the company founder's mates just comes in and
00:45:14.160 | puts in a whole lot of money with you not being allowed to participate, which reduces
00:45:18.880 | your stake down to 1%.
00:45:20.280 | So you want to definitely be aware of that, and most of the platforms are very strong
00:45:24.320 | on that, but some are less strong than others.
00:45:29.640 | And I think as well you should be doing what you said in terms of trying to get beyond
00:45:36.520 | just the computer screen and the online aspect of it.
00:45:42.600 | Just because crowdfunding is done online doesn't mean you can't pick up the phone and talk
00:45:47.520 | to these founders who are asking for your money.
00:45:49.900 | After all, it's your money and they need to convince you of whether they're worthy
00:45:54.320 | of it or not.
00:45:55.320 | So definitely ask for business plans, ask lots of questions, ask the hard questions
00:46:00.480 | that you think they're not going to be comfortable with, and through that way you'll gain more
00:46:05.280 | confidence in the team that you're ultimately looking to back.
00:46:09.640 | I think people often underestimate how accessible and available entrepreneurs are.
00:46:15.120 | I worked closely with one company that was going through the rounds of VC funding, and
00:46:21.800 | what was remarkable, it was a bootstrap story.
00:46:25.440 | The founder started it off just kind of as a fun project, all of a sudden realized the
00:46:29.840 | market potential, bootstrapped his way through it.
00:46:32.600 | It was a digital technology company.
00:46:35.600 | And systematically worked, worked, worked, and then they came to that point where they
00:46:41.040 | needed funding, and they had worked their way through investments from friends and family,
00:46:47.760 | etc.
00:46:48.760 | But it was at a stage where the company had huge potential.
00:46:52.280 | It had potential of tens of millions of dollars of revenue.
00:46:56.400 | But what the founder needed was $5,000 so that he could make his personal rent payments
00:47:01.360 | for the next two months and keep things going.
00:47:06.480 | And working with them and kind of watching that, I learned how impactful a few thousand
00:47:12.280 | dollar investment can be at the right stage of a company, where you see a company where
00:47:18.480 | there is a market potential, and particularly with this one, because it was based around
00:47:23.080 | digital technology, it was very expandable.
00:47:27.280 | And the heavy work was up front in building the infrastructure, in setting and doing the
00:47:32.760 | coding, and then the profit was on the back end.
00:47:36.240 | The few thousand dollars spoke very, very heavily for just an ordinary person.
00:47:41.800 | And the few thousand dollars is what was enabling the founder to systematically go and meet
00:47:47.860 | with the VCs and the VC firms and bring in the six and seven figure checks, which ultimately
00:47:52.840 | happened.
00:47:54.160 | And in that case, the company has gone on to do extraordinarily well, and it has been
00:47:59.800 | a winner for all of the investors.
00:48:04.640 | There was a way for an investor to be involved at every stage.
00:48:08.320 | In hindsight, I was too young and green at the time to be confident in kicking in any
00:48:14.800 | money.
00:48:15.800 | But I learned from that experience, I'm so grateful for it, and I realized that I should
00:48:19.880 | be more proactive, and that I always wanted to keep some money on the side that was ready
00:48:25.800 | to invest into risky, high risk of loss, but potential of return investments.
00:48:33.520 | And I had to change my mindset, but the founder was available, and the opportunities were
00:48:39.920 | there.
00:48:40.920 | I've heard other stories from listeners in my audience who similar things, they didn't
00:48:45.120 | realize how much a few thousand dollar or $5,000 investment would have meant to somebody
00:48:50.680 | at that right point in time.
00:48:52.080 | They never picked up the phone, made the phone call, and in hindsight, they kicked themselves.
00:48:59.120 | Because then later, they came in too late, where the person needed a few million dollars
00:49:03.960 | to hire 10 people, now all of a sudden it was too late.
00:49:07.280 | So picking up the phone can be a good way to figure out the life cycle of a company,
00:49:12.080 | and don't be scared to research it.
