Selecting the correct crowdfunding platforms series – Republic The 2012 passing of the Jumpstart Our Business Startup Act (JOBS Act) allows privately-held companies to sell equity to the public. There are many platforms available to help companies launch, host and manage their equity crowdfunding campaign. Each episode of this multi-part series will feature a different crowdfunding site explaining to Dan Humiston how their platform provides the guidance and infrastructure for companies to launch a crowdfunding campaign. They will also clarify what types of cannabis companies their platform accepts. Matt Melbourne from Republic is today's featured guest. Produced by PodCONX Cannabis Crowdfunding - https://podconx.com/podcasts/cannabis-crowdfunding Dan Humiston - https://podconx.com/guests/dan-humiston Matt Melbourne - https://podconx.com/guests/matt-melbourne Republic - https://republic.co/
Selecting the correct crowdfunding platforms series – Republic
The 2012 passing of the Jumpstart Our Business Startup Act (JOBS Act) allows privately-held companies to sell equity to the public. There are many platforms available to help companies launch, host and manage their equity crowdfunding campaign. Each episode of this multi-part series will feature a different crowdfunding site explaining to Dan Humiston how their platform provides the guidance and infrastructure for companies to launch a crowdfunding campaign. They will also clarify what types of cannabis companies their platform accepts. Matt Melbourne from Republic is today's featured guest.
Cannabis Crowdfunding - https://podconx.com/podcasts/cannabis-crowdfunding
Dan Humiston - https://podconx.com/guests/dan-humiston
Matt Melbourne - https://podconx.com/guests/matt-melbourne
Republic - https://republic.co/
CC republic
Dan Humiston: [00:00:00] Today and raising cannabis capital. We are continuing our cannabis crowdfunding series with Matt Melbourne from Republic, Matt. Welcome to the show.
Matt Melbourne: Thanks so much for having me.
Dan Humiston: Well, I'm glad you could join us. We have a lot to talk about today because over the last few years, a ton of companies have used equity crowdfunding as a way to raise capital. And Republic is a platform that hosts crowdfunding campaigns and you've hosted campaigns for a number of companies that we've had as guests on this show.
And I think one thing that companies need to understand is that Republic doesn't disappear. Every company that applies. And that's where I wanted to start today. What criteria does Republic use to select companies?
Matt Melbourne: So we're a platform and we're regulated by the sec and FINRA. So the offerings that we pick, like we have to have a lens for quality and that's really important to us. And , the legal [00:01:00] term for what we are as a gatekeeper. So , the types of opportunities that we bring to our investors, it matters the.
The way that we think about it is a little bit different than the industry as a whole. So some platforms take a more, a true open platform approach. Whereas Republic ads on the other end and it takes a much more curated approach. So of the companies that apply to raise with us, on the cold application, like we accept less than a percent of those , to actually run a campaign.
But from a cannabis perspective, it kind of mirrors what we look for in the startup space or in real estate or in small, medium sized businesses or crypto, which are all, the different types of assets that we have on the platform that folks can invest in.
So we're looking for like a stellar team that has experienced in what they're doing. Maybe even has an exit under their belt and has sold a company and made a return for investors or were looking for a company with traction. So there's sales and there's revenue and there's growth in both of those metrics , that kind of shows promise to the company.
And another important piece that's maybe. [00:02:00] From a traditional individual investor or an institution that's important for a platform like Republic is what sort of like the community behind the company or the product or the founders that's going to support the raise. Is there an average customer base or a user base behind the product?
Is there this like partner support or network that the company would like to engage with an investment campaign by making these people owners? Those are kind of the, the three big things that span industry and the verticals.
Dan Humiston: That's it. That's interesting. It's the first I've heard about that. And I think that. , it really clarifies , some thoughts. I have , and before we get too far into this, I want to make sure that people understand that crowdfunding falls under federal jurisdiction. So what's federally illegal businesses are precluded.
Can you breakdown, this for us and tell us what type of cannabis hemp companies are accepted and Republic and what types are not.
Matt Melbourne: You're exactly right. Cannabis is federally regulated, federally illegal. The piece that's most important on our end is we have an escrow agent. Who's . our banking. And so it's at their [00:03:00] discretion, which cannabis deals we can host and which we can't, because they're the ones that process, , the investments in the funds that are raised in the campaign.
So yeah, what we've found is they're actually more liberal and open than you might expect. For example, we actually have a true cannabis brand raising on Republic right now. It's called union electric. They're technically not plant touching, even though they are a brand that, , the company does have a cannabis product.
So it depends on the way that the company is structured and if it's plant touching or not, that determines if the company can run a campaign. So what I always say to cannabis companies is there's probably a good chance that for other reasons, you've set up the company in a way that may make it possible for you to.
, to keep your money in a bank or , for other legal reasons that you've set up a company , in a specific way that may make you able to actually run a campaign. So I always recommend applying, sending us your materials and we can get the thumbs up from our escrow agent on whether we can host them.
