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VC10X - VENTURE CAPITAL PODCAST

Venture Capitalists (VCs) & Angel Investors share their investing thesis, screening process, value-add, exits, and more. Hosted by Prashant Choubey (@ChoubeySahab)

  • angel-investing
  • crowdfunding-platforms

Investing on Crowdfunding platforms - Raymond Brown, Angel Investor

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Today we've Raymond Brown with us. Angel investing since early 2018 Raymond has personally invested in over 60 startups. He was the lead investor for Zestbloom which is a web3 NFT marketplace built on the Algorand which also support NFTs search capabilities blockchain. He has helped founders raise over $500K from investors. Scouted for DVC and Global millennial capital. He's been know to invest in startups before that masses. He's also interviewed over 35 founders who have raised on platforms like Republic.com and Wefunder.com on the Money Clip Podcast. Some of his well known investments are Immersed, AltoIRA, Asaak, Stacksource and Beaconsai.

We talk about:

  1. Raymond’s story and how he started investing?
  2. How do you pick the industry that you want to invest in?
  3. How do you evaluate pitches?
  4. What qualities do you look for in a founder?
  5. Most exciting investments
  6. Investing in a volatile crypro market
  7. Major sources of dealflow
  8. Why hasn’t Crowdfunding gone mainstream yet?
  9. What does the value-add look like?
  10. Rapid Fire Round

Raymond’s story and how he started investing?

So originally how it kind of started was really getting involved with the Jobs Act during 2015, 2016 time period. And I was trying to identify what was the best way to take my dollar forward. I was always curious how companies got into the public stock market and what they did prior to that. And what I found out there are these people called angel investors or venture capitalists that actually put money into these companies to help them get to their growth stage to actually reach the market.

I heard stories like Jason Calacanis, and Peter Thiel and so on and so forth about people who wrote $25,000 checks or $10,000 checks and those 100X or 1000X. And I figured to myself, well, since the Jobs Act of 2016 allows people who are not necessarily institutional investors investing in startups, why haven't I gotten started yet? So since I would say 2018, up until now I've been headfirst reading about companies trying to understand the market and investing in spaces like fintech, business to consumer, and hardware companies and things like that.

How do you pick the industry that you want to invest in?

So primarily, traditionally it was always based on fintech . But more so, I guess, in the last two years, it was primarily based off of not only fintech, but mission based startups, like startups that really compelled the listener or the viewer or the consumer to really want to be a part of what that company was about. Like the true mission of the company. And then also identifying is there a massive, massive use case here. And can I see people almost having like a contagious like viral affects where when someone hears about it, they're instantly consumed and want to be involved in it. Almost like how Facebook, when Facebook first got started, or Instagram or even TikTok.

How do you evaluate pitches?

Sometimes you might get deals that come across and there's only a very, very short window. But the basic thing is trying to understand what's the history of the founder? Do they have experience in that space or do they really truly believe in the mission that they're talking about there? And a lot of times sometimes those things aren't directly correlated to the success of the company. But after having a few conversations with the founder, seeing how large the profit margins are, do I think they have ability to be very competitive in the space? Is the space over populated or not? Are they really being innovative? And sometimes is the idea crazy enough to the point where if it works it could be a windfall for the investors and people who actually use that product or service. So those are just a few things that I consider in addition to doing due diligence and things like that.

What qualities do you look for in a founder?

I think the biggest thing is fortitude and honesty, right? Because a lot of people that you're investing and you don't really know them that well and you're really giving them your hard earned money and the belief that they will bring you some type of return. And do they truly believe in what is it they're doing or they're doing something that might be hot in the market? For example, are they creating an additional token in the trillion dollar crypto market because everyone else is doing it and they're looking to make a quick 5 X or 6 X return but not really have plans to innovate the space as a whole? Are they able to handle their finance as well? Being able to see a breakdown of how much money they're spending every month or every week?

