What’s new in crowdfunding for startups

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Joining me is an entrepreneur who says today’s startups have new options for raising money.

He’s helping startups raise money through crowdfunding where anyone can invest. His goal is to get 80% of the population to start investing.

Kendrick Nguyen is cofounder of Republic, an investment crowdfunding platform for startups.

Kendrick Nguyen

Kendrick Nguyen

Republic

Kendrick Nguyen is cofounder of Republic, an investment crowdfunding platform for startups.

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Full Interview Transcript

Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy where I interview entrepreneurs about how they built their businesses, and I do it for an audience of real entrepreneurs. And joining me is an entrepreneur who says that today’s startups have new options for raising money, which actually is obviously he doesn’t say that, that’s part of the premise behind his business. But the thing that he’s doing is he’s helping them raise money through crowdfundings to post online that they have a business, describe what the business is and say to anyone, “Hey, if you want, you could invest.” And within certain criteria, people can invest, and he’s broadening out the investment pool. I think, Kendrick, your goal is to get 80% of the population to invest? Am I right about that percentage?

Kendrick: Hopefully, we’ll get there one day, Andrew. And hi, everyone. Thank you so much for having me on your show.

Andrew: You bet. The voice you just heard, he is Kendrick Nguyen. He is the founder of Republic. It’s an investment crowdfunding platform for startups. This interview where we dig into whether this is doing well yet, how he got the Drapers on his site to do a show, famous family in venture capital and everything that’s coming up in crowdfunding for startups, it’s all due to two great sponsors. The first will get you phenomenal designs from the crowd. Ken, you’re going to love that. It’s called DesignCrowd. And the second will help you hire phenomenal developers. I’ll talk about them later. And that company is called Toptal. Ken, good to have you here.

Kendrick: Great to be here and thank you to the two sponsors.

Andrew: How much money did you guys bring in? Let’s talk about revenue to Republic. I’m laughing because I always dig right into that. Let’s go for it.

Kendrick: We just got through our second year anniversary since our launch in July 2016. And glad to report that in year one we help raise $1 million for companies, and in year two over $10 million. Hopefully, in year three it’s going to be a lot more.

Andrew: Wait. Year two you guys raised $10 million for companies and you guys get 6% of that, right?

Kendrick: Correct.

Andrew: Okay. And then in addition to that, any other fees?

Kendrick: Yes. So, in addition to that, we have . . . Well, it’s a bit more than 10. It’s more like 12, 13 by now, but I just rounded up in that simple figure there. So we do . . .

Andrew: Wait, wait. Sorry. It’s a bit more than $10 million that you’ve raised?

Kendrick: Yes. Today is probably about 12. I’m just saying that 10 in year two, 1 million in year one to collectively from inception into now. We’re probably somewhere between 12, 12.5 or so in total capital that we raised [inaudible 00:02:46].

Andrew: Okay. All right. What about revenue to you guys? Tell me about that. So it’s 6% and then what else?

Kendrick: Six percent in cash commission up to successful campaigns so that let’s say out of $10 million raised that means we’ll take in about $600,000 in revenue for Republic. And in addition, we have a little bit of that equity interest in each company raising on Republic is very hard to attach a dollar value to this upside interest, but we’ll go along as an investor in every partner that launch on our site.

Andrew: What percentage do you typically get? Is there a typical amount?

Kendrick: Yes. So it’s 2% of the amount raised. So here’s a simple example. If a company is raising $100,000 on Republic using a convertible note, out of that $100,000, we get $6,000 in cash. And we also receive a convertible note from the company in the amount of $2,000 essentially treating us like a micro-investor.

Andrew: Okay. You know what? And before we started, you brought up crypto and you said, “Hey, Andrew, is your audience interested in crypto?” They are. I did some research online to try to get a sense of how much you guys do in ICOs and I can’t tell. How much is ICO?

Kendrick: We have already launched and closed three ICO projects. The reason is that it’s such a multi-landscape and we are fairly unique in our ability to allow non-accredited investors to participate in a legal way in an ICO. So each and every single project that we launch typically has sold out. That said, we’re going to launch hopefully quite a few more between now and the end of the year.

Andrew: And what’s the advantage of doing an initial coin offering, an ICO?

Kendrick: Think of coin offering as just another way of crowdfunding. You’re asking people to come together, put money in, in exchange with something that if the business does well, you do well. So it’s just another form of crowdfunding. The advantage is this global awareness. Everyone even from China to Peru, even if you’re not investing yet, they know that there’s something called crypto asset. So if you manage to reach that audience and bring the spotlight to your company, then you can fundraise effectively.

Andrew: You know what, Ken? That’s what I thought. So, if Mixergy needed to raise . . . Again, you like to use $100,000 amount, and I get it because it makes fractions easier to work with. So if Mixergy were to raise $100,000, if we did it through just crowdfunding, the standard way that you do it on your site, people might be interested, but if I say, “Andrew is doing an ICO, an Initial Coin Offering,” then I get lumped in with the whole cryptocurrency, Bitcoin, Litecoin, the works, and everyone pays more attention. You’re smiling and nodding. That’s basically it, isn’t it?

Kendrick: A hundred percent. And here’s an example that a few months ago Kodak, this film . . .

Andrew: Dead company.