00:49:15.080 | Yeah, yeah, you're right.
00:49:18.000 | Founders are very accessible when they're asking for money, and wouldn't we all have
00:49:21.240 | liked to have been the person who gave Mark Zuckerberg his first $5,000 when he needed
00:49:26.200 | it?
00:49:27.200 | Indeed, indeed.
00:49:28.200 | But it did convince me that there is a way to invest at just about any scale, and maybe
00:49:33.520 | this is one of those scales.
00:49:34.760 | Of course, you need to know that the company can make that transition, because, well, you
00:49:40.400 | need to know that there are opportunities.
00:49:43.520 | Nathan, coming back as we wrap up here, coming back to the entrepreneur, I didn't mean to
00:49:50.440 | discount the value, because I actually could see a lot of benefit for an entrepreneur of
00:49:56.000 | using an equity crown funding site, because they can avoid, as I understand it, and tell
00:50:01.240 | me if this is right or wrong, but one of the major benefits would be if I've got a company
00:50:05.360 | that has been doing well, and I need funding, but I don't want to take some of the control,
00:50:12.860 | I don't need the benefits of working with a VC who's going to help me, or a partner
00:50:16.720 | who's going to help me with connections, I'm not trying to get those benefits, I just need
00:50:20.680 | funding, and I don't want to do it with loans, because I don't want the payback terms, I
00:50:26.240 | don't want to be saddled with the obligation.
00:50:29.200 | But I'm not big enough to go and hire an investment bank to do a public offering, or to work with
00:50:36.520 | accredited investors who can't wake up in the morning.
00:50:40.280 | For many people, if they were to invest less than a million dollars, it's not worth their
00:50:43.400 | time, because they've got such a huge portfolio they're trying to handle.
00:50:47.100 | But this does seem to be a very possibly effective way, especially for somebody in the local
00:50:53.720 | market, to use a website, but then use the excitement in the local market where people
00:50:59.720 | are going to have a connection with their brand.
00:51:01.900 | Because even though I, sitting here in West Palm Beach, have no interest in investing
00:51:05.160 | in this Austin, or the only craft microbrewery in Mobile, Alabama, if I were with the Haint
00:51:13.080 | Blue Brewing Company in Mobile, Alabama, I know without a question that I could take
00:51:18.720 | that and go in my local market, and I could do my rounds of marketing, and I could use
00:51:27.200 | this as a simple way for me to attract, at a $100 minimum investment, these people have
00:51:32.360 | raised $200,000 here from 190 investors, I can go around and in my local community, I
00:51:40.080 | can solicit the investors at a small level, and connect and just simply use these crowdfunding
00:51:46.300 | sources as a way for me to facilitate the sale of some of my company in exchange for
00:51:54.160 | equity.
00:51:55.360 | So I don't want to diminish how, as a local business person, how valuable I think this
00:52:00.100 | can be.
00:52:01.100 | Yeah, you're absolutely right.
00:52:03.520 | I think the great thing about it is that it fills this funding gap between startups and
00:52:10.640 | entrepreneurs who have grown beyond the scale that they can fund with their own personal
00:52:17.480 | resources, or those of friends and family around them, but are still too small for the
00:52:23.320 | IPO market, or for venture capital, who, as you say, tend to want to invest much larger
00:52:29.660 | amounts in fewer companies.
00:52:32.520 | And the ability to get people to pay attention to you, there needs to be some reason for
00:52:38.120 | that, and having a funding round going on which is open to them is a great way to get
00:52:42.680 | media involved, to get the community of customers and suppliers around you on board, and to
00:52:49.280 | expand your network too by exposing yourself through these online platforms to a whole
00:52:53.640 | new audience.
00:52:55.040 | So it's a really interesting way for startups and growing companies to raise funding, absolutely.
00:52:59.960 | I can see it, even in some of my own project ideas and business ideas.
00:53:04.320 | I'm happy to be thinking about this and filtering this in.
