Below is the ‘Tip of the Week’ transcript from the Podcast Ep40: Crowdfunding & The Socialization of Finance (Jon Medved)
Today we discussed how different platforms are unique. And Jon cited four aspects that differentiate. I’d like to review the four and add a fifth variable that I’ve noticed as well.
1- Quality of Selection/Evaluation/Diligence
2- Platforms Ability to raise follow-on Rounds
3- Governance and Representation on behalf of the investor group in the form of Board Activity, Seats & Mentors
4- Portfolio Company Support via a structure & methodology to support startup companies in the areas that they need it, such as recruiting, strategic introductions and contacts w/ the press
And the fifth and final key distinguising feature between the equity platforms, that I’d like to add, is the
5- Degree of Centralization
On this point it seems that platforms are making a strategic decision on how they want to be involved. Take OurCrowd, for instance, they have a more centralized approach where they themselves source, evaluate, negotiate and lead every deal on the platform. They are the organizer and investors follow along. It’s like a syndicate, but there is one syndicate operating on the platform and it is OurCrowd. Whereas other models are completely decentralized, merely facilitating the listings and interactions between startups and investors but taking no role in organization. AngelList seems to fall somewhere in the middle, where they are mobilizing syndicate leaders and authorities to organize and lead deals on the platform. They help to alleviate the traditional red tape in the process, while building, sort of a social or investment network in the process. So, for their approach, investors are choosing different leads and/or investment approaches within the same platform.
It doesn’t seem like there is a right or wrong way to do this. Certainly some degree of unique and valuable differentiation seems necessary to sustain, but the approaches toward creating value are distinct. And the list of platforms facilitating equity crowdfunding at this point is long and growing.
Off the top of my head, there are a lot of players out there including, of course,
the list goes on…
So, as one proceeds with their own personal approach to startup investing, I’d caution to not only look at the target startups to invest in, but also to think about the platforms facilitating. Is there a platform approach that aligns well with your comfort-level and/or strategy? What is their unique value that they bring to you? If you can’t find something it’s probably not the best fit for you.
That’s a wrap on the episode for this week. Thanks for taking the time to give it a listen and I wish you all the best w/ your future investment or fundraising efforts. Until next time, overprepare, choose carefully and invest confidently. See you soon.