Kendrick: Camera company and they announced that they begin to leverage blockchain and overnight their stock price, like, shot up out of just global awareness. And that level of an impact, there’s definitely an angle there for very early stage fundraising as well.

Andrew: You are from Vietnam. Your parents being immigrants to the U.S. they had this belief that they brought you here for a purpose. Was being an entrepreneur the purpose?

Kendrick: No. If you ask most immigrants, particularly from those from Asia, you know what they want the next generation to have is stability and security, which means become a doctor, a dentist, a lawyer. But doing a high-risk investment like a startup entrepreneur is not at the top of the list.

Andrew: Instead what do they want you to do?

Kendrick: I was a securities lawyer in a prior life before going to tech.

Andrew: You made your parents proud. And you know what? And I heard you didn’t love it at all. It was draining for you. What was it about it that within months made you feel like, “This is miserable. I don’t like this.”

Kendrick: I think that’s a great question. I think every profession, not every profession is for everyone else. What works for me doesn’t work necessarily for other people. So I loved law, but one month into working in a large law firm, I could tell right away that gut instinct I wouldn’t be ecstatic going to work every day much less for the next 50 years. And I think it’s just that question that . . . And I think the same applies to a founder. Do you find meaning in what you’re doing now, and are you happy at work, and do you see yourself doing it for years to come? And until I launched my own company, Republic, the answer was always, “No. If not, within a month, it was a year or two.”

Andrew: Then you ended up working for AngelList, right?

Kendrick: I did. I joined AngelList as their first, I think, non-engineering hire as their company’s General Counsel, and it was a great place still within the family.

Andrew: Because they’re one of the leaders in this. They’re the people who started out with their newsletter to angel investors, making one-on-one introductions. Naval was on here a couple of times talking about how he did it. Building up this network of investors and network of startups for them to invest in. And as a general counsel, what did you do for them?

Kendrick: Anything that relates to fintech, financial technology, much less anything that’s new is going to be highly regulated and navigating this uncertain regulatory landscape. So having internal legal expertise is a core component in my opinion of every fintech startup. You cannot innovate, you cannot move ahead unless you have, in addition to engineering and business expertise, internal legal expert.

Andrew: Give me an example. What’s something that you did that they needed you on board for?

Kendrick: You touch on the prior history of AngelList, from venture hacks and doing the blog and creating the site where people can create a profile for their startup. None of that was regulated, and it was fine and free and it was just a team of engineers. The moment they rolled out a syndication product, which allows a bunch of accredited investors who are investing through an SPV into a startup and get a fee, get a carry on it, immediately they move into the land of having to register with the SEC. Is that broker-dealer investment advisor a potential legal risk of agreement? Every day, tens if not hundreds of agreements needs to be dished out and of course that would be unduly expensive and impractical to rely on outside law firms forever. So I took on a lot of the productization of that syndicate product launching a new fund for them, etc.

Andrew: And before you, they didn’t have . . . Did they have outside counsel that did that?

Kendrick: They surely did for, I think, a few months and when it became wholly unaffordable and not pragmatic to do so, that’s when they brought me in. But I joined very early on as soon as they initiated and launched the syndicated product.

Andrew: Yeah, that was revolutionary. So, for a long time, they were bloggers. All they did . . . And I shouldn’t say all. They had the best blog for entrepreneurs explaining not just how to create a product and launch but the VC part of it, the deal part of raising money for entrepreneurs. Then they tried to create a social network for entrepreneurs and venture capitalists. All that stuff is very consumer-oriented, very interesting, but not revolutionary yet. They hit the revolution when they decided they were going to merge the investors who are reading their stuff into this one, as you said, into a syndicate that would then invest in companies. What are some of the challenges that you guys had internally to put that together?

Kendrick: The blog and the social network, the intention behind it from day one and it still is, how to make it easier for entrepreneurs, for startup founders to build a business. And that’s why they also had the talent piece as well. When we rolled out that syndication product, it was a natural extension of already a budding community. And so there was supply. There was demand. The biggest challenge indeed was regulatory and legal and, you know, something that had not existed before but are now introduced to the world.

Andrew: So what were some of the challenges involved with that? Was it just creating a contract and telling the SEC, or was there . . . Obviously, there was more. What was it?

Kendrick: No. There was much more to form a venture fund and syndicate an investment from say 100 investors. In the old days when I was still an attorney at Goodwin Proctor, it would cost something like $50,000, sometimes $100,000 per [FTB 00:12:33]. If you imagine if that’s the base cost to funnel investment into a seed round, that’s like pretty much all of the seed round, right? So unless you find a solution to make it a lot cheaper by productizing, by identifying lawyers who can do it cheaply by doing it internally. So I would say that the productization of legal product to make this possible in as cheap and convenient and quick a way as possible for the companies and for the startups, that was probably one of the major challenges back in 2013 and ’14.

Andrew: All right. Before we get into why you left, give me a high. You’re working at AngelList. This is one of the best brands in the Silicon Valley helping launch some of the other big brands in Silicon Valley. What’s a high moment for you, a time when you said, “I cannot believe I get to do this”?

Kendrick: The first week of getting hired by Naval . . .

Andrew: That was it.

Kendrick: I immediately . . . There was an aha moment that I was . . . I think on day four that I never thought having practiced law for five years that I never thought that in law there was room to be creative, there was room to make that much of a difference rather than just churning through contracts.

