Republic, an investment crowdfunding platform that is an offshoot of AngelList and affiliated with digital asset issuance platform CoinList, is one of the leading sites in the US providing access to equity capital for early-stage firms. It is also democratizing investment opportunities by allowing non-accredited investors to participate in these private securities offerings.
Launched in late 2016, Republic has iterated and updated and now offers securities under several exemptions including Reg Reg CF and Reg D, as well as digital assets. The NYC based team numbers about 40 as the platform has expanded its services while targeting underserved communities like minority and women entrepreneurs. In over three years of operation, Republic claims a community of over 400,000. Not bad.
Recently, Crowdfund Insider had the chance to catch up with founding CEO Kendrick Nguyen. He told us that 2019 was an amazing year for Republic.
“In the second half of 2019 versus 2018 we did more than 8 times the investment volume,” Nguyen shared. “Our investor base has more than doubled. I am more optimistic than ever for the entire [crowdfunding] industry to see some consistent and drastic growth.”
At least part of this growth has been aided by Republic’s segment that targets institutional and accredited investor money which sh0uld help them scale over time.
Up until now, Republic has been a tech-focused investment platform. The company may expand into other verticals, like health care or even real estate investment opportunities. Republic may soon be offering revenue sharing opportunities or more traditional debt financing.
Nguyen said the total raised crowdfunding during the year was about $20 million with the bulk of it arriving during the second half of 2019.
“I would surprised if there was another platform that did substantially more than we did,” said Nguyen.
In the aggregate since platform launch Republic has facilitated over $55 million in capital raised. Nguyen explained that he expects the “crowd-invest” side [Reg CF] to be quite robust during 2020. The two sides of the investment platform, meaning accredited/institution, will grow at about the same pace.
“It is easier for founders to raise a Direct D [Reg D 506c],” he acknowledged. But he said the traction on the crowd side may be at the cusp of hockey stick like growth.
“The average investment amount in 2019 for [Reg CF] was over $500,000. Second half over $600,000. Over 90% of the deals successfully closed … [this is] 3 or 4 times the amount we did in 2018,” Nguyen stated.
Community has always been at the forefront of Republic’s mission. Inclusion. Make it accessible. This is a “core tenant” of what they do. To help build upon this thesis, Republic hired 7 people to their marketing and content team last year. If a founder has a good business model but not a strong personal network, Republic wants to be there to help them successfully raise the funding they need.
The acquisition of SheWorx has been helpful too as Republic was able to identify and support very strong female founders on the platform.
Asked about expansion opportunities and the possibility of supporting startups globally, Nguyen mentioned the partnership with UK based Seedrs but added they are always looking at ways to expand.
“We have soft partnerships with platforms in other countries like Australia and the UK. If we need we can help companies crowdfund quietly in those other countries. We are having some early discussions with governments in other countries around the world,” Nguyen added.
Asked about the number of Reg CF platforms in the US as there are currently around 50 FINRA approved funding portals, Nguyen believes the entire ecosystem is still quite young.
“If you walk down the street in New York City right now and you ask a random person they have no idea where to go to invest and no idea what an accredited investor is. The more people hacking at this and getting the word out the better.”
Nguyen admitted there may be some consolidation over time but for now, he is completely focused on organic growth.
Currently, the Securities and Exchange Commission (SEC) is considering changes to the definition of an accredited investor. As it stands today, an accredited investor must earn over $200,000 a year or have a net worth of $1 million (beyond one’s primary residence). The SEC is expected to add a sophistication qualification to the rule. A move that may expand the number of investors for Reg D offerings. Nguyen believes a more relaxed definition would be helpful to Republic as well as the rest of industry
“I think the US is the only developed country that does not have a sophistication qualification,” said Nguyen
Going forward Nguyen sees the opportunity to take models that have already been validated and make some changes to make it easier for founders to raise capital. Reg A+ is an area that Republic expects to pursue at some point this year.
We will apply our unique edge, true internal legal expertise, and work with outside counsel to not do the status quo but to fine-tune our offerings, he explained.
Token Drops and tokens, in general, is an area of an intense experiment at Republic. They are working on security tokens as well and we can expect more news on this topic later this year.
As for deal flow, Republic curates and launches projects in a very conservative manner. Investors only get access to deals that have been sufficiently reviewed. At the time of our conversation, Republic had 39 live deals and a good number more in the queue. Nguyen said they expect to soon have more live deals than the entire first three years of operation. The growth trajectory will continue, he said.
“Early-stage companies, backed by YCombinator and Founder Funds at a $10 Million cap open to the public at $50 to $100 dollars – we have those now,” said Nguyen. Quality deals count.
Nguyen said the narrative of adverse selection for Reg CF is more and more a false narrative as they pair up with Reg D offerings and can raise more meaningful amounts for founders.
“I am more excited about the potential of private investing for the crowd than 4 years ago,” Nguyen said.