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Republic – Now everyone can invest in startups

republic.co

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Re: Republic – Now everyone can invest in startups

#21

Post by twblalock »

pavlov wrote: post #17
twblalock wrote: post #3

You don't get shares if you invest -- you get something called a "crowd safe": https://republic.co/learn/investors/crowdsafe More info here: http://www.crowdfundinsider.com/2016/06/87034-republic-adds-... I'm a bit leery of these. According to the article, "unless specifically negotiated, SAFE holders do not have any voting or information rights." I also suspect that the shareholders get taken care of before crowd sa…

Shareholders rarely get anything in a bankruptcy, and at best it tends to be pennies on the dollar, so that seems like a minor concern. Voting rights are more interesting, but my impression is that tiny shareholders in startups are usually bound by tight shareholders' agreements so that they must vote along with the majority investors anyway. (That at least seems to be the practice in Europe.)

The information rights are pretty important, though.

Re: Republic – Now everyone can invest in startups

#22

Post by twblalock »

skrebbel wrote: post #20

Wow, I'm blown away by the negativity in this thread. I know Silicon Valley is conservative but this is killing it. In Europe (of all places), this sort of stuff has been going on for a number of years now. The first startup I worked for had gathered its €150k preseed funding from over 20 people. Not even with a convertible note, they really all went to the lawyer's office together. It was pretty nuts, but it got the…

> Why is it stupid to invest $5k in a startup but not to invest $500k in a startup?

Because if you invest $500k, you get information rights, and a significant number of votes. If you invest $5k, you get nothing, and you just have to hope the company makes good decisions. It's like buying a $5k lottery ticket -- it's an investment based entirely on trust without any information, accountability, or influence over the outcome.

I suspect that the real reason companies want to crowdfund is to raise money without giving information and voting rights to their investors.

Re: Republic – Now everyone can invest in startups

#23

Post by inputcoffee »

There are a number of similar sites (wefunder was YC, and Angellist dominates the space).

We shouldn't treat the "public at large" like kids, and they have the right to do what they want with their money.

HOWEVER, I do hope that people don't get hopped up on TechCrunch stories about gazillion dollar exits and then cash out their 401k to invest in some company or another.

They should know that the vast majority of startups fail, and that the chances are any particular one will fail. They should also understand that it isn't worth the due diligence for $100 or something, so you're really taking a flier unless you piggyback off someone else's diligence (which you should).

Re: Republic – Now everyone can invest in startups

#24

Post by forgetsusername »

skrebbel wrote: post #20

Wow, I'm blown away by the negativity in this thread. I know Silicon Valley is conservative but this is killing it. In Europe (of all places), this sort of stuff has been going on for a number of years now. The first startup I worked for had gathered its €150k preseed funding from over 20 people. Not even with a convertible note, they really all went to the lawyer's office together. It was pretty nuts, but it got the…

>I know Silicon Valley is conservative but this is killing it.

The area that is generally known as the innovation capital of the planet is conservative? Can't say I agree.

Re: Republic – Now everyone can invest in startups

#25

Post by mdorazio »

leesalminen wrote: post #14
twblalock wrote: post #3

You don't get shares if you invest -- you get something called a "crowd safe": https://republic.co/learn/investors/crowdsafe More info here: http://www.crowdfundinsider.com/2016/06/87034-republic-adds-... I'm a bit leery of these. According to the article, "unless specifically negotiated, SAFE holders do not have any voting or information rights." I also suspect that the shareholders get taken care of before crowd sa…

> I would also be skeptical of the potential of a startup that can't convince normal VCs to fund them. If people who do this for a living don't think a startup is worth investing in, why should I? There are plenty of SaaS companies that are naturally limited in revenue potential. In my experience, VCs are not interested in a company with a conservative forecast of 10MM ARR in 5 years. These are still viable businesse…

How is an investor in such a company supposed to actually get a return? Unless the company is paying dividends or something similar, the only payout comes from selling your shares or if the company is acquired at a premium. But who is going to buy these companies with a conservative "slow and steady" growth rate and market share?

