Top Takeaways

• Ken’s worldview: crowd investing is a powerful way to give people around the world access to high-growth opportunities and give companies a way to raise money while creating a deeper connection to their community.
• Startups are staying private longer, so platforms like Republic are the only way for the average person to get access to private companies.
• Ken’s goal is to make it easy for people to begin investing for as little as $10. Republic achieves this by streamlining everything related to organization, legal, & compliance.
• Republic uses a Crowd SAFE, which essentially groups all investors together as one line item on the startup’s capitalization (cap) table. This makes it easy for the company raising money to manage.

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Intro

Ken Nguyen (also appeared on E856)

• Ken & his parents emigrated from Vietnam to California when he was in elementary school, which partially influences his mission to allow people from all over the globe to invest in great startups.
• Co-Founder & CEO of Republic (2016-Present)
  • Equity crowdfunding platform
  • “Republic empowers everyone to invest in the future they believe in by providing access to startups, real estate, crypto, and video game investments.”
• Previously:
  • General Counsel at AngelList (2014-2016)
  • COO at Kanbar Enterprises
  • Other legal roles

Republic’s Funding (more than $70m to date)

1. $2.1M Seed AngelList, Upventures & others (Dec 2017)
2. $12M Early Stage VC led by Binance Labs & NGC Ventures (Jun 2018)
3. $36M Series A at $137M Post led by Galaxy interactive (March 2021)

Republic Stats

• 1 million investors on the platform
• Avg. raise is ~$600k

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Why is crowd investing a new thing?

• After the Great Depression, Congress enacted legislation that only allowed “accredited investors” (read: millionaires) to invest in private companies
• All non-accredited investors were deemed unfit to invest in private companies and were banished to the public markets and index funds
• Investing and financial services continue to be highly regulated.
• In 2012, Barack Obama signed into effect the JOBS Act (Jumpstart Our Business Startups Act), The JOBS act went into effect in 2016 allowing for some equity crowdfunding
• Republic focuses on Reg Crowd Funding (CF) and Reg A, these regulations were changed in March 15th, 2021 allowing for more investment:
  • CF: $5M max raise (previously $1.07M, set in 2016 Jobs Act)
  • A+: $75M max (previously $50M, set in 2016)
• Republic is shaping laws – was referenced over 20 times in 2021 SEC ruling
  • The SEC is moving much faster than Ken though possible (still slower than private companies to protect investors).
  • Ken thinks President Biden’s SEC will move slower at loosening regulations than Trump’s because there is a different focus.

What it takes to raise on Republic

• Diligence is required to list on Republic, but legal and accounting fees for new startups to raise is less than $15k (for most it is much less).
• To use Republic to raise money, companies pay a fraction of the amount they are raising (on average):
  • 6% in cash
  • 2% in stake of the company (this gives Republic upside in the company and an incentive to make sure only good deals come on the platform)
• Companies that have a large audience and bring investors to the Republic platform will pay a lower fee. You can think of them in two groups.
  • Those looking to find investors from the community that invests on Republic (Low fee)
  • Those with large following that will use this infrastructure to make it easy to raise (High fee)

Recent big raises on Republic

• Sahil Lavingia (E1188 ) & Arlan Hamilton (E1080, Angel S2 E5, E772) both raised $5M rounds
  • Gumroad – Sahil Lavingia
    • Crowd SAFE: $5M raised at $100M valuation from 9346 investors
    • Co-investors: Naval, Jason Fried put in $1M as anchor investors
    • 8x price to earnings, over $10M ARR, growing 120% year over year, team of 10
  • Backstage Capital- Arlan Hamilton
    • Crowd IPA: $5M raised – for 10% of future earnings of Backstage capital (~10% carried interest & 10% management fees) from 6958 investors

“My question for VCs criticizing this model is: If your assessing a b2c business that has such a relationship with his customers that these customers would part ways with 500 bucks, not getting anything back [except equity], just on the belief that one day this company is going to succeed. Is it a good signal or is it a bad signal if a company can convince 10,000 customers?”

Ken Nguyen

How power is shifting to the crowd

• When people are invested in a business they become evangelists for a product. This is especially helpful when a product becomes commodified (like Skyy Vodka Ken used to work for).
• In 5 years of data from Republic there have not been instances of fraud (this doesn’t mean all investments worked out).
• There are more reasons than purely financial why people invest on republic.

