Interview conducted by Jason Manolopoulos
Republic stormed the world of crypto last year achieving its first successful crowdsale for Props. It achieves this by permitting non-accredited investors worldwide to invest in projects in the Crypto world.
We sat down with Kendrick Nguyen, CEO of Republic, and had a deep dive about what motivates him, inclusive capital raising, what to expect from crypto regulation this year and what we can look forward to from Republic in 2018 and onwards.
Republic is a leading equity crowdfunding platform, that now gives blockchain companies an legal route to raise capital from non-accredited investors around the globe. They aim to become the Amazon of private investing, thus fully democratizing the financial markets, giving everybody a chance to be a part of it.
At the same time, it allows a diverse group of entrepreneurs, to get a chance to find early backers.
Jason Manolopoulos (Q) – Thank you very much for taking the time today. Can you tell us a bit about yourself, your background and what you were doing before Republic?
Kendrick Nguyen (A)– Of course. Thank you again for having me. Prior to launching Republic I was an early employee at Angel List and held the role of General Counsel. In that capacity, I also led product structuring and regulatory relations.s In the world of Fintech, law, engineering and business go hand in hand. From that experience I launched Republic as an equity crowdfunding platform in 2016, making it easy for everyday people to invest in securities.
Q – What was the inspiration behind launching Republic? How did it come about?
A – Well it shares Angel List’s democratized investing mission. The belief that broadening capital sources and resources would necessarily lead to more ideas getting funded and more companies maturing. That mission was the reason why I joined AngelList years ago. So when the law changed to allow everyone, and not just millionaires, to invest in startups, we launched Republic to bring that mission to main street. Two years after, more than 50% of the financing on Republic goes to founders who are women, minorities and veterans.
Q – Excellent. So you’re democratizing both the access to capitals to startup founders, and the access to the 97% that aren’t millionaires.
A – Correct. I strongly believe that entrepreneurship and investing should be a shared economy. More people participating in entrepreneurship, if not as founders then as investors and advisors, means more money, more knowledge, more innovations, and a more robust economy and society. Hence, Republic’s vision is to be the Amazon for private investing, where making an investment will be as easy as making a purchase on Amazon. Actually, it’s already that easy today.
Q – That’s amazing. So, becoming the Amazon means you’re going to have thousands and millions of investors. Can you tell us about how so many investors will learn about Republic?
A – We gain new investors via three avenues. Each new deal, each mission-driven startup that successful raises funds on Republic naturally brings in its own supporters, followers, family and friends. Second, media influencers like Tokens24.com play a crucial role in spreading the word. We also have a wide range of partners – such as Angel List, CoinList, ProductHunt, Latino Startup Alliance – who support our mission and help evangelize. We even partnered with Sony on a recent TV show, in hopes that more and more people know that it is possible for them to invest, that everyone should invest.
Q – How can investors sign on the platform. What is the onboarding process, because some of the KYC and AML procedures are very arduous. Can you tell us what your investors have do?
A– It’s a very simple process. It takes about 30 seconds for a person to go from making a decision to invest to completing an investment using a credit card. We do conduct KYC AML review, but the process for retail investors investing small amounts can differ from that applied to large investments in the venture world.
Q – Excellent. How do investors choose the deal? What benefits does Republic give them, cause there are numerous deals on the platform. How can they choose and what benefits do they have?
A – So, from thousands of applications we’ve chosen less than 5% for fundraising on our website. And we curate using two main lenses. One is on business fundamentals, leveraging our team’s venture experience. Second, we focus on a company’s mission, beyond just the bottom line. We want to feature companies that people can relate to and understand. As to how investors should choose, we let investors make that decision for themselves. Investing is fun and satisfying because it is a personal experience. Republic investors have told me that they invest either because they believe in the potential success of a company, or because they believe in the founder and her story, or both. That’s the same for crypto deals and equity deals.