How long do I think based off of those numbers, do they have as it relates to runway to kind of get their company or business to the next level? So fortitude and honesty is probably the biggest thing I would suggest. Especially when they're super early stage pre revenue and sometimes even pre product. 

Most exciting investments

So I have a few, I can't name them all, but the first one I'll mention is this company called Alto IRA. Alto IRA is a program or application that allows investors to take their IRAs and invest in alternative asset classes. So for example, let's say you want to get involved with crypto, but you don't want to use your debit card to get involved. You want to use that IRA account that's probably barely making 10% to 8% a year and have the ability to invest in crypto. You can also purchase farmland, you could also invest in startups. And what that also allows you to do is play the long game, but this time actually giving each individual the ability to bring the dollar forward by investing in all these different asset classes as opposed to just investing in the stock market as a whole. That's one of the companies.

The second company is Beacons AI. So Beacons AI is basically your onestop shop for creators and everyone knows the creator economy is exploding now everyone has the ability to create their own brands through their own platforms. And with Beacons AI you're able to bring people who view your platform to one individual place to buy, sell, consult, give products, give them ability to view other applications that you support all through one platform. And they're really, really explosive. Their growth has been tremendous these last few years. They recently passed over a million users. About maybe ten months ago they were YC backed startups. I backed them pre 20 million valuation. So I definitely think they're going to go places for sure.

And then we also have Immersed VR. Immersed VR is a software application on the Oculus platform backed by VCs. I actually backed that company twice back at their 10 million valuation and also their 60 million valuation. And what their platform is they revolutionized the virtual reality space but their focus here is to create virtual office spaces. Within this virtual office space you're able to see high resolution desktop screens and you're able to code program, have meetings and they're able to also integrate they're also able to integrate other individuals that come into the platform and use these services as well. So they're really doing excellent job. They grow over 10X in the last twelve months so that's really what they're doing as well.

And then also Sock is a fintech company primarily based in Uganda, but I've also reached out to other countries within Africa and they have grown eleven to 15 X in a very short period of time despite having COVID and Monkeypox being rampant. So I'm really excited about them. Very smart team. They do a lot of asset loan backing for example in that small economy or the economy in Uganda. A lot of people there, they use bota bikes, these cell phones and fuel but sometimes they need additional financing to really boost that economy there. And then growth has also been tremendous and have been very mindful of their cash spending what I think is very, very beneficial, whether an up market or down market. So I'm really excited to see where sock goes in the short term and the long term future.

And then lastly, Transit Net. Transit Net is really trying to become the first title registry for crypto as we're moving forward. You're seeing a lot of laws change as it relates to how we see and view crypto, right? A lot of people are scared that it might be secure. They're worried about rug pools. How do we account for individuals sending crypto back and forth? Is the crypto really yours? What they're trying to do is when you get a house, you get a title to your house.  So they're able to create a title registry for crypto. And I think moving for accounting purposes and just trustworthiness as a whole in the crypto space, having application like Transit Net could definitely be advantageous for all the NFTs and crypto investors to come because this is a multi-trillion dollar market and I'm sure through time, despite we're in a cold or bear market now, that will continue to continue to rise in value.

Investing in a volatile crypro market

So when we think about the overall market, there's always up markets, there's always down markets. I think the biggest thing for anyone who wants to get involved in investing is to understand what you're investing in. And it's not going to always go up. It has to go down just the way the things work, right? Even we think about inflation, we are coming out of a pandemic, we are sending money. There's a lot of things that can affect the price of a stock or company, right? But the biggest thing is the biggest thing is refer to companies and businesses. You're owning a part of your business, right? As long as you truly believe that there's value there, then I think in the long term it might take five years, it might take ten years. But over time, companies tend to do better over time. Just look at Tesla. Look at Apple. Look at Microsoft. These are really big companies, right? But even for Amazon in the early days, there was a time period when we had the .com bubble and Jeff Bezos saw that the value of his company was going down, the sales were up. So I would say those things are important in addition, considering when you do invest.