Andrew: What’s an example of a big difference that you made for a company that we might know, that because of you or what you worked on they were able to raise money, they were able to go on to great success?

Kendrick: From Authy to Uber also raised the very first million dollars on AngelList. Any company that raised on AngelList in 2013 and ’14 very much rode that first wave, that right before that was not possible.

Andrew: And you were doing the paperwork for them?

Kendrick: Yeah. No. We productizing it. They’re . . .

Andrew: Yeah. But did you come in after that at AngelList? No.

Kendrick: No, no. So when we launched the first version of that syndicate product with carpooling, legal documents, and forming the structure and AngelList eating a lot of high cost and net loss for each and every single syndicate that was launched, it was refining it, productizing it, adding in in place disclosure navigation for the companies to deal with investors. All of those pieces came much later on from 2014, 2015.

Andrew: You’re saying that you were at AngelList when Uber raised money at AngelList.

Kendrick: No, no. Uber . . .

Andrew: No, that’s what I’m saying. You weren’t.

Kendrick: Correct.

Andrew: This was before you. Was there one company that while you were working at AngelList because of your work got to grow?

Kendrick: Well, of course. I mean, Authy, A-U-T-H-Y is one of the example that was then acquired. Shyp, another one that’s also very well known. A few of the crypto, now big names in crypto also did their equity round at AngelList as well.

Andrew: Yeah. Shyp was . . . Wasn’t that Tim Ferriss also was a big investor in that. He was putting together syndicate, right?

Kendrick: He was the lead investor in Shyp. I think there were two syndicate leads. It’s been a while now, but yeah.

Andrew: You left and the reason that you left says something about the direction of AngelList. And I want to come back in a moment to talk about that. But first, do you know about DesignCrowd, Ken?

Kendrick: Well, obviously that’s the plan that would help startups, you know, stand up and design and do the product work necessary to help them succeed, but would love to learn more.

Andrew: Perfect. You know what? For some reason, DesignCrowd does not have much attention. I believe it’s because they didn’t raise a bunch of money. They didn’t get written up in TechCrunch and all that. There’s a reputation that comes from the investors who back you. I don’t think DesignCrowd has it. It’s like a dude sitting there hustling, growing his business and nobody knows about it. Anyway, I guess that’s . . .

Kendrick: That’s my favorite type of entrepreneurs.

Andrew: Is it?

Kendrick: Yeah.

Andrew: You know what? I wonder if he’s . . .

Kendrick: People who certainly grind, work and build it on their own, those are my favorite people.

Andrew: I do too. I love those entrepreneurs also. Those are the ones who have the interesting stories that most people don’t know about, but I also feel like at some point, they have a chip on their shoulder because they’re doing good work and nobody loves them. Meanwhile, their competition gets attention. They go, “Wait, what about little old me? I kind of don’t want you to know, so you don’t like pay too much attention and I kind of do think that I’m entitled to attention.”

Anyway, that’s the way I imagined that they feel at DesignCrowd. They could be frankly feeling really good without any of this, because here’s the deal with DesignCrowd. These guys came up with an idea that said, “Hey, a bunch of great designers out there. Why don’t we allow any entrepreneur, any business that needs a new design to come in, fill out a short form, say, ‘This is what I need,’ and then have a bunch of those designers create designs?”

Then entrepreneur can go through all those designs, give some feedback, say, “I like this, I don’t like that,” and boom, get another round of revisions from people and even more design work. Get a little more feedback and more designs, and then after all this work, they pick the one design that they like and they could pay for that, and if they’re not happy, they don’t even have to pay for any of that. They don’t have to pay for anything. So all you have to pay for is what you love, and if you don’t love anything, let them know and you don’t have to pay. You confirm that actually.

Is there a guarantee? There’s got to be a guarantee. People are emailing me about this. Again, I don’t think there’s a . . . No, it is. Good. Money back guarantee. Did I just imagine that and I’m promoting something? No, they do have a money back guarantee. The reason I don’t really care about it is because it costs nothing. I got my cover art for Mixergy’s podcast for like $100, something like that. It’s not going to take too much money.

All right. Anyone out there who needs a design, even if you have a designer and you just want to shake things up, see it from different perspective, go to DesignCrowd, tell them what you’re looking for, and you’re going to get a crowd of designers creating work for you. You get to sit back, give them feedback, they go and design again, and you only pay for the one you love. Here’s the site. Go to designcrowd.com/mixergy. When you add that /mixergy at the end, you’re going to get up to $100 off. You’re going to get to save up to $100 on design projects, which are frankly already low. I’m kind of embarrassed that we forced them to give a discount to our audience. The reason we do that is people will then use my special URL, which will then show DesignCrowd that my ads are working. So, if you want that discount and you want a great design, I really highly recommend designcrowd.com/mixergy.

Ken, why did you leave? You were at AngelList, top of the top.

Kendrick: At the beginning when I joined, as you mentioned, the mission and the model, the vision of AngelList was to make things more accessible for entrepreneurs but also for investors. Here were . . . Yes, they may be accredited, but they had never had the opportunity to invest in early stage in Uber, in Thumbtack, in Shyp, and AngelList is doing that. But over time, due to the need to close quicker, they move more toward the institutional model and really tailor the product for investment seed funds and syndicated that sort of capital. So when the JOBS Act, that is, the retail fees non-accredited came to pass in the middle of 2016, I saw that opportunity, finally here’s the gateway truly to open access for all into startup investing.