“Our tagline is aligning profit and passion. The smaller dollar amount that you enable someone to invest the passion bucket is going to be more and more important in their decision making process.”

Ken Nguyen

• Republic’s social component:
  • People can write reviews on the platform, saying why they invested (it also shows amount invested if they check that box).
  • A co-investor is highlighted with their track record of investing.
  • There is a space for discussion on republic
  • See Review Screenshot & Co investors section

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Top Insights

“Every 8 to 10 years there’s a new dating app that kind of enters into the space and Tinder’s now nine years old. So it is the right time for that next dating app to come in and usurp them. And I fundamentally believe that’s what Snack is doing with a video-first approach.” – Kimberly Kaplan

• Snack was created to optimize a single dating platform for Gen Z
  • What was the problem?
    • Users, especially Gen Z, would match on Bumble or Tinder and immediately move the conversation & interaction to other apps like Snap & Instagram
    • On those platforms, users would reply to each others’ stories and casually flirt, rather than carrying on in a more high-pressure DM conversation on the dating apps
• Learning different lessons from different Match.com properties:
  • Tinder: design-driven
  • Match: marketing-driven
  • Plenty of Fish: data-driven”Match has done a phenomenal job at working with different companies and acquiring different companies.” – Kimberly Kaplan
• It has been significantly easier to raise capital for Snack post-Bumble’s IPO.
  • A sector can become stale to investors, especially after being burned repeatedly.
  • Proof of a publicly traded challenger company makes picturing startups’ success easier.

Ask Jason

From TWiST Slack member Alan from (msb.ai):

Aside from a PR news wire or DIY PR methods, how else can a company with over $1M in revenue let people in VC know about us?

Jason’s Answer:

• Celebrate your wins, write a short blog post when you hit milestones (300-500 words).
• Content Marketing on Twitter, LinkedIn (social media), start following VCs and engage with them. Host conversations where you can share your expertise.
• Run targeted promotions of your best blog posts to VCs and like-minded individuals.
• Send monthly updates to non-investors.

From Jacob:

As a new investor – what key metric would you look for in these 3 different types of startups: consumer subscriptions, marketplaces, b2b saas?

• Consumer Subscriptions (Calm, Netflix, Spotify)
  • What is the user profile of your top users, and what is the retention and churn like for those top-tier users?
  • Customer acquisition cost
• Marketplaces (UberEats, Doordash, Zillow)
  • Frequency of use (transactions per customer)
• Bottom-up Enterprise SaaS
  • Land-and-expand, or net dollar retention (NDR)
  • NDR measures impact on revenue generation from existing customers
  • If your net dollar retention is over 100%…
    • It means your startup will grow revenue only from its existing customer base, without needing to acquire any new customers
    • It also means you have achieved net negative churn:
      • which is when revenue gained from existing accounts exceeds revenue lost from churned accounts – (see David Sacks on churn)
      • an example would be: more existing Slack customers expand from free to paid accounts then churn or downgrade from paid to free
      • According to David Sacks, the master of bottom-up SaaS, this is a great signal for your B2B company

Kimberly Kaplan

• CEO & Co-Founder, The Snack App (Nov 2019-Present), launched in 2021
• Website: https://www.thesnackapp.com
• Funding
  • (1 round, early-stage VC) $3.5M in funding, led by Kindred Ventures (Kanyi Maqubela) and Coelius Capital
• Formerly worked at Plenty of Fish (2009-2018)
  • Started as VP Marketing & Advertising (3rd person at company)
  • Became VP Product Management, Revenue Optimization & Marketing
  • Grew Daily Active Users (DAUs) from 1M to over 4M and Annual Recurring Revenue (ARR) from $10M to over $100M
  • sold to Match Group for $575M in 2015

The Snack App

“You shouldn’t have to date across two platforms. That’s why we built Snack to pull the best of the two together.” -Kim Kaplan

• A video-first dating app that asks users to create a video and post it to a feed.
• Users can scroll through a feed (like Instagram) and when someone likes a video, it opens up the ability to comment.
• Once two users have liked each others’ videos, DMs are open.
• She reached out to a Gen Z focus group to name the app and come up with the logo. Snack is a Gen Z term for cute/attractive.
• Snack is not a static app where you update 5 photos. Snack has more dynamic profiles to show off and interact.