Q – Do you think that you’ll be offering in the future, maybe a curated, like, portfolio kind of approach. Or will it be single project picking , based on which one one you want, which one you have an affinity to?
A – The portfolio part, as in investment funds, already exists out there. Our focus in the near term will be presenting stories and projects for direct investment. We will likely roll out an influencer product, similar to AngelList syndicate product, which still permits investors to pick and choose their investments deal by deal.
Q – That’s amazing. Could you give us a sneak preview of who they are, actually?
A – Not a surprise. The first people are some of the most well known syndicate leads on on AngelList, with a brand. But we’re going to go beyond that. Cody Willard, a known TV host and a investor, has joined us as an adviser to help build this product.
Q – Excellent. Huge news. Last year you had a major success with PROPS. What made you transition into the crypto market?
A – The transition into the crypto space reflects our view of how blockchain technology affects startup financing as an ecosystem. Since gaining popularity in 2017, token sales have drastically changed venture financing. It’s still early, but we are a fintech company company, so we cannot afford to ignore this new mode of financing. Republic also happens to have the domain expertise to effectively compete in this field. We have in-house legal expertise, product experience building 3 fundraising platforms, and valuable relationships traced back to our days at AngelList. So we leveraged all that to launch a second line of products called Republic Crypto. PROPS was our first crypto deal, with a robust pipeline in the work.
Q – This is extremely exciting of everyone in the community. You’ve mentioned you have your own in-house expertise. This expertise, how does it comply with the services you offer to the issuers, or to the companies that want to do non-accredited ICO offering.
A – The world of ICOs remains highly confusing today. That’s in part due to legal uncertainty and as well as a crowded field of vendors and advisors. It makes it so difficult for young founders who have never dealt with complexities at this level before, to be able to effectively navigate it. So, in addition to helping projects raising via crowdfunding, the Republic team also provides guidance to selected projects on ICO logistics. Our focus right now is to provide some clarity in the ecosystem, to the extent that we can. The industry needs leadership, clarity and trust, and Republic will focus on filling some of that need for the foreseeable future.
Q – Thank you for that. If we could dissect, would you offer the company’s legal advice, book-running services, marketing outreach, smart contract evaluations… Which part would be your sweet spot?
A – So we offer very high-level consulting services, but we do not act as an accounting firm or law firm or smart contract provider in any way. Not yet, and not in the foreseeable future.
Q – Great. You’ve mentioned 5% only pass through your filter. What kind of attributes will you be looking for in these companies: is it a size consideration, the founding team or a community threshold?
A – Aside from fundamentals and mission, readiness to execute on a campaign is important. We want to work with really motivated founders who are ready to go out there and pound the pavement, and hit up with a friends from high school or college or whatnot. Readiness and execution are much of what it takes to do a successful crowdfunding campaign. The quality of the team is also important. Do they have the expertise, are they resilient, and are they passionate about what they do.
Q – You’re a US company. Do you accept applications from people outside the US. Both in terms of companies and investors? Or is it just US centric only for now.
A – No. We have investors from almost 100 countries, but we can only allow US-formed company to run a campaign, per specific regulations. If a French or a Vietnamese company may raise if it has an operating US subsidiary.
Q – In the PROPS offering, from how many countries did the investors come from and what was the split from a geographical standpoint?
A – I don’t have the exact numbers off my head. I remember seeing a 30%+ figure but don’t hold me to that.
Q – So Republic has been around two years. What are you most proud of and what is one of the mistake you’ve made over the last two years.
A – There have been so many mistakes. You’ve got to learn from them, and not regret them. Almost every week, every day. If we don’t make mistakes, then we don’t really learn and move fast enough. Specifically though, in hindsight, we rushed the launch a bit in 2016; we wanted to be out there in the market and get the business going. But aspects that weren’t fully ready ended up causing a lot of stress for the entire team for a good 4-5 months out launch. But things ultimately worked out well for us and our launch partners.