Andrew: Wait. So they at some point started shifting away from the smaller investor and went towards the bigger . . . And this is when they were raising bigger and bigger funds, right? That when they needed the big money, they couldn’t keep going after guys like Tim Ferriss to get his audience to syndicate with them. That’s what you’re saying?

Kendrick: Partially, that’s one of the reasons, but there’s a more practical reason behind that. Say you’re an entrepreneur, say you’re the founder of Uber back in 2012. And there’s an AngelList syndication of $200,000. You are not in need of capital from Sequoia and everyone is looking to give you money, so the only way that you would agree to allow for an AngelList syndication is if they can close that money pool very quickly and not waiting for 80 people to wire their small checks. You get three seed fund each dishing out $70,000. Next thing you know within 24 hours you get 210. And so the desire to make things more convenient, simpler for entrepreneurs, for the hot startups, definitely drove the shift from individual investors to more institutionalized capital.

Andrew: And once they went to institutionalize, you said, “Hey, there’s an opportunity in the smaller investor. I’m passionate about that. Also, there’s the JOB Act which is allowing more people to invest. They don’t have to be accredited, meaning they don’t have to have a certain amount of money in the bank. They don’t have to make a lot of money. They could just invest in this.” And you said, “This is an opportunity.” Did you take it to AngelList and say, “How about we create a smaller site, a sister site, a section of AngelList for this?” Anything like that? You did.

Kendrick: I instead ask about permission for me to spin out Republic. We, of course, had a discussion about the possibility of doing it under the AngelList brand. Going back to your initial question as to why legal is a necessary component. So if you do a fintech product, you have to deal with compliance and regulations. The moment that you touch retail investors, grandma, student, the weight of regulatory compliance obligations really fall on you. It literally will 10X or 20X the complexity of operation or complexity of a company. So it was not possible for AngelList to do it internally in my opinion.

Andrew: Why not? They have the resources. They could create a smaller . . . No? Why not?

Kendrick: Resources is only one component of running a company’s team, culture, openness. That’s why Gorman [SP] has a very different culture than Google. What I’m saying is that for a company that has already been out for five, six years, a brand in the industry like AngelList, but team that’s predominantly engineer-heavy and has a very open, free-spirited and flat structure internally everyone held exactly same title, venture hacker. You cannot couple that with a broker-dealer that requires a chief compliance officer that has underlying recording line that if they say, “No, no one can do anything,” that any message internally has to be reviewed.

Andrew: I guess I see what you’re saying, but they also . . . First of all, the title, yes, everyone has venture hacker as a title, but you would put a venture hacker and then slash general counsel, so we were all kind of working around that limitation, right?

Kendrick: Of course. Of course.

Andrew: Number one, and number two, they own Product Hunt and Product Hunt is a different culture completely, and they’re working out of their office differently in their weirdo space. They could have done that. It seems like maybe it’s too small of an opportunity for AngelList? Is that it?

Kendrick: No, no. Not at all. And Product Hunt is very much in line, right? Product Hunt is not regulated at all. It’s a team of engineers, in fact, a distributed team of engineers, very creative engineers. It was a perfect blend and not just between two teams but between two modes of operation. Indeed, I put general counsel because I had to deal with the SEC, with external parties, so they know that there’s actually an attorney at the company. But internally? I view a very junior engineer who had just joined in very much on the same footing in terms of credibility and how his or her views would be taken or would be accounted for.

Andrew: Okay. So I kind of get it right. You’re saying highly regulated is not going to fit nicely in loosely regulated. This had to be its own thing. It seems like you also felt, “This is my opportunity to be an entrepreneur like all those people that I see here.”

Kendrick: Yes, and arising out of that, which means that if I really believe in equity crowdfunding, retail investing, which I do, then naturally I want to make sure that it succeeds to my best ability, and the only way for that to work is that there’s a well-structure complying, top-down engine to deliver on it. So I know that if I were to stay at AngelList and tried to build that out, it would be less efficient than if I were to set up that framework on my own and have that flexibility to deal with it free of distraction, free of business compromises from the other business angles of an established startup.

Andrew: I was checking out . . . This is the kind of person I am. I was checking out Naval to see if on his LinkedIn profile he lists himself as a venture hacker or does he say “Venture hacker/founder bitch.” But no, he says . . . He does say venture hacker, but the interesting thing is . . .

Kendrick: I did not know that. I did not know that.

Andrew: No, he does. He list . . . But he doesn’t list AngelList at all on there. He’s like a completely disconnected from it. He has Epinions on his . . . but not AngelList. All right, I get it. Tell me about the conversation, walking into Naval and saying, “Hey, look, I got this great idea. I want to take in. It’s similar enough here.” Any nervousness there? What did you feel as you walked in to talk to him?

Kendrick: Well, the conversation was probably a little bit less of me asking for permission and giving and proposing this idea and more like a mutual conversation and Naval say that, “Hey, Ken. I know. Do you have any interest in this model? Let’s sit down and talk. Is it possible to do it internally?” “Likely not.” “So how about us . . . ” And I was like, “I would love to do it and on my own,” and Naval was suggesting that, “Hey, perhaps AngelList can invest in you guys and give you the support that you need to succeed at this business model.” So it was a very collaborative and that among many things that I am grateful for Naval about.

