40. Crowdfunding & The Socialization of Finance (Jon Medved)

The Full Ratchet Podcast on iTunesNick Moran Angel List

Jon Medved of OurCrowd joins Nick to cover Crowdfunding & The Socialization of Finance. We will address questions including:

  • Medved Crowdfunding & The Socialization of FinanceGoldman Sachs recently published a report on the Socialization of Finance. Can you first talk about what they mean by this term and what are the key factors are that are causing this to occur?
  • Specifically, what markets and/or sectors within finance are either currently being disrupted or are positioned to be disrupted significantly in the near future?
  • Crowdfunding has emerged as one of the most disruptive new financial models. We’ve talked previously about donation / reward-based crowdfunding  and also equity-based crowdfunding. Can you give us an overview of the major categories or segments that crowdfunding platforms have emerged around?
  • What are the major growth drivers or enablers of crowdfunding?
  • Can you mention some of the key players on the equity crowdfunding-side?
  • For startup investors specifically, what key factors should they assess when evaluating an crowdfunding investment platform?
  • What are your thoughts on the future of equity crowdfunding, let’s say in the next five years and the next ten years?

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Guest Links:

Key Takeaways:

 

1- Problems with Crowdfunding

  • Lack of Supervision
  • Lack of Coordination going forward
  • Lack of Curation of the Opportunities
  • Lack of awareness that this extends beyond the Seed Stage and that the platforms are going to get second-rate or non-top-tier opportunities

w/regards to the last point, Jon has made investments through the platform from seed all the way to IPO. He doesn’t see the role of syndication through crowdfunding being limited to seed deals and, in fact, it has not been from his experience. They have co-invested with big name individuals, venture funds and corporate venture investors.

 

2- Limited Access to Top Deals

Jon spoke about how the majority of investors can’t get into the top-tier venture funds like the Kleiners and the Sequoias b/c they’re not taking new investors. And just to get into some of the other major funds out there you may need a $15M check, which typically means that you have over $100M in your investment portfolio, which is a pretty exclusive group. So, what is the opportunity for smaller startup investors to get into some of the best deals, if you can’t cut a $15M check? And this is where Jon feels that OurCrowd and other platforms can play a major role going forward, giving investors the access to top-quality deals and allowing them to get in at dollar amounts that, traditionally, would never have been possible.

And this is not a small group. The Total Available Market of Accredited Investors in the U.S. is 10M people, yet according to the Angel Capital Association there are between 100-200 thousand Angel investors in the U.S. So, only 1-2% of the total number of potential angels are actually angel investing. And, from Jon’s perspective, innovation on the investment-side and new ways to invest in more high-quality startups will only expand the participation of accrediteds in this asset class.

 

3- Types of Crowdfunding

  • Debt/Lending: This includes Prosper and Lending Club
  • Rewards-based: Kickstarter & IndieGogo
  • Equity: AngelList & OurCrowd
    • Accredited
    • Broad-Based (non-accredited): Doesn’t exist yet. The way they’re talking about this is a direct exchange for equity as opposed to being organized in an SPV with a lead.
  • Real-Estate
  • Charitable Crowdfunding
 

 

Tip of the Week:   Differentiators in Equity Crowdfunding Platforms

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FULL TRANSCRIPT