I think what I’m most happy about, what keeps me and the whole team going, is how quickly we were able to validate our conviction that people want to invest in founders outside of the venture lens. And these investment gave life to these projects, giving them a real opportunity to flourish. That validation, which we saw even from the early days, continues to energize and keep us going, no matter the stress or lack of sleep.
Q – Thank you for sharing that and being so candid.
A- If I may add one more thing, and that’s Republic’s focus on inclusion and diversity. Founders from all sorts of backgrounds, genders and experiences have raised on our platform, many of whom wouldn’t have been able to access pre-seed capital otherwise. That these startups can operate today through the support of investors on Republic has made it all so worth it.
Q – This is such an empowering message, can you give our readers some examples.
A – One founder comes to mind. She’s a mom from Fresno, without tech experience, and without wealthy relatives. She’s one of the most talented, resilient, intelligent human beings that I have met. But her profile is not one that Silicon Valley VCs would seed. She raised over $80,000 for her new startup, and in a big part of that came from Latino-American professionals and people who believe in inclusion. With that money, she hired a team, built a product and signed on paying clients, and her startup is now an appealing investment prospect for VCs.
A – Congratulations! That’s such an inspiring story.
Q – Can we talk about Republic itself? What do you think differentiates you. It’s a crowded space, as you’ve said, there are a lot of competitors… How do you look at yourself, your business model, your monetization plan. How do those things come together?
A – Two main angles. First, we benefit from the AngelList family affiliation, with its reach and reputation. Second, among leading platforms that accommodate non-accredited investors, we are somewhat unique in our focus on inclusion and community building. Republic is not intended to be an investment platform only. We want to promote awareness around retail tech investing. In a way, we’re alone in our quest to change consumer behaviors as a long-term initiative, as opposed to focusing on how to monetize on as many deals as possible today.
Q – Great, great. What can the crypto audience look forward from Republic in 2018. You made one deal last year. How big is your pipeline? What else is exciting from the crypto standpoint?
A – We’ve got hundreds of applications since the end of last year. I think we have a very exciting deal pipeline to present to our community, starting with PROPS, then Witnet and Blockstack. Currently deal sizes are limited at one million per year, but hopefully by the end of the year, that cap will go up to $5M.
Q – So in March, there’s going to be a new deal?
A – Yes, and more than 1.
Q – Fantastic. You’ve mentioned something very interesting. For non-accredited investors, the cap is $1.070.000. You’ve said that it’s going to increase by the end of the year. So, are you in touch with the regulator and have a proposal on the table, or is it going to be a partnership with Coinlist as you did with PROPS.
A – A couple proposals are making their ways through Congress. So we hope that by the end of the year the cap will be raised to USD 5 millions. In addition, there are other legal angles or securities regulation under which we can rollout projects at a much higher cap. As high as $50 million. But it would cost more and take more time to launch such a campaign.
Q – Wow, that’s huge news.
A– I’m excited, too. Lots of challenges in these early days, but the future is promising all around.
Q –Let’s delve in more then. What is the situation with utility tokens and security tokens. Will utility tokens be phased out? Is there any fear for retroactive laws and regulations impacting existing products, and what do you see happening in the US and in the rest of the world? Gibraltar and Switzerland came out with new rules. What do you see trending?
A – It’s a one way train towards regulation. It’s just moving that way. In the US, the SEC has taken very pragmatic view, taking action only in case of fraud or overt violation. However, there has been an unsettling movement within the legal community in recent weeks, with lawyers are now taking the view that there is no token that is not a security token in the early days of a network launch. I think it’s overly sweeping, but one person’s opinion means little here. By all indications, all ICOs in the US will need to be treated as offerings of securities.
Q – Okay. But that would also have huge implications with the exchanges and trading, cause the rules of trading..
A – Without naming, more than a few exchanges without securities exchange license appear to be selling securities to unaccredited and accredited US investors. The implication is very difficult to guess, but I can’t imagine that the SEC will look the other way for very long. Until then, it’s a confusing world for investors.
