Crowdfunder is bringing real crowdfunding investment to small businesses and early-stage startups
A Q&A with Crowdfunder co-founder and CEO Chance Barnett. The Los Angeles–based company was founded in November of 2011 and recently raised $400K in Seed funding from Angel investors.
SUB: Please describe what Crowdfunder is, and the value proposition you bring to funding for startups and small businesses.
Barnett: Crowdfunder is collaborative funding platform that brings crowdfunding to the world of investing in businesses. You might be familiar with top crowdfunding sites like Kickstarter. Kickstarter is for donating to creative projects, which occasionally happen to be part of a company. You can only Donate on these sites. Crowdfunder is for investing in startups and small businesses, and for raising funding via equity, debt, or revenue-based financing. Crowdfunder was created around two goals: to help founders succeed in the challenging role of fundraiser with the support and feedback of their existing network, and to bring the opportunity of investing in early stage companies to the 99 percent of everyday Americans who were previously excluded from participating in the wealth cycle of early-stage investment returns.
We believe that crowdfunding and crowdfunding platforms must evolve to succeed in the new world of investment offerings. People invest not just in companies or ideas, but in people. Crowdfunder is a move beyond the basic project posting boards of many donation-based crowdfunding sites today. We serve as a place for founders, teams and investors to connect as real people.
This makes identity a key differentiator in our social platform. Investing is a social process, and we bring the supporting, vetting and funding of a company through real identity and conversation to crowdfunding with our platform.
SUB: Who are your target users?
Barnett: Crowdfunder is for startups and small businesses looking to raise equity or debt-based funding. We serve great companies and founders who believe in the power of collaboration on the web, and who want to see their local network and beyond engaged in the funding and growth of their company. We’re excited at what is possible when a great company has 200 inspired investors who have a vested interest in the success of the company. While some naysayers of crowdfunding call attention to this as an issue, we have plans to help founders manage this and see it as a huge opportunity.
We’ve attracted over 2,000 companies looking to fundraise with us. While a good portion of those companies working with us are in the tech space, we also are serving a large number of companies in the local and small business market, socially conscious businesses, or impact investments, cleantech, and consumer products. We see a really incredible market in the overall $143 billion dollars that were invested in U.S. companies in 2010.
SUB: Who do you consider to be your competition?
Barnett: Not donation-based crowdfunding sites. Donation sites are a different animal and community altogether. Kickstarter has stated that they won’t be doing investment offerings, although Indiegogo likely will. But we’re not trying to take the smaller creative and independent projects market space. Crowdfunder is for investing in businesses, which we believe to be a much more attractive and wide-open market.
There are a good number of crowdfunding sites who offer donation-based crowdfunding who say they want to be in the crowdfund investing space. There are very, very few at the table directly engaged with the SEC and other key regulatory bodies who have the full picture and understand the significant and requirements of offering security based investment.
For that reason, we see only a few other true business crowdfunding competitors. Many of those have smaller niches—such as Solar Mosaic for the funding of solar related projects. Or AngelList, which serves the tech startup niche and a specific type of accredited investor. Business crowdfunding is not all about accredited investors who often like having special terms and privileges and might not like being thrown into investing alongside crowdfunders.
We find that we’re well-positioned in the press, with our existing user base, and in the public mindshare as a leading platform for startups and small businesses in the U.S. We’re the broad market leader to the other niche-positioned companies.
SUB: What differentiates Crowdfunder from the competition?
Barnett: Platform. Team. SEC and Regulatory engagement and leadership. Head start and results. Our platform brings a much needed upgrade to what crowdfunding sites have been to date. We are bringing the important pieces of identity to crowdfunding, where each founder and each member of a team or the team’s advisory board has their own profile that gets attached to the company profile. This social innovation in crowdfunding will bring the important real-world relationships and connections to bear, bringing to light a “social investing graph” for each company.
We are directly engaged and part of crowdfunding leadership groups working with the SEC and key regulatory bodies, so we know more than many or most about what crowdfund investing will look like and what it really means to become an accredited platform.
SUB: When was the company founded and what were the first steps you took in establishing it?
Barnett: The company was founded when the first crowdfunding bill was introduced in the House of Representatives in November of 2011. We were involved in legislative efforts immediately with the House HR 2930 bill, giving legal framework input as well as guidance on the role of crowdfunding platforms in reporting and operational requirements.