00:53:08.820 | For those who are looking at investment, here are the ideas, and I'll give you the last
00:53:13.720 | word in terms of closing advice, and then I want you to talk about your company and
00:53:17.400 | your book and any services that you have.
00:53:20.440 | But for those who are looking to invest, it would seem to me, if I were an investor and
00:53:25.240 | I wanted to factor this in, I would try to do two things.
00:53:31.840 | I would try to be focused on an area of expertise and be somewhat agnostic about the platform
00:53:38.680 | I'm choosing to invest.
00:53:40.480 | So if I'm investing in beer companies, I'm going to be paying attention to Anheuser-Busch,
00:53:48.720 | and I'm going to be paying attention to the local guy down the street who I went ahead
00:53:52.980 | and just privately made an investment deal with him, and I'm just going to be looking
00:53:57.080 | at a website like this and factoring in the ability for me to reach new companies and
00:54:04.660 | new investment opportunities through this platform.
00:54:07.620 | The idea is I'm not going to a platform like this and saying, "Well, this is my plan."
00:54:11.240 | No, my plan is that I'm investing in a sector of the market, and I'm doing that on whatever
00:54:18.320 | platform I find to do that, S&P 500, my own business, or a platform like this.
00:54:24.320 | And so I think this should be something that we keep in mind when we're interested and
00:54:30.160 | we have an investment idea, a thesis, as they say, that we want to follow through or an
00:54:34.400 | approach, something that we're trying to pursue.
00:54:37.800 | Or I think that if you are looking for a way to supplement it, that you would want to use
00:54:45.680 | this and just simply filter very carefully based upon your criteria and use it as a way
00:54:51.160 | to learn some of the skills of being a VC or angel investor.
00:54:56.400 | And so there's where you're going to be looking and saying, "Okay, I'm going to walk away
00:54:59.680 | from this brewery because this brewery doesn't have any opportunity to 30X my money in the
00:55:05.200 | coming years.
00:55:06.240 | But over here, there's this little interesting technology idea that somebody has put on here,
00:55:11.320 | and let me go ahead and research that and use this as a way for me to learn the business,
00:55:17.640 | perhaps even a cheap way for me to learn the business and learn the emotions of it while
00:55:21.680 | preparing for my bigger role in angel investing or working in my local investment club."
00:55:26.200 | So those are just two ideas that I think would have a lot of value on this.
00:55:30.600 | Does those seem reasonable approaches to you?
00:55:32.800 | Yeah, I think investing in things that you already understand well is definitely a good
00:55:38.360 | approach to be taking.
00:55:40.280 | So if you're from a beer background, we keep coming back to this beer example.
00:55:45.600 | Everyone, you can relate to it.
00:55:47.280 | We all get the beer business.
00:55:48.440 | I think so.
00:55:49.440 | If that's your background, then you're much better equipped to evaluate markets and risks
00:55:55.360 | and business plans in that sector.
00:55:57.160 | So that's a great place to start.
00:55:59.560 | And yeah, in terms of education, I think it's a great point you make too.
00:56:04.960 | When people have kids or they're trying to get their own family more interested in investing
00:56:12.200 | and more responsible for their own money, a great thing to do is to get them to buy
00:56:16.840 | a couple of stocks just so they can see how it's working.
00:56:19.520 | So if you're looking at becoming more involved in angel investing yourself, then getting
00:56:24.960 | a couple of crowdfunding offers as investments under your belt is a great way to get started.
00:56:31.480 | And so especially if you're in a place where one of these companies is, it's great to say
00:56:37.080 | for kids, and I think it's fantastic and I intend to do it with my kids, "Oh, look, we're
00:56:40.800 | buying you this share of stock."
00:56:43.280 | It's great to be able to do that.
00:56:44.400 | A lot of people say, "Oh, I'm going to choose Disney," or, "My wife's grandparents bought
00:56:48.520 | them all the share of Coca-Cola stock."
00:56:51.400 | But I feel like that lesson, because it's often restricted to the annual investment
00:56:57.680 | report, the annual reports, and it's very immaterial to a kid.