Q – Yes, Absolutely. Hopefully, with more regulations, people can focus on products rather than on regulations over time.
A – Yes. I would be very surprised if we see definitive guidance over the next few months, or on a black and white line that people can use. The only way for these projects to go forward is to consult outside lawyers. Larger corporations are also contemplating blockchain initiatives, and they too have to worry about the implications of securities and and money transmissions, and taxes and so forth.
Q – Yes. If we could move on a bit to the cryptomarket itself, and the issuance platforms. We’ve seen Ethereum dominating the issuance of the new cryptoapps and cryptoassets. Do you see the scaling issues coming to fruition in 2018? Do you see other platforms like Stellar, Neo, Komodo, taking bigger pie of the issuance?
A – Sure. I think Stellar as an example, is cheaper and more scaleable. You see project like KIK/KIN and Mobius switching to Stellar. I’m also a fan of Qtum. That said, it’s still Ethereum’s market to lose, but there are serious competitors out there.
Q – Does this mean. Could this infer that you have some Stellar projects in your pipeline?
A – Yes, particularly projects that do not rely on heavily on smart contracts.
Q – If I may put you on the spot in regard to the cryptomarket. What is your outlook, I know it’s an impossible question, for 2018? Bullish, bearish, neutral?
A – [Laugh] You know, I’m a lawyer by training, so i am careful with all statements. I’m actually quite long on the cryptomarket. It’s analogous to the the dotcom bust, which actually was a huge boom in the long run. Just looking the rate of adoption, of people now comfortable enough to actually open a wallet or buy an ETH, every month, around the world. With that influx of capital, it’s hard for me to see a major collapse beyond the correction that we’ve seen earlier this year.
Q – So, very bullish. That’s great news. Are there any smalls protocols or projects that you like? Not the big ones, like small ones that you think, have fantastic teams?
A – [Laugh] I think it’s pretty much a guessing game with new coins and projects. Most projects will fail and some will emerge as a multi-billion or trillion dollar businesses years from now, but no one knows for sure which is which. So, right now, bitcoin and established currencies have lower risk and lower volatility, for newcomers wanting some exposure. And the rest of them are like gambling bets.
Q – Very wise!
A – I do like the guy from Quantstamp, which does the security audit. I like infrastructure projects and those tackling long-term industry needs. Things like security audit and smart contract dispute resolution. I also prefer asset-backed tokens over those with utilities only.
Q – Great. Since we’re in the future gazing conversation. Let’s go closer to home, For Republic. What’s your vision for it over the next five years, and what will we then discuss in 2023?
A – I can’t accurately predict with any details or depth, given all of the uncertainty, particularly in the crypto space. You will see some aspects of Republic’s operations get tokenized,. Which exact aspect, I will disclose more about once we get there.
In five years so, I don’t know, but I hope to realize our vision of being the Amazon for private investing by then. That does mean millions of users and thousands of projects every month and the opportunity for influencers to connect with investors from Alaska to Florida. That’s an ambitious goal, but you’ve got to dream a little to be in this industry for any length.
Q – Absolutely. That’s such an exciting and empowering vision, to really democratize investments for millions of people, like we have other services. And getting outside of the Wall Street stronghold I think will be great for society overall.
A – Yes, and I think when people asked me if I really think everyday people should be investing in high risk early project, my answer is absolutely yes. Like what Uber and Lyft did to transportation, there’s no reason why entrepreneurship and investments should not be a shared economy. It will be, and we hope to be there when that is the reality. I just hope it doens’t take too long.
Q – Excellent. That’s such an exciting vision. Well, Kendrick, thank you, I’ve asked you over 30 questions, so I think that that’s enough for now. Thank you very much for sharing your time and all your great insights.
A – Thank you for taking the time and for your interest. And for helping us spread the word about private investing for the masses on Republic and Republic Crypto.