Re: Republic – Now everyone can invest in startups

#26

Post by detaro »

skrebbel wrote: post #20

Wow, I'm blown away by the negativity in this thread. I know Silicon Valley is conservative but this is killing it. In Europe (of all places), this sort of stuff has been going on for a number of years now. The first startup I worked for had gathered its €150k preseed funding from over 20 people. Not even with a convertible note, they really all went to the lawyer's office together. It was pretty nuts, but it got the…

Most comments seem critical of the specific offer and risks of investing badly, not the idea of allowing smaller investments.

Re: Republic – Now everyone can invest in startups

#27

Post by twblalock »

mdorazio wrote: post #25
leesalminen wrote: post #14

Earlier quoted context omitted.

> I would also be skeptical of the potential of a startup that can't convince normal VCs to fund them. If people who do this for a living don't think a startup is worth investing in, why should I? There are plenty of SaaS companies that are naturally limited in revenue potential. In my experience, VCs are not interested in a company with a conservative forecast of 10MM ARR in 5 years. These are still viable businesse…

How is an investor in such a company supposed to actually get a return? Unless the company is paying dividends or something similar, the only payout comes from selling your shares or if the company is acquired at a premium. But who is going to buy these companies with a conservative "slow and steady" growth rate and market share?

I think you have to get in early and hope for an IPO. But anyone who buys after the IPO is probably a sucker.

Re: Republic – Now everyone can invest in startups

#28

Post by rlucas »

mdorazio wrote: post #25
leesalminen wrote: post #14

Earlier quoted context omitted.

> I would also be skeptical of the potential of a startup that can't convince normal VCs to fund them. If people who do this for a living don't think a startup is worth investing in, why should I? There are plenty of SaaS companies that are naturally limited in revenue potential. In my experience, VCs are not interested in a company with a conservative forecast of 10MM ARR in 5 years. These are still viable businesse…

How is an investor in such a company supposed to actually get a return? Unless the company is paying dividends or something similar, the only payout comes from selling your shares or if the company is acquired at a premium. But who is going to buy these companies with a conservative "slow and steady" growth rate and market share?

There are lots of ways to get a return. I helped start Lighter Capital (originally "RevenueLoan"), which invests a lump sum that gets repaid as a percentage of revenue (like a royalty). That model, Revenue-Based Financing, is harder to game than dividends (management can and often does make profit "disappear" but rarely has any incentive to make revenue disappear).

You can also have redemption rights or dividends. Depending on tax treatments these can be reasonably lucrative.

Of course, if you tautologically declare that the only payout is from an "exit" then no exit, no returns. But historically speaking "exits" are the exception, not the rule -- yet businesses have been aggregating capital and rewarding investors for centuries.

Re: Republic – Now everyone can invest in startups

#30

Post by Animats »

Interesting. These appear to be JOBS act short-form mini-IPOs.[1] That's something new, which just became possible this year and hasn't been used much.

Here's Farm from a Box's SEC filing.[2] Typical crappy terms - no voting rights, no anti-dilution, no transferability for one year, insiders have control.

Nobody associated with the project has a farming background. They have two employees. One is a liberal arts majors from UC Berkeley and one has an unspecified degree from UCLA. They do not have a working prototype farm according to the SEC filing.

The filing for Youngry [2] is more interesting. They want to start a glossy web site for young entrepreneurs. They claim lots of good contacts. (Miss Las Vegas?) They're only asking for $50K, which isn't enough. Two-person business.

Republic takes a 5% cut; that's how they make their money.

This is a reasonable concept, but the current set of deals isn't very impressive. These are people looking for Series A funding and would probably be rejected by YC. The idea behind the JOBS act short-form IPO was supposed to be that when your startup got too big for angel/friends and family/Kickstarter funding, there was a next level and an exit strategy for the original funders. It wasn't intended for startups this early.

You can look up these companies on the SEC's EDGAR system. If you scroll down all the way to the end of Republic's pages, there's a link.

[1] https://media2.mofo.com/documents/120416-pli-quick-guide-job... [2] https://www.sec.gov/Archives/edgar/data/1679373/000167937316... [3] https://www.sec.gov/Archives/edgar/data/1679372/000167937216...

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