But as long as you have a founder or team who's truly creating something innovative, you're paying for what the future might have for that particular company. And the most important thing is, especially for that founder, is to understand when the market does change. A few months ago, companies were raising at $100 million valuations, especially if they came from YC or some of those really well known accelerators. But if you paid attention to what companies are doing now, some of them are having bridge rounds or even down rounds to try to get through this down market. And it doesn't necessarily have any direct correlation to how well they're doing, but it's what the appetite is for investors. So for a founder to understand the appetite of investing, what I currently understand the market to do and where I imagine the company going in the future has a lot to do with how I decide to write my check or help them. Incentives to additional syndicates or even VCs. 

Major sources of dealflow

I have a lot of great relationships with a couple of syndicates, especially join DVC Angeles, a really great team there, General Partners, LPs. I've actually helped them source a few deals myself. There was also a period of time where I was selected from Global Millennial Capital to be a part of their venture program. And one of those, there's a company there also that I helped source and eventually they did make an investment in that company I was really excited about. And then crowdfunding is huge, right. I don't think a lot of people know about it just yet. I think people are coming around. But you know, you have platforms like Republic Co. WeFunder.com, Seed Invest, Star Engine, just to name a few, that allow individuals who are institutional investors to write sometimes even small checks of $100 up to 10,000 and $50,000. So starting there, just scouring the platform, do my own little data scraping there and identifying what's the most attractive at the time. And really the biggest thing is wanting to be, I would say, compelled to invest in these companies. It really gives me the motivation and dedication to do additional due diligence and buying companies that way.

And then, you know, people who are involved with Angel syndicates, if you get a part of a few syndicates there, you also get additional deal flow. And even Twitter, I'm very active on Twitter, there's always founders reaching out, talking about building in public, which I think is a very innovative way to people to see the progression and you might have that person who's been watching since day one and want to write a check. So emails, being part of syndicates, have relationship with venture capitalist and even looking at my own portfolio companies and having them build one another sometimes also gives me this opportunity to invest in startups as well. 

Why hasn’t Crowdfunding gone mainstream yet?

The way I kind of view companies that are on Republic Co or We Funder or things like that, that are really open to the community, it allows investors and companies to do almost free advertising. Like if the biggest thing is for you to grow additional users, why not use these crowdfunding platforms to bring more brand awareness? Because companies spend thousands of hundreds, even millions of dollars on marketing. Right, but if you have a well known, very reputable crowdsourcing or crowdfunding platform to help market for you, I think it takes a lot of stress and burden in building those additional users and sometimes raising a quick $100,000 just to get you to the next quarter because that time period is very serious for a lot of founders.

 I've talked to founders where they've only had four months to runway left and it almost made them pack up their bags and try to seek with some of the assets to pay back investors. Right, but it also allows them in addition to that flexibility, a lot of times if you do reach out to VCs, they might have very stringent terms as to what you can, you cannot do or might tell the founders or the CEO how they should run their business. But when you have a community who supports you in multiple ways from investing and also brand awareness by reassuring, because I know myself after the company finishes their funding round, or if they're currently raising, especially through regulation CF, which is regulation crowdfunding. I talk about the company all the time.

There's another company that I forgot to mention earlier, Huddle. They just raised $3.4 million when I first invested, I think it was maybe like a year ago or so, I was talking about huddle.com a few times on my Twitter page and even sent it out to people to review because I thought it was a great opportunity and just to give the listeners a little background. Basically what it does is it creates a platform for people to reach out to resources to help support companies. Like, sometimes you're having a startup, you need a product person or you need a developer, and it incentivizes people with some form of equity through that company. So bringing creators and people who actually have those talented skills, you need to get to the next level for your startup at one stop, shop in another place, and supporting the creator economy. I think there's a massive use case there and I wasn’t surprised that they raised $3.4 million. I was really excited and even posted about them on my LinkedIn page.

