The Rise of Crowdfunding (#12)
Crowdfunding has seen an uptick in popularity with recent changes in regulation and investment appetite
Every Sunday I publish a newsletter featuring the best hacks and insights I discover on my journey as an entrepreneur and investor.
There’s a value-add gap
The value delivered by VCs to start-ups, as perceived by start-up founders, has been diminishing in recent years. According to a Forward Partners and Landscape VC report, while 92% of VCs consider themselves “value-add” investors, 61% of founders rated their “value-add experience” as “below average”. 🤬
In our work with founders the issue of finding the right investor comes up every single time: What does a good one look like? How to win them? What can we expect beyond the money? If three in five founders feel they’re not getting the right value from their investors, it means three in five startups could go further and faster; it means three in five investors could be doing a better job and getting better returns.
— Marta Kripinska, Head of Google Startups UK
Could Crowdfunding help ease these problems?
I’ve generally taken the stance that Crowdfunding is Plan B for start-ups that couldn’t raise money from their ideal VCs and Angel investors. The recent SEC announcement amending the amount of capital that start-ups can raise through Crowdfunding, however, has helped changed my mind. 🤔
Approved companies may now raise up to $5M in a 12-month period through Crowdfunding. Formerly, businesses were limited to raising $1.07M in a 12-month period. Additionally, the SEC has removed investment limits for accredited investors (those with an income >$200K or a net worth >$1M) and enabled non-accredited investors to invest based on their net worth or annual income.
What does this regulatory change mean?
Coupled with a more open-minded view on Crowdfunding across the start-up ecosystem, I think this means we may see the next Facebook, Uber or Airbnb raising $5M of their $50M Series B through Crowdfunding. In other words, anyone connected to the internet with $100 could soon invest in the hottest new companies and disruptive technologies. 📈
While it’s cool that regular folks now have the opportunity to 100x their money, I’m more excited by the fact more people can now participate in deals they’d generally not have access to. Democratising finance still has a long way to go, but these regulatory changes are certainly one step in the right direction. ✅
My experience with Crowdfunding and Monzo
My first Crowdfunding investment was back in 2016. I joined 1,800 others and invested in Monzo, a digital bank, through Crowdcube. It was the fastest crowdfund ever and Monzo raised £1M in only 96 seconds. At the time, I was the only one of my friends to have discovered Monzo - I was confident it would succeed and revelled in the opportunity to participate in their growth story. 🤩
Where I look for new Crowdfunding deals
One of my favourite Crowdfunding platforms is Republic. Founded in 2016, Republic enables anyone to invest in startups, crypto, gaming, real estate, and small businesses. Republic only accepts about 2% of projects submitted and is also investing in educational tools to help users back projects responsibly. 📚
Earlier this month, Republic announced it’s expanding its crypto offerings and will host digital asset sales on the platform, allowing blockchain projects to sell native digital assets. They also recently expanded into new markets through strategic acquisitions, including Fig, a leading video game publisher, Compound, a real estate investment platform, and NextSeed, a crowdfunding platform for local businesses.
With 1M members who’ve invested $300M in over 250 deals to date through Republic, it’s not surprising they just raised a $36M Series A and was the platform of choice for Gumroad who made history by raising $5M in only 12 hours. 🤑
Deals I’m looking at on Republic
I’ve looked into two deals for the last couple of weeks.
The first is Kibbo, a subscription service that combines co-living and van life. They’re looking to capitalise on trends in remote work, co-living, and transportation. They’ve raised $590K on Republic at a $15M valuation, 20% discount and $250 minimum investment. There are 19 days left to invest. 🚋
The second is Linen, a crypto investing app that helps you earn shares in community-owned projects. They’re looking to democratise wealth building with crypto and the ownership economy. They’ve raised $2.5M on Republic at a $22M valuation, 0% discount and $200 minimum investment. There are 265 days left to invest, but I imagine they’ll hit the $5M threshold before then. 💹
I’d love to hear from you
I’ll be writing investment memos on both Kibbo and Linen. Is that something you might want to read about? Also, have you ever participated in a Crowdfunding round before? Would you be open to the idea? You can reach me on Twitter, email: email@example.com, or leave a comment below.
What I’ve been reading
⛳ How to Start a New Country. Whether it’s social, legal, economic or bureaucratic - are you tired of the constraints your country places on you? Do you want a fresh start? A clean slate? In this post, Balaji Srinivasan shows you exactly how - by starting a new country. He runs through options including Revolution, War, Micronations and Seasteading, eventually landing on Cloud Countries - beginning with a digital community rather than starting with a physical territory. “We build the embryonic state as an open-source project, we organize our internal economy around remote work, we cultivate in-person levels of civility, we simulate architecture in VR, and we create art and literature that reflects our values.” (2,000 words).