Andrew: What about Paul? Paul is the guy who worked at AngelList. You recruited him. How do you pronounce his last name? Menchov?

Kendrick: Menchov.

Andrew: Menchov. He seems like he’s got a really good career. He was at AngelList, CoinList. Is he still with you guys?

Kendrick: Well, he’s the head of CoinList Capital and one of the co-founders at CoinList surely on the executive board.

Andrew: What about Republic? He’s one of the co-founders of Republic, right?

Kendrick: Yeah, he’s a co-founder, but he’s no longer a full-time employee. He’s only a senior advisor.

Andrew: He moved on to CoinList.

Kendrick: Correct.

Andrew: But he’s the guy who you partnered with at AngelList and said, “Hey, do you want to start this with me?”

Kendrick: Yes. Paul was a senior engineer at CoinList. And again, back to our original discussion, financial product is part legal but part engineering. I’m not an engineer and I figure, “Who else but Paul of who had already been one of my very close friends?” And I’m glad to report that after four years working together, we probably even closer friends now.

Andrew: All right. So, you said, “Hey, do you want to come in with me on this?” You got a couple of other co-founders together. You guys all started. By the way, what’s CoinList’s connection to AngelList?

Kendrick: Similar to Republic, AngelList has an exposure and ownership interest in CoinList as well.

Andrew: Okay. All right. So you get together, you guys start this business. What’s the first thing that you do?

Kendrick: Come up with a name. The name of your company matters a great deal. And I got to give Paul all the credit for picking Republic and for coming up with Republic. I had gone with something super easy and quick and focusing on other things like DealList, OpenList or OpenDeal. But we ultimately settled on Republic. And the next step was recruiting another engineer and put together a sales plan and application to FINRA because we have to be authorized by the SEC and FINRA and also moving to New York away from Silicon Valley.

Andrew: Why? Why New York?

Kendrick: Recognizing from the outset that what we’re building at Republic is far more difficult, ambitious, larger, and it requires relationship with people well beyond venture. Our parent, AngelList, and our friend, the AngelList employees, are already there in Silicon Valley to give us that root. From hiring to media to partnership, we have to pick a different city, and New York is really the only spot we had considered outside of Silicon Valley.

Andrew: It seems like it’s you’re saying also, “We think we can get the companies on board. It’s the investors that are going to be more challenging.” That’s it.

Kendrick: The name of the game for companies that get accepted to fundraise on AngelList is how to do it quickly and conveniently. They’re all [hotkey 00:31:03]. For Republic, we want to change the game and give credible entrepreneurs who don’t already have access to Naval, who don’t already have access to Sequoia a way to fundraise from the public. So, yes, we would not be able to help these entrepreneurs unless we can bring on investors who believe in micro-investing in private startups.

Andrew: You told our producer, “We wanted to build our own platform from scratch.” I wonder why. You mean software platform, right?

Kendrick: We’re going to do everything from scratch.

Andrew: Why? Why was the right software so important early on? I keep thinking about AngelList. It’s called AngelList because it was like a list of email addresses and involves phone book basically or in MailChimp or whatever you used. But you went more . . . You wanted your own platform from scratch because?

Kendrick: We’re highly regulated and so it’s not that easy to just take an AngelList email list and duplicate it and send it over because our . . . I think how you build a platform down to the code base, down to users’ experience relates and reflects the underlying mission. So if the core mission of Republic is very different than the core mission or is significantly different from the core mission of AngelList, we can’t just borrow the foundation. If we do that, it’s very difficult to change later on, so we went back to the drawing board on even design on how to market ourselves. Of course, we borrowed a great deal from institutional knowledge. We just didn’t borrow the actual work, just the know-how, but not the code base, not the design.

Andrew: You know what? The first version of your site and even the current one, they look very much like the format pioneered by Kickstarter and Indiegogo, right? It’s very clear. “This is what we’re raising.” I’m taking a look. “Here’s our story.” “Hit the button to buy.” In fact, on the latest version, there are even rewards. I think I could get a tote bag if I invest as little as $100.

Kendrick: Exactly. If we had . . . We couldn’t just borrow the clean, crisp minimalist design of AngelList. It’s just different demographics. We want ours to be colorful, to be relatable for everyday folks, whatever that means, and not for just engineers and designers in Silicon Valley. So, yes. When you deal with consumer, the consuming public, Kickstarter, Indiegogo or Republic, relatability is a major advantage.

Andrew: I’ve got a screenshot of the early version of your site. It says, “Now everyone can invest in startups. Invest as little as $10 in the private companies shaping the future. Pick the companies you believe in and support their mission.” Ten dollars. You were going for people who had just $10. I got to tell you, I wouldn’t want . . . If someone just had $10 at Mixergy, I would just say, “Keep it for yourself. I don’t think I need you as a customer. It’s not worth the headache.” Someone who’s just putting in $10 is . . . You’re saying, “No.” Oh my God. I see the look on your face. You’re shocked.

Kendrick: No, no. I’m saying that I will be able to change that view of yours very quickly. Imagine if all of your listeners 90% of them love you so much and each of them want to invest $10 into Mixergy.

Andrew: But that’s not the way the world works. It would be nice if you . . . But?