And sometimes, just overall, I don't think that if the company uses crowdfunding, they are not as reputable. Sometimes it might be the best thing for the company as a founder or CFO in the early stages or even towards potential IPO. You're always thinking of what's the best thing to do for my company on my current stage. I've even seen companies like. For example. Alto IRA. I invested in them and months later. Or years later. You had Coinbase Ventures investing. You had New York Life Investing and other big VC. If I would have sold out to IRA on Republic and thought because maybe they weren't at a VC at that particular time, that I wouldn't invest. No, I thought that it was a great mission statement. I imagine myself using that particular product or service. And I really had a lot of belief in what the founder and the chief revenue officer were really trying to do here because of that. So the other people, they might have not seen it that immediate time. But you can't count out crowdfunding companies just because they're on crowdfunding. Sometimes. Actually the best case, depending on where the company is, it didn't get investors in there.

What does the value-add look like?

Value add is real big thing. I think sometimes it's not necessarily dependent on how much you write. The check is important, but the biggest thing is, how can you help the company go to the next step in the growth process? And one thing I like to ask for is what are the three biggest pain points? I'm not an expert in everything, but I know people. And I have other portfolio companies that have either passed this current state that you're at.

For example, there was a company that was having issues with logistics, with some of the merchandise. And I remember previously there was another founder who had that experience who was able to get through that. So what did I do? I reached out to that founder and asked them, do you want to connect with another founder who was able to get through that particular problem with logistics? And after a while they did reach out to each other. I made that connection and they were able to get over that hump, right? And then also if, for example, if I'm only writing $5000 to $3000 check with this particular round, I'm like, hey, all money counts. But what I want to do is reach out to my network to see if there's a way for me to connect the syndicate with you. And that way we might be able to help you raise over $100,000.

And even though in that process is for example, I was a part of lead investment, this company called Zest Bloom, Zest Bloom is an application built on the algorithm blockchain that is basically like an NFT marketplace. And I saw the company on We funder, and just because they weren't over a certain dollar amount in investment, that's didn't really discourage me. And wanting to lead that round, I talked to the founders. I saw that they're really product people. They're really passionate about the algorithm blockchain. They're even through an accelerator, even though it might not be well known to other people, because most people are familiar with like tech stars and Y Combinator. I saw that they were very serious about the product or service that they were creating after doing that.

And then they sent me to be the lead investor. I went to work reach out to my entire network on Twitter, some of my contacts and my email accounts. And from them being close, around $50,000 invested by time around was over, it was more north of $400,000 invested, and that was enough for them to get to the next level. And at that particular time, there were partially pre product and pre revenue, right? But I was willing to take the chance with that particular company. And now they're continuing to build and even have developed an NFT search engine, which is massive because a lot of times people are trying to see if this has been copied before. Are they their original artist? And you could easily type in, for example, Joker. You will see a list of all similar joker like NFTs  all on one page, which I think is very advantageous for people looking for certain NFTs. It's almost like the Google for NFTs. So that's very extremely impressive. So I think as an investor, you want to do as much as you can or in your space of expertise. And if you don't know something, which it happens at times to reach out to people who have some type of expertise or can add value for you, for you to help your particular company. 

Rapid Fire Round

What industries, sectors, regions you invest in?

Primarily Fintech or very small, sometimes for consumer based technologies, but definitely say fintech or crypto or sometimes even medical, but primarily fintech.

So regions, I would say it could be US, it could be Africa, it could be Europe, it could pretty much be anywhere that I think that there's potential value there. It doesn't need to be an emerging market. A lot of times, you being the first one there, it could be the hitter you need in order to get to the next level and really increase that portfolio.

What's the typical stage you invest in?

A lot of times it depends on where I think they are in the stage of growth. I do invest in pre-seed companies all the way to Series A, but I do have some portfolio series B companies.

What's your typical check size?

It can vary between $1000 to $15,000.

Where can founders pitch you?

So you can DM me, you can reach me, send me a message through my Gmail account. You can also reach out to me on LinkedIn. I think LinkedIn is the most popular place where CEOs often reach out to me and wanting to review their pitch. And then from there we can have additional conversations and even have zoom