How Kim got the idea

• Saw that people were trying to date on TikTok (making a video with bio about themselves), 13B views of #single on TikTok
• Users, especially Gen Z, would match on Bumble or Tinder and immediately move the conversation & interaction to other social media like Snap & Instagram
• On social, users would reply to each others’ stories and more casually flirt, rather than carrying on in a more high-pressure DM conversation on the dating apps

Dynamics of modern Dating Apps

• Snack app is breaking out the gender categories to better reflect society.
• Snack is looking more toward social media instead of what the legacy dating apps are doing.
• Most dating apps are now using a freemium model where people can pay more to get more features or matches.
• Match.com is the dominant company in the dating apps space:
  • 10.9M average subscribers
  • $2.4B in revenue
  • Brands include: Tinder, Hinge, Match, Meetic, Pairs, BLK, Plenty of Fish, OurTime, Upward, and Chispa
• Bumble has been a strong competitor and allowed more investor confidence for dating apps challenging Match’s dominance.
• Kim learned from each different portfolio company in Match.com
  • Tinder: design-driven
  • Match: marketing-driven
  • Plenty of Fish: data-driven
• Facebook is a massive channel for dating app acquisition
• Apple is stingy about dating app approvals, Kim had to pull strings to get it approved. Apple has a high quality bar for these apps.

Startup vs. Large company

• In the early days of Plenty of Fish “we could sit around a table and drink wine in the afternoon because there were only 6 of us.”
• There are clear changes in how an organization feels at 30, 60 and 90 employees.

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Top Insights

• Products must begin with only 2-3 key features. Once there is traction, you can prioritize what features to build next by asking users for feedback.
• Fewer features allow you to launch quicker, at a lower cost, and actually determine if there is product-market fit.
• Replacing a founder with “professional management” to commercialize a business often kills the product and company culture. (See Tobi’s Rule EP 1184)
• Twitter’s new product roadmap offers an antidote to the chaos of text-based social media, a natural extension that compliments their core product.
• NFT & blockchain technologies will revolutionize the ways we manage rights & ownership, despite most projects in the space likely being worthless.

Intro

• Kevin Rose is a partner at True Ventures, a consumer-focused venture firm with early bets on Peloton, Fitbit, Blue Bottle, Ring and more. He hosts the “Kevin Rose Show” Previously, he founded the social news site Digg, the intermittent fasting app ZERO, and the meditation app OAK.
• His most notable investment include: Twitter, Facebook, Zynga, Square, Medium, Foursquare, Nextdoor, Blue Bottle Coffee, Clever, Ripple, Oura.
• Kevin’s past This Week in Startups appearances:
  • E740 & E741 (June 2017)
  • E404 (December 2013)
  • E218 (December 2011)

Experience as a founder vs. investor

“Nothing beats the rush when you launch a new product. The ultimate peak as a founder is to have people using something that you created.”

Kevin Rose

• Some downsides of being a founder include managing people, making hard initial engineering hires, fighting for talent, and having difficulty sleeping.
• Kevin prefers building a product in the early stages over trying to scale a growth-stage startup.
• A common mistake founders make is not asking for help when they don’t understand how to do something. Great founders seek out mentors and soak up information like a sponge.
  • For instance, when Mark Zuckerberg visited Digg in the early days of Facebook, Kevin was surprised at how unafraid Zuck was to ask questions and be vulnerable.
• Investing is fun because you get to identify companies early on and try to imagine how it could become a multi-billion dollar business (and sometimes that happens!).
• There will always be a randomness in investing:

“Some investments, I really did a good job getting the deal done. I tracked down Jack [Dorsey], I had him on my podcast, I convinced him to be an Angel in Square. But the crazy thing is that I’ve had cryptocurrency investments outpace that return, just because somebody asked ‘hey, do you want to throw in some cash on this crazy new up-and-coming project?’ and I put a little bit of money in and it returned a boatload.”

Kevin Rose

Product philosophy

“Pound for pound as product person [Kevin is] part of an elite top 10 alongside Elon, Steve Jobs, and Alex from Calm. When [Kevin] makes a product it just comes out great.”

Jason

• Creative people are filled with ideas, but you need discipline to boil it down to the simplest version of your product vision.
  • Pick only two or three things that absolutely must exist and do them really well.
• Building fewer features shortens the development timeline down to just a couple of months versus 6-8 months.