Kendrick: But if they want to do that, you don’t have to worry about dealing with 100,000 people in the cap table. All you get out of that is this, a supporter, a customer or a listener, a fan who now is incentivize because she’s now an investor, and she’s going to tell all of her friends at Harvard and Ohio State about you and drive them to you because if she does that, the value of her investment $10 maybe will go up.

Andrew: You know what? It was a Howard Dean who first showed the world that you can raise a lot of money for a presidential campaign online. And his campaign manager was named Joe Trippi wrote a book about this process, and he said, “Ultimately, if we could raise $10 from people, an amount that most politicians who are trying to raise millions don’t care about, it doesn’t matter if we ever use the money because if we get lots of people to put in $1 or 10, they now are invested in the campaign, they’re more likely to vote, more likely to tell their friends.” And that’s what you’re saying. Forget the money, Andrew. Everyone who’s giving you $10 is giving you their heart, and now they’re attached to your mission.

Kendrick: A hundred percent. Venture capital, financing, raising capital from AngelList and Sequoia is primarily about the money and the advice. Fundraising from the crowd in addition to the capital, what you get in terms of brand loyalty of marketing value is at least as important.

Andrew: But Ken . . .

Kendrick: It is twice the work but twice the value added.

Andrew: I’m sorry to interrupt. But when entrepreneurs sit here and they talk to me about their SaaS companies, often they say, “I should never have charged $10 a month. The customer who pays $10 a month is too much of a pain in the neck when it comes to customer service, when it comes to problems, when it comes to all this stuff. It’s just doesn’t pay to service them.” You’re finding that it does pay to service them?

Kendrick: We leave it to each company to set that minimum amount that they’re comfortable with. Similarly, a toothbrush company selling product for $5 a pop and if you’re selling iPhone, it’s going to be $1,000 each. We just make it possible that even businesses, companies that are dealing with products that are priced not very high or that are open and willing to deal with investors and customers who don’t put a lot of money into their business. We give them that avenue to gain and to extract value out of that [inaudible 00:37:21]

Andrew: You know what? As you’re saying it, instead of listening calmly, patiently and taking it all in, I was looking at what the current version of the site is to say, “Look, he stopped saying as little as $10 is enough to invest here.” No, I was proven wrong. I went all the way back to [inaudible 00:37:33] right where it says $10 and the current version where you did not turn your back on it. You still say $10.

All right. Let me talk about my second sponsor and then we’re going to talk about how you got these people with $10 to come in and invest because that’s not an easy pool of people to attract. All right. Boy and I’m looking at my notes. We got a lot to cover. I got to zip through this faster. Second sponsor is a company called Toptal. Ken, do you know Toptal at all?

Kendrick: I have not heard of Toptal, but I’m very excited.

Andrew: How do people still not know about Toptal? What is with these guys? These are people who did raise money. They raised money from Andreessen Horowitz. These are entrepreneurs with a nice track record who said, “You know what? We know where we’re going to go jump in. We’re going to jump into the hiring market.” What’s the biggest problem that most entrepreneurs have? I don’t even know that it’s funding. It’s hiring, don’t you think?

Kendrick: A hundred percent.

Andrew: Which it’s this crazy market. And so they said, “Here’s what we’re going to do. We’re going to get a pool of developers who are the best in the best. We know they’re going to be the best in the best because we’re going to screen them like crazy. We’re going to put tests in front of them. And then when an entrepreneur like Ken or anyone on his website decides that they need to hire developers, they just have to talk to us, and we will introduce them to the best of the best developers.”

Ken, every interview we just about who I talked to gets excited about this company. I’m going to tell you the domain, and I’ll let you go and do your own research later. It’s called Toptal, top as in top of your head, tal as in talent. When use this domain, you’re going to get 80 hours of Toptal developer credit when you pay for your first 80 hours in addition to a no-risk trial period of up to two weeks. It’s 100% money back . . . Not money back guarantee. They’re just not going to bill you if you’re not happy. Here’s a URL, toptal.com/mixergy, T-O-P-T-A-L.com/mixergy. I’ve hired three people from them. They’re that good.

All right. Let’s talk about then the first people on the site. Going back to the Wayback Machine, I see the first companies were Farm from a Box, RaceYa, Maternova. How did you get these early companies? Youngry.

Kendrick: We purposely picked out of several dozen applications. I picked out four that represent what Republic stands for. In that these are, in my opinion, in our opinion, strong, strong entrepreneurs but who weren’t young grads from Stanford or Berkeley and they didn’t have access to people like Tim Ferriss. But we think that what they’re building or what they were building had such a relatable story that can excite . . .

Andrew: And how did you get them?

Kendrick: The one who had never been invested.

Andrew: Is this . . .

Kendrick: Yeah. Through word of mouth. In one case it was an introduction to a friend. And inbound application. Maternova came in organically. Farm from a Box was an intro from a friend. Youngry, I think I spoke at a conference and who reach out to me. And today that still remains to be the various ways that applications come in.

Andrew: It’s you going out talking and people hearing about it and coming in. It wasn’t like you went back to AngelList and said, “Hey, are there people that you guys can’t work with?” No, it wasn’t that at. All right. So you got them on board, now you got to produce for them. How did you get the early batch of investors for these new companies that you were backing?

Kendrick: So in addition to employees and hiring which, as you mentioned, in Toptal being a great platform for that, but startups have also relied heavily on advisors. One of our advisors, Kathrine Krug of BetterBack, at the time, she was the first woman founder to raise over $1 million on crowdfunding through crowdfunding. And today I think she has raised vastly more, something like over $5 or $7 million, on Indiegogo and Kickstarter, and she went on Shark Tank and all that, which she’s been a good friend, a close, close friend for a long time.