I’m a serial startup entrepreneur turned advisor turned investor, and I carry a great team of developers and talent with me across projects. When I saw the opportunity that the proposed legislation presented, I started building a platform immediately.
I guess I don’t mind taking pretty big risks. Most people told me that a final bill would never pass, or would be so watered down that it would kill the opportunity. But it happened with a lot of hard work. We rallied thousands of public supporters, $17 million in pledges for crowdfund investments, and were a part of a group effort that was really kicked off earliest by Jason Best and Woodie Neiss of Startup Exemption.
SUB: What was the inspiration behind the idea for Crowdfunder? Was there an ‘aha’ moment, or was the idea more gradual in developing?
Barnett: It was gradual, and at a deeper level came from what I’ve seen with the explosion of collaboration on the web in the last few years. I believe that the power of the social web and local web have made what’s happening today possible. I see crowdfunding as an emergent behavior driven by these powerful forces.
Today the understanding and openness to collaborative funding—crowdfunding—is pretty amazing. If you would have told someone five years ago that people would be raising funding online in the millions of dollars from people they’ve never met, they would have thought you were crazy. Now crowdfunding seems so mainstream that I think some people are tired of hearing about it. It’s pervasive.
Then the first framework for the first crowdfund bill in the House came forth, and everything was catalyzed for me. That was the inflection point that kicked me into high gear.
Also…I love helping founders, and that’s what I think is such a great opportunity. As a serial startup founder, I’ve seen and lived the reality of how every founder has to become a full-time fundraiser in his or her business, and can’t stay focused on executing. Changing this by making it so that founders can communicate ‘one-to-many’ with their fundraising pitch, and bringing the power of the crowd intelligence and collaboration to early stage investing will be a game changer. These are the things that excite me most and I see as the biggest drivers of innovation. That’s the ‘why’ of Crowdfunder for me. Innovation. Collaboration. Value to business founders and investors.
SUB: What have the most significant obstacles been so far to building the company?
Barnett: It’s a unique time, and this is a very unique space. This is the first time in our lifetimes that we will see the birth of a new capital market. With that, there is a lot of noise and distraction in the space. And there are a lot of potential directions or paths to follow. Being a startup founder, one of your biggest challenges is staying focused and not trying to do too many things. What we’re doing is new and fairly complex on the securities and legal side.
The biggest obstacle is staying focused and managing the exciting growth and wealth of opportunities that litera
lly just pop up in our inbox each day. It shows me how much what you do and who you are is shaped by what you say ‘no’ to. Fortunately, we’ve got a great team and even with all the intense hard work, there’s really nothing that keeps us from doing great work, being committed to excellence and supporting each other.
SUB: You recently raised $400K in Seed funding. What are your plans for the funds?
Barnett: Product development. Value to Companies. Revenue. Scale. This current funding will take us up to the coming January 2013 SEC Ruling Period.
We have a lean team and the funding furthers our efforts in iterating and executing on the few priorities I mentioned above.
SUB: Do you plan to raise more outside funding in the near future?
Barnett: Most likely come Fall we’ll be looking at our Series A. We’re already talking to some great folks about this to build the right relationship.
I’m a strong believer in getting to know potential investors over time to make sure I want a relationship with them, and they with me.
SUB: What are your goals for Crowdfunder over the next year or so?
Barnett: The first big goal is to be a first crowdfunding platform for investing. We’ll get to bring investing to crowdfunding for the first time. We know it’s important that crowdfund investing work smoothly in the first year of the industry. This first year is really a proving ground for what we believe will be a new period of growth and innovation in finance. Beyond this first year, we’re really excited to see when other large pools of capital see early stage investing via crowdfunding as another high growth and risk area where they’d like to invest a portion of their savings and portfolio.
Amy Cortese, author of Locavesting, stated that “If Americans shifted 1 percent of the $30 trillion they hold in long term investments to small businesses, it would amount to more than 10 times the venture capital invested in 2011.”
We have a really interesting product roadmap that will keep rolling out. I’ll say that we’re clear that funding is just one of the key resources that companies can find in a collaborative environment. We’re excited about what’s possible with funding being a first catalyst for a longer term relationship between company and crowdfund investor.
Crowdfunder – www.crowdfunder.com