Case study on Kevin building Zero Fasting

• Problem: Kevin read promising research on intermittent fasting from Dr. Valter Longo at USC. There were human placebo, double-blinded, “gold standard” studies showing autophagy, improved glucose levels, and reduced chemotherapy side effects. In short, fasting was helping people live longer with less disease.
• Market Research: There was nothing on the App Store dedicated to fasting. Using your phone’s timer was inadequate because it didn’t track historical fasting data.
• The essential features: Timer + Calendar. Allowing for historical performance, average fast duration, streaks, etc.
• Kevin’s subtle fingerprint on Zero: Showing the live number of simultaneous fasters on the platform in order to create a feeling of community, due to the difficulty of fasting – especially in the early stages. “570,345 people are fasting with Zero”

• Essentialism creates a clear user value proposition & lets you bring it to market quickly.
• Once you have traction, there is an opportunity to add the other features you wanted to build. More importantly, your community is going to start telling you what they want.
• Digg would survey 1 in 100 users, asking them to stack-rank the list of features the Digg team wanted to add. By combining the team’s product insight with the input from users, the community was engaged and excited.
• Kevin invented the “Like” Button on Digg (called “diggs”).
• Don’t get high on your own supply as a product person. Keep trying and keep iterating.

“If you try and fail as many times as I can, you will get some home runs from just the sheer number of times you’ve had the at-bat.”

Kevin Rose

Lessons from Digg & Mahalo

• Jason saw Digg early in 2004 and was impressed with how quickly it became a top source of traffic for his company Weblogs, Inc
  • Jason got a verbal OK from Weblogs investor Mark Cuban to try to buy Digg for $1M.
• Jason’s idea for Mahalo was 10 years too soon: “I knew that search would change from 10 blue links to what it is now. I even came up with that name, ‘comprehensive search.’ What if the images and the video and content were mixed with the search results? -Jason
• Branding Mahalo: Jason considered which companies and products had the most beautiful logos. Thunderbird and Firefox came to mind, so Jason tracked down the designer Jon Hicks.

• There was a 6-month wait due to the demand for Jon’s design genius, so Jason made a series of aggressive offers to jump to the front of the line. Jon’s Mahalo logo was an instant hit amongst “product-people” like Kevin Rose.

• Beware of relying on one source of organic traffic: Mahalo was making thousands of dollars per day from ad revenue. But when Google released the Panda update for search, 90% of Mahalo’s traffic went away overnight. Even with influential connections at Google, Jason was told search was a “black box” and nobody was able to help.
• “Professional management” can destroy a product and the culture around it: Digg’s 3.0 redesign made it more commercial, prioritizing publishers instead of the content the community loved. The goal was to become a bigger business, but it destroyed the core product value and eventually led to Kevin’s departure.

Twitter Spaces and Clubhouse

• Not needing to download a new app reduces friction and it’s easy to get “40 blue checkmarks in a room” on Twitter, since influential people are already there.
• Twitter has been slow to add features or change the core product, which they have been lambasted for by power users. However, it’s also a secret sauce to success. Reddit is in a similar boat with their product history.
• Twitter Spaces is a natural extension the platform. Audio has the power to create a meaningful dialogue to offset the “dunking” and tensions created from the current lack of tone/context on Twitter.
• Social media founders didn’t set out to create chaos online, and these new features can help realize an idealistic vision of an at-scale social product. “I think that you’ll use text until you feel misunderstood or the conversation devolves significantly and someone says ‘you guys should talk it out in a Twitter Space.'” -Jason

NFT & blockchain technologies hold promise & potential pitfalls

“I’ve been tracking NFTs for a long time. I believe there’s going to be a lot of garbage in the space when every artist with Photoshop can become an ‘NFT Master’. But there’s a lot of really credible projects reimagining rights, distribution and ownership.”

Kevin Rose

• Tokenized ownership can allow the creator of an object to receive a portion of the proceeds every time the asset changes hands.
• Some potential revolutionary use cases:
  • Unisocks has dynamically priced socks where the token can be exchanged for the physical product (it’s silly because these are socks but imagine them as Yeezy’s or other high-end collectibles). This allows for price speculation on objects without needing to hold physical inventory.
  • Backing early musicians, where the owner of the token is entitled to residual music royalties.
  • Media licensing on the blockchain, where every artist/creator can set the price to license their creation.

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We recently launched a curated list of the most generous software discounts for startup founders. View all deals at startupdeals.tech.