Frankly, I don’t remember when a guest and I covered so much important ground in so little time. Don’t miss my conversation with Christopher Lustrino, the founder and CEO of KingsCrowd.
SuperCrowd22
Chris will be speaking at SuperCrowd22, our two-day virtual conference on impact crowdfunding and community capital. This event is for you!
“One of the cool things about building our business is that we get to watch how the entire world of equity crowdfunding is forming, what investor sentiment is like, what their behavior is like, what startup founder behavior is like,” Chris says.
“This is an incredible place to be in the world at this moment in time,” Chris continues. “So, it’ll be fun to dive in and tell folks more about what it is that’s happening all around us as this industry develops.”
KingsCrowd is tracking every deal in the sector, so he has a great perspective on the industry. Don’t miss it!
Readers can register now for half price!
Convergence of Crowdfunding and Venture Capital
“Venture capital is the only industry today that still lives offline,” Chris says. “The idea that the industry that innovated every industry will continue to live offline and act like a dinosaur is completely absurd to me.”
Venture capitalists still largely source and execute deals outside of the platforms that increasingly, even angel investors use for making investments.
“Nearly every financial service has moved online,” Chris says. “Health care—everything about health care is moved online. I mean, everything is moved online. I mentioned those two industries because they’re the oldest school industries and the ones that have the most risk in moving online. And yet they still have.”
“What we’re going to continually see over the next decade is this continuous convergence of both of those industries coming together and venture capitalists becoming more tech-centric and being able to utilize marketplaces like Republic, Wefunder, so on and so forth, both for sourcing and executing deals,” he says.
Chris sees the evidence of his prediction in two observations:
- VCs are finding deals by browsing crowdfunding portals
- VCs are encouraging their portfolio companies to raise money there
Chris has raised $7 million, primarily via crowdfunding, using NetCapital, Republic and StartEngine. KingsCrowd has over 4,000 investors, including some institutions. “We’re 25 full-time folks; we have over 10,000 paying customers.”
KingsCrowd’s Portfolio Tool
One of the fundamental problems of investing in crowdfunding is that your investments don’t all live in one place. “In the traditional public equity world, you most likely have a brokerage account with someone like Charles Schwab or Fidelity or Robinhood, whoever it may be. So, you see all of your individual stocks in one place,” Chris says.
Not so in crowdfunding. To buy shares in a company, you need to open an account with the FINRA-registered portal offering the securities. If you invest regularly, you’ll end up with shares in a dozen companies on half-a-dozen portals. Tracking gets tricky.
“Did I invest in this? I don’t remember if I invested in this,” Chris says is a common refrain. It inspired KingsCrowd to create a portfolio tracking tool that not only allows you to create a list of your holdings but also provides some updates on valuation.
“We allow you to put all your investments into one place from a visual basis. Think of it as mint.com,” Chris says. “The investments don’t live there, but visually they do.”
The basic portfolio tool is available with a free KingsCrowd subscription.
KingsCrowd’s Search Tool
KingsCrowd is more widely known for its searchable live database that allows customers to access every company raising money via Regulation Crowdfunding plus regulation A, rules similar to crowdfunding but for larger deals, plus some deals available only to accredited investors.
Chris offers a hypothetical example:
If you come to our site and you're an investor who likes health care, you like to invest in pre-seed companies, and you like founders with a lot of experience—being able to go and find those things on 40-plus marketplaces is very challenging and very time-consuming.
So, you can come to KingsCrowd and say, “Show me all the health care companies, show me the ones with the $10 Million valuation or less. Show me the pre-seed companies that fall in that bucket and show me the ones with X amount of experience within the founding team.”
The search tool includes tags for impact in a variety of ways. “We have ESG [environment, social responsibility and corporate governance] tags, female founder tags, underrepresented founder tags, LGBTQ tags,” Chris says, adding that they regularly add new tags as customers request them.
There are about 700 companies raising money via crowdfunding at the moment. With the KingsCrowd tool, you can find the ones that interest you in just a few minutes—not hours. You can learn to do a new search in seconds with a bit of practice.
The basic search function is free, even before you create an account.
KingsCrowd Analysis
Chris is proud of the analysis his company provides on crowdfunding offerings. Even tiny offerings where issuers are raising less than $100,000 are covered by some data-driven analyses.
Chris explains:
We collect over 500 data points on each and every company that's raising capital in these markets. Financials, valuation, amount raised, how many investors are partaking, what their traction looks like, so on and so forth.
We put all of this information into our database, and then we compare and contrast all of the companies against one another and those key fundamentals. So if there are 500 pre-seed companies all raising capital actively, we'll look at things like their valuation versus all the other valuations out there.
We're going to help you see the strengths and weaknesses in each and every business and let you do a deep dive so that you can make an informed investment decision that isn't based on hype but is based on real facts and content.
This analysis is the information KingsCrowd customers pay to access. If making better investment decisions can increase your financial return, it could, in effect, pay for itself.
Chris leverages an unusual superpower to accomplish all this: patience.
Read, watch or listen to more at http://bit.ly/s4g-p95.
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