She sat down and gave us her silver bullet, her magic recipe on how to execute a crowdfunding campaign. We recorded a video, made it available to the four companies. And part of that recipe is how to engage your own network of friends and families, that is for each founder to do that. And then on top of that, we, of course, identify conferences that can speak of, figure out ways to help them do webcasts. It’s really all hands on deck and a very involved process between myself [inaudible 00:42:04]

Andrew: So it was helping them to go out and get people to sign up to . . . Okay. So, for example, what are some of those things? You said you taught them how to create their video, you taught them to do more.

Kendrick: One thing I would recommend that anyone who considers any form of crowdfunding donation or investment to do, at least three or four weeks before you launch your campaign, put together a list of everyone you’ve known from your ex-girlfriend, boyfriend to the guy that you bought a used couch on Craigslist from 10 years ago. [inaudible 00:42:39] them to bucket, like an onion, and then repeatedly follow up giving them like, wanting to send, there’s an opportunity to come up, ask this support. It’s that’s kind of engagement methodology that we show and we suggest and over time we build out tools for entrepreneurs to do. You are on mute, Andrew. I’ve lost you.

Andrew: Got it there. Yeah, I did hit mute. I was . . . Whenever I breathe a little bit too heavy, I mute it. I noticed that there’s some podcast where you can hear the interviewer as he’s listening and go . . . That drives me crazy. [inaudible 00:43:22] mute button. And I think also, Arie, our editor will mute it too but just in case I mute myself. All right. You launched with those four companies. How many of those ended up raising money?

Kendrick: All four.

Andrew: All four, all using this process that you talked about? How much outside help did you bring them? I get that they should go and get their own investors. How much did you help them with? How much did you bring in?

Kendrick: I would say for the first four, or I dare say for the first 10 projects, all the money that we brought to them ranges anywhere between 50% and 75%.

Andrew: From you. And so where did you get those 50% to 75% of investors?

Kendrick: Oh, on day one we did AngelList network of friends and supporters who paid attention to what we were doing and signed on as our very first users and investors. They obviously supported the project that we picked and validated our belief in these entrepreneurs. So they added a lot of . . .

Andrew: How did you get to them? Did you guys get to do email marketing to that list? Did you do anything else? What did you do?

Kendrick: So there are a few things that we do and it’s also heavily regulated. So we do announce every new project that launches on Republic to the entire network. We arrange for a webcast so that our own users can ask the entrepreneur questions directly and can learn more about the businesses. We, in some cases, had events in San Francisco, in New York and gave people an opportunity to meet one another to learn more about equity investing is really a whole long laundry list of things that we tried and have done.

Andrew: That’s you going to the current list that you have at Republic? What about in the beginning when you didn’t have a mailing list? What did you do where you said that you tapped into the AngelList audience? What did you do to get into that AngelList audience?

Kendrick: Just to give you an example here. So when crowdfunding became a reality, there was a lot of press written about the potential of investment crowdfunding. Republic being a spin-out from AngelList got significant press. In Inc. magazine, we were featured on various blogs and posts. And so, just from inbound interest from people who read about equity crowdfunding, we had a substantial mailing list even before we featured the first deal. So that definitely added significant value.

Andrew: You said that one of the groups of people you found that actually were right to invest were retirees in the Midwest. How did you find retirees in the Midwest were the ones to go after?

Kendrick: We’re still trying to figure out how some of these incredible people found out about us because we certainly didn’t have the budget to run an ad campaign anywhere, much less in Milwaukee or in Indianapolis. That said, the Inc. magazine exposure, Ivanka Trump tweeted out about us back in late July of 2016. And we have people like Shiza Shahid, co-founder of the Malala Fund also tweeted about us. So there’s been countless channels. We, today, even from the beginning got really the tapestry of America. You know Americana, so to speak. But I wouldn’t know precisely how some of these people found out about us.

Andrew: What do you say to someone who hears that you guys are going after retirees and says, “That’s exactly why people need to be accredited. Retirees don’t have the long term . . . don’t need this type of product that may not pay off for a long time where their returns are a little bit harder to predict”?

Kendrick: That’s an excellent question. To say that we’re going after retirees, is definitely a slight misinterpretation.

Andrew: What about enable them?

Kendrick: Yeah. I think we’re going after everyone and suggest that everyone doesn’t matter what income or net worth, what situation in life, should very much invest small amounts but invest in the businesses where they think represents the future that they want to see. It can be women founders. It can be male founders. It doesn’t matter. From gun manufacturing companies to a food truck ran by two Latinas, whatever it is that you feel engaged or passionate about you should not just buy a product but make a small investment, building with your money in addition to building [inaudible 00:48:22] and I think that that’s completely agnostic as to age or wealth or location.

Andrew: And it really is that 80%. Where’d you get the 80% number that I mentioned earlier where you said 80% of people should be investing?

Kendrick: I do very loosely discounting unit of population under 18 years of age.

Andrew: Got it.

Kendrick: Because they’re not legally allowed to do [inaudible 00:48:49]

Andrew: But as long as someone’s over 18, they could invest in a company on your site $10 or more, just go in and put it in.