🤓 Platform Like A Content Professional. Deborah Carver is one of my favourite writers on strategy for content creators and community builders. In this article, she discusses how to choose your content platform. From Substack and Revue to Slack and Discord, whether you’re a creator or an enterprise business, I’d highly recommend this article to help decide on your strategy going forward. (2,300 words).
🇨🇳 China Creates Its Own Digital Currency, a First for Major Economy. Controlled by its central bank and designed to be untethered to the global financial system, it’s called the digital yuan. The project to find a digital currency started in 2014 after the growth of bitcoin started to raise concerns in China. China is far ahead of other major economies and the repercussions of disrupting money will be huge. It’s interesting to consider the possible future dystopia or utopia this might drive. (800 words).
🇮🇪 Ireland’s “Rural Future” Strategy. Earlier this year, Ireland announced it’ll invest €15M in making 147 rural towns amenable to remote working. This week, they unveiled the "Rural Future" strategy comprising 152 measures to reduce the urban-rural divide! It’s exciting that the government recognises this as an "unparalleled opportunity" for decentralisation. However, the opposition spokeswoman summarises the need for bias for action nicely -- "It's great to have documents & ideas, but there has to be a clear roadmap." (3,000 words).
😵 Remote Work Since Covid-19 Is Exacerbating Harm. Ellen Pao, the former Reddit CEO, who currently runs an advocacy group for diversity & inclusion, conducted a survey that dug deep into the dark side of remote working -- work pressure, mental health impacts, harassment & hostility. The results are eye-opening and warrant an urgent systemic change by companies. The report gives recommendations for all company leaders and comes highly recommended. (63 pages).
🇦🇲 This Is What It's Like to Live in a Country ‘That Doesn't Exist’. VICE reports on how 6.5M people across Europe are trying to live normal lives in countries mostly unrecognised by the rest of the world. The prime example they give is Artsakh - the breakaway state in the South Caucasus integral to Armenian history. As an Armenian upset by the recent war in Artsakh due to ownership disputes with Azerbaijan, this article spoke to my heart. (2,700 words).
✍️ The Part Time Creator Manifesto. A reflection on why we need more people creating Part Time and how you can do it too. This resonated strongly, having only started publicly writing two months ago. (2,400 words).
🎾 Roger Federer as Religious Experience. I grew up mesmerised by ‘Federer Moments’ - on and off the court. This article from 2006 discusses how beauty is not the goal of competitive sports, but high-level sports are a prime venue for the expression of human beauty. The relation is roughly that of courage to war. Beauty is not the goal of competitive sports, but high-level sports are a prime venue for the expression of human beauty. The relation is roughly that of courage to war. (6,800 words).
What I’ve been listening to
🇪🇸 Learn to Speak Spanish With Discover Spanish, Episode 1. Having arrived in Barcelona a couple of weeks ago now, I’ve been trying to make the most of the opportunity by immersing myself in the language. This podcast series is the best I’ve come across so far to learn Spanish for beginners like me. (00:08:49).
💰 Bankless interviews Justin Drake, Ethereum Foundation researcher. Justin is leading the charge of applied cryptography to the Ethereum network. Warning: this interview gets very technical. For me, the most interesting part came in at around 45 minutes, where they discuss how a Government could quash BTC or ETH. They also discuss Ethereum’s economic engine and how its design decisions (EIP-1559, Proof-Of-Stake, Issuance, etc.) emerge as an incredibly bullish evolution of “sound money”. (02:28:24).
💸 First Money In Podcast on Harlem Capital’s second round of funding, Crypto coming of age, and how Biden is spending big bucks to future-proof America. Only on its fourth episode, this is becoming one of my favourite casual listens of the week. (01:16:56).
🚀 Kevin Rose interviews the founders of Cryptopunks. Cryptopunks were the first NFTs ever - these guys started all the hype - and it was interesting to get a first-hand perspective on their founding story and motivation and future plans. (00:56:23).
🏦 Scott Galloway interviews Martin Chavez, former CFO, CIO and Global Head of Securities at Goldman Sachs. A very level-headed discussion on trends in software, technology and cryptocurrency. (00:58:51).
Tools I’ve discovered
🇯🇵 【雑貨屋店主のモーニングルーティン】キッチン棚のディスプレイと収納のコツ。塚本佳子さん編 インテリア/朝ごはん. People close to me know that I'm addicted to anything Japanese. And I'm also curious about other people's daily routines. This combines both - it’s a YouTube playlist of Japanese morning routines. Even though I don't understand everything (yet), this has been so nice to watch.
🧐 A16Z’s NFT Canon. A16Z is a notorious venture capital company, often described as a content company that happens to make investments. They’ve put together a curated reading list of articles, guides, and resources for Non-Fungible Tokens - really a great place for anyone from artist to investor - to get started and learn more about the space.
🐦 Excerpts from the Twitterverse
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