00:57:04.000 | But when you have something that is local, perhaps a local business, if there's something
00:57:09.120 | here, and this is this Austin company, well, for a hundred bucks, I'll buy into that just
00:57:14.880 | to be able to say, "Hey, let's go down and look at that company and let's use this as
00:57:18.920 | a way of actually being able to see it."
00:57:21.760 | Kids will relate to it from a tangible perspective.
00:57:25.200 | I'm going to be searching some of these websites for things in my area for that benefit in
00:57:31.080 | and of itself.
00:57:32.720 | I'm most intrigued, Nathan, as we wrap up, with your business, because to me it seems
00:57:36.180 | like you've got the one selling shovels to gold diggers, which I think is great.
00:57:43.400 | That's always the business that I want to be in.
00:57:44.760 | I don't want to be a part of the gold rush in terms of out searching for gold.
00:57:49.240 | I want to be the person selling shovels to the prospectors.
00:57:52.840 | So tell us about your business and tell my audience any follow-up that you'd like them
00:57:58.280 | to take, information, who would be a good fit for you from a client perspective, and
00:58:02.720 | who would be a good fit for reading your book?
00:58:04.600 | Well, I think the good fit for a client and for reading the book are pretty much the same
00:58:10.120 | person.
00:58:11.120 | I've written this book, Equity Crowdfunding, The Complete Guide for Startups and Growing
00:58:15.920 | Companies.
00:58:16.920 | I'm not too creative with the title, I have to say, but it's aimed at companies that are
00:58:24.840 | looking for more than 50 grand, less than a million in the US, but less than 5 million
00:58:31.840 | euros in the European Union, because there's different limits at play there, who have a
00:58:37.560 | business that they need funding for and they want to know more about equity crowdfunding.
00:58:44.920 | So I can step them through the process with one-on-one coaching calls.
00:58:50.900 | We can work out which platform is going to be right for them based on their specific
00:58:56.120 | objectives, work out a valuation that's going to be reasonable and accepted by the investment
00:59:01.640 | community, form a marketing plan that they can go away and execute on to ultimately drive
00:59:07.340 | people to their offer page and invest, and to be well prepared for life as a company
00:59:12.720 | with all these new investors in.
00:59:15.480 | So it's helping, it's hand-holding along the way, and the book is a great place to start
00:59:20.880 | if you want to know more.
00:59:23.000 | It's available on Amazon now.
00:59:25.280 | And if you're looking at investing in these companies, another thing that I'd encourage
00:59:29.980 | your readers to do would be to go to my site and you can actually download a free chapter
00:59:34.480 | from my webpage.
00:59:35.480 | If you sign up to the email list, I'll send that to you.
00:59:39.180 | And I think that free chapter actually has a bit of a word on what investors' motivations
00:59:46.200 | are for investing in this new equity crowdfunding phenomenon, because it's interesting and I
00:59:51.400 | think it's important even as a company too to understand what investors' motivations
00:59:55.720 | are because they're ultimately going to be along with you for a long time on your ride.
01:00:00.880 | And the webpage that you want my listeners to go to is assembleadvisory.com?
01:00:05.600 | Yeah, and assembleadvisory.com/book.
01:00:10.640 | We'll talk all about the book and show you how to opt in for that free sample chapter
01:00:14.800 | too.
01:00:15.800 | Great.
01:00:16.800 | Well Nathan, this has been exciting.
01:00:17.800 | I apologize to you that even at the beginning I wasn't steering us in the right direction,
01:00:22.160 | but you got my creative juices going and I will be watching this intensely.
01:00:26.720 | I'm embarrassed that I'm behind the eight ball already where I haven't been paying attention
01:00:31.080 | to this market, but you definitely got me excited in today's interview.
01:00:34.600 | And I hope that many of my listeners, I know many of my listeners will benefit both as
01:00:40.000 | investors and as entrepreneurs.
01:00:41.920 | Thank you for coming on the show.
01:00:42.920 | It's been my pleasure and thanks for having me.