Kendrick: Yes. And to give you an interesting statistic. You know Americans spend some $80 billion a year in lottery tickets and lose about $100 billion at the casinos. Much of that comes from non-accredited fellow citizens. So the $10 or $50 we think it’s necessary to allow everyone to participate. It doesn’t matter what your income or net worth may be.

Andrew: All right. Let me close it out with this. In a pre-interview, we like to know what’s like one big challenge that you have and you said, “You know what? The one regret that I have is I wish I’d taken even more meetings.” Most people don’t want to meet anymore. You wish you’d taken even more meetings. You say, “I never regret the meetings I take as much as I regret the meetings I didn’t take.” Tell me about what that is.

Kendrick: We are so busy, all of us, these days that the general message is guard your time and don’t distract, don’t spread yourself too thin. From my own personal experience, the 90% of what I’ve gotten out of life, and I’ve been very lucky, and probably 60%, 70% of the thing that’s been most generative at Republic had come from the most unexpected place of a random meeting of someone just wanting advice but had seemingly nothing to give. So I think that’s very important to keep that open mind. And more than that, I think you got to give back a little, and if you’re always looking to speak and interact and deal with people who have something to give, you’re missing out on that component of reaching out to people who want advice and . . . Yeah, I think . . .

Andrew: And here’s an example. You said, “The lead investor in Republic’s recent round was introduced to me by someone who in no way seemed to be relevant at all to the venture ecosystem. He was just interested in entrepreneurship, wanted to meet for lunch on a Sunday. I thought, ‘All right, let’s go do it.'” And so you went, you met him, and then he ended up being the lead investor. Speaking of, I just realized there’s something I forgot to ask you about, the thing that’s all over your site, the Drapers. Are the Drapers investing in your company?

Kendrick: No, not yet. But Tim is an investor on Republic, that is he has invested in a number of companies that had fundraised on Republic. We have [inaudible 00:51:34]

Andrew: And then what’s the deal with the TV show that he’s on there? I’ve seen him as an investor who’s investing in companies within your platform. What’s the . . .

Kendrick: Right, right. You know when season two of a Shark Tank-like show, people get excited and . . .

Andrew: Did you guys produce that show?

Kendrick: But we’re . . . Sony Entertainment is the producer of that show. We’re the engine that allows everyday people of the audience at home to co-invest with Tim and with his father, Billy, and the daughter, Jessie.

Andrew: So wait. So who produces that show?

Kendrick: Sony. Sony Entertainment.

Andrew: Sony produces it and any company that they see to decide whether to invest or not, anyone else who’s listening can go to your website and invest along with them. Am I right?

Kendrick: Exactly. Just like Shark Tank. Were you watching the Shark?

Andrew: Yeah. So how did you get that?

Kendrick: Tim and Sony reached out to us. They vetted all the platform. They believed in what we’re building. They like the team. Think that we have integrity and the product is good. So we’re very fortunate for that partnership.

Andrew: That’s what it is? He just liked your product? He didn’t have an investment in the company, he had no connection to you before, he’s not your neighbor, not your brother, nothing like that?

Kendrick: No connection and today we have not paid Sony or Tim a single dime, like no money. Just [00:52:53] just about people believing in what each other is building and the alignment of interest.

Andrew: Wow. That’s an impressive person to have behind your company. First of all, he’s a big brand name and second, I think his family is like generations into venture capital, right? Literally on the show, three generations.

Kendrick: Right. And I think that even the generation before that, who’s no longer around, with the first wave of venture capitalists in America.

Andrew: Yeah, that’s right. I’m looking actually right now to get backing on that before I said it, but I’m glad that you said it because that was my understanding also.

Kendrick: Right.

Andrew: All right. So anyone who wants to go check this out, they should take their $10, literally just $10, go in the site and do it? And the URL . . .

Kendrick: Just $10. You can use your credit card, ACH, even Bitcoins. The URL is republic.co, not dot-com, dot-co.

Andrew: Yeah. Nobody has a dot-com. It’s like angellist.co, right?

Kendrick: It would have cost us $2 million to buy dot-com, so hopefully one day.

Andrew: That’s not even necessary anymore. I feel like dot-co is now become cooler than dot-com. Go figure.

Kendrick: I agree.

Andrew: All right. Go check them out. It’s republic.co. And also I want to thank my two sponsors who made this interview happen. The first will help you get great designs. It is designcrowd.com/mixergy. And the second is a company that will help you hire developers. It is called toptal.com/mixergy. And finally, I want to send a shout out to one of my listeners who’ve been supportive over the years who says that he hates email just like everyone else but he loves Trello like a handful . . . Do you love Trello too, Ken?

Kendrick: I do.

Andrew: Yeah, look at this. Look at that look in your eyes when it comes to Trello. People who love Trello they’re in love with it. Do you guys use that as your project management software?

Kendrick: We use a bunch of process and product management software, but Trello is my go-to.

Andrew: Yeah, Joel Spolsky created something that a handful, not a handful, large number of people are addicted to. Anyway, Iain Dooley says, “You know what? How about if we turn email into a Trello experience?” And so he created this little bit of software that will turn your email into nice organized Trello board. If you want it, go check it out at benkoboard.com. Go to work and good luck with that.

All right. Cool, guys. Thank you so much for doing this interview, Ken. Thank you all for listening. Bye, everyone.


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