Do you ever wish you’d had the opportunity to invest in a company like Netflix or Facebook when they were just a fledgling startup?
In the most simple terms, investment platform Republic was created to just that. The platform democratizes fundraising so that anyone can access investment opportunities in the startup ecosystem.
The company has quickly built a name for itself — even though it is not even five years old.
Republic co-founder and CEO Ken Nguyen started the company after the SEC enacted legislation in May 2016 enabling non-accredited investors to put some cash into early-stage companies. Since then, Republic has taken the lead in the equity crowdfunding space, making it easy for almost anyone to invest as little as $10 in a business. The good news — especially for unseasoned investors — is that they heavily vet startups before promoting them on the platform. They say that fewer than 3 percent of companies that apply pass their due diligence.
Even though Ken started the company to meet a contemporary need, he’s looking to the future. His optimism and desire to bring investment opportunities to more than the 1 percent came through loud and clear in his interview at the WGN studios.
Giving newbies a shot
Scott: If a startup is in their early stage and I want to participate in a round with them as an accredited investor, or tell them you should go on Republic — and I’m going to spend the same amount of money — how do you feel the terms would line up or differ?
Ken: The terms are completely dictated by the founders. Investors who invest around the same time should have very similar terms, if not identical.
The difference with a Republic campaign is that if you are a relatively inexperienced investor — when the company has new developments or when there are decisions that you need to make as an investor — you can turn to Republic and say, how are you guys looking at these issues? And use us as a community and resource to help you along as an investor in that company. But the terms themselves do not need to be different.
Scott: Could you explain to founders why Republic — and equity crowdfunding in general — is a smart option, regardless of what stage you’re at?
Ken: In terms of marketing value, it’s truly unprecedented. If you buy a product, once it’s done, you have so many options out there. If you’re a $10 investor, whether in a restaurant or in the next Uber, you have a vested interest, and a loyalty that will turn you, a customer, into a brand ambassador.
Usually for a company of any stage, marketing is one of the largest items on your budget, and it costs that much more to convert customers into ambassadors.
It’s also a notion of fairness: the first thousand adopters of Facebook at Harvard absolutely added more valued than Peter Thiel, who came in much later, and they didn’t benefit in any way. I’m sure if Mark Zuckerberg could go back in time to bring in 500 Harvard dormmates, then he would have done.
Putting the fun in finance
Scott: I don’t want people to think it’s not a risk, because you are investing real money, so if you don’t have this money to lose, you shouldn’t invest it on platforms like this. But the amount of learning and fun that a person can take from this is immense.
Ken: There’s this stat: 75 percent of Fortune 500 companies that will exist in the year 2035 — 15 years from now — have yet to exist today, meaning that the new innovations that are coming out of people’s garages, some of them will grow to be the vast majority of Fortune 500 companies down the road.
I really think that how people should look at risks and investing is that the less you understand something, the smaller the check you should invest. And if you really don’t understand something — and a lot of people are doing it — put in fun money that you can expect to lose completely.
My personal ethos is that if you’re going to be part of a time when things are moving and changing so drastically, whether it’s $1, whether it’s $5, whether it’s doing something to earn a stake in it, you have to so that later on, if that technology matures into something that’s life-changing, you can look back and say, I had the opportunity and I participated a little. And if things that you get involved in end up not panning out, it’s the learning and the education behind it: whether it’s $10 or $20, that’s the value that you pay to be involved and to learn from that new trend and new experience.
Scott: This sounds like a weird analogy, but it reminds me of fantasy football. Watching football is great — watching startups is cool, tech is cool. Investing in it, betting on it, gives you skin in the game — it makes you care more.
Ken: Soon enough, you’re going to see e-sport leagues raising on Republic — and hopefully one day real movies.
Let’s say you’re a big fan of the Lord of the Rings franchise, and let’s say there’s a sequel to it and you can invest $20 in it: the most you’re going to get out of it is probably $100 — 5X, that’s a really successful movie return. But the fact that you can invest early and feel like you’re a part of it, I think that’s the next wave of business.
Investing in the future
Scott: Your growth has been huge: I think you told me that now you see as much money raised in a month on the platform as you saw in the first year. I would love to know from your end why you think things are going so well.
Ken: Thank you for that. I think it’s not hockey [stick] growth just yet — I think we’re at the very tip of that growth. The name of the game is exposure and awareness, and thanks to you and some of our other media efforts, more people know that they can invest early and invest privately.
I think that’s the main thing: when people see WeWork, about how their valuation is $10 billion instead of $40 billion, if you could invest early at $100 million valuation — which is still a large valuation — what difference does it make whether the IPO valuation is at $10 billion or $20 billion? That’s the value of investing early, and you can do that with a small amount of money.
I think most of the world still does not know that that already exists, and as we grow and get the brand and the story out there, I think you’re going to see that growth go up.
Scott: What do you see changing over the next five years in how we invest and how we look at investing?
Ken: That’s a difficult question and I want to be careful in giving my projection, to make it not overly optimistic, but I think we’re moving faster than ever before. It took about 25 years for recycling to gain mainstream adoption, and about 10 years for fair trade, organic, and ethical spending to gain mainstream adoption.
With blockchain technology and with communications now, I think it will probably only take another three to five years for micro-investing early in a range of businesses to be something that people think of as natural, and something that people just do. You walk into a restaurant and if you really like it, on your way out, you have the chance to invest $100, and when you come back you probably get a discount, and you can bring your friends to your own restaurant. So I do think that five years out, you’ll see this level of expectation and participation.