Dan Humiston: That's really optimistic. I'm glad you said that. Cause , , we hear that that's most of the time, [00:04:00] no banking, no banking, but I guess it, a lot of it has to do is how you structure your business. Let's say that. Someone has decided that they want to go forward and do a crowdfunding campaign, say in Q1 of 2022, what should they be doing now?
So that they're prepared.
Matt Melbourne: I think the biggest piece is , to make the offering as attractive as possible is to focus on setting up your business, building your business and making it an attractive investment opportunity. And then once you're there and you're saying, Hey, this is a good point to accept outside investment.
It's going to be attractive to investors. So, whenever you decide you want to launch a month to two months before, then really start focusing on engaging with Republic and going through the onboarding process , with us,
Dan Humiston: Okay.
Matt Melbourne: Focused on the business is the biggest.
Dan Humiston: Yeah. So building up your, like you said, your customer base and showing some profitability and some traction, I think, like you mentioned in your earlier answer when you fill out an application to Republic or , what are some things that would be helpful , [00:05:00] to maybe get that application to the top of the pile?
What are some things you can include?
Matt Melbourne: Yeah. So our high level application is super easy. We collect just a few pieces of information. Who are you? What's your name? What's the company name, a pitch deck, or other business summary. A little description on the track. And that's basically it. So the way to get your application reviewed as quickly as possible is to include as much information in that short application upfront.
You you'd be surprised how many companies just don't include a deck or any business summary, or they leave that section blank. That makes it impossible for us to evaluate. So just, be honest, be truthful about where your company's at, give us everything upfront and that'll be the best way to, to get the application evaluated and to get you on a call with someone on the industry.
Dan Humiston: Talking about the investor side for a minute. Crowdfunding is not typically a short-term investment. So most of the investors realize this is a startup or early stage business. So they don't expect that immediately to turn right around with profit. But on average, how should investors plan to [00:06:00] expect a return?
Matt Melbourne: This isn't investment advice in every offering on the platform. There's no guarantee of getting, money back and making a return. In fact, especially on the startup side, a lot of these are early stage enough where it's frankly pretty likely that you'll get zero back you won't earn a return.
But what you're optimizing for hopefully , is to hit that opportunity. Invest in a diversity of deals, invest in a spread ideally at least 10 plus so that you get access to the upside of one that happens to do the 50, the a hundred, the a thousand X, what you put in.
What's definitely important for investors is to have a spread of investments, diversify If it works out, it's probably going to be at least a five, seven year plus time horizon before , you potentially see,
Dan Humiston: Yeah, but those returns, like you said, these are what I would classify as a risky investment, but you're not talking about a lot of money. sometimes the minimum investment is as low as a hundred dollars.
Matt Melbourne: Exactly. Right. , a hundred dollars is usually the the minimum investment.
Dan Humiston: So, like you said, if you [00:07:00] invest a thousand dollars, put a hundred dollars , on 10 different companies, you never know, you get that one home run and it's, multiple acts. That's really exciting. , there are a bunch of crowdfunding platforms. makes Republic unique?
Matt Melbourne: I'd say, one of the things that we talked about in the beginning is curation. And why that's important is on the company side. And on the founder side, we want raising on Republic to be a high school. Sort of opportunity. We don't want to be seen as more like the Kickstarter or Indiegogo is of the world where anyone with a business plan that isn't, a bad actor hasn't committed fraud can raise.
We definitely want investors and founders to see that this is a high signal platform, which is good for going on to raise more money. It's good for, , building your brand in the industry as a strong, reputable brand. So I think. Is a main differentiator, but that curator for founders it leads to other benefits beyond that, one level below, which is better customer service.
We have a [00:08:00] really large team. That's able to take companies through the onboarding and the campaign process in a really white glove way. And we can do that because the platform yeah. Isn't as open, widely as other platforms our success rates are higher. So we have a 95% success rate in the past two years of companies reaching at least their minimum target amount for other platforms, that's probably much lower, closer to the 50 to 70% range.
Our average campaign sizes are higher because it's fewer deals on average. And higher success rate. So, that sort of curation allows us, I think, for a better experience for the founder in terms of their onboarding , and campaign management process. And then for investors, it's obviously a great thing that we curate as well.
And that's, I think that's a differentiator. That's the main one.
Dan Humiston: Yeah, I think it's a nice benefit. If you can say, Hey, look at, I got my campaign posted on Republic. You're sending a message to everybody. Well, we'll have all our mats and republics information in the show notes. Considering raising money or looking [00:09:00] for a company to invest in, check out their website and please make sure you read everything and understand everything before you invest.
Matt. Thanks for being on the show today,
Matt Melbourne: thanks for having me on Dan. And I'm excited to meet some of the entrepreneurs in the cannabis space that our listeners, so, definitely reach out, apply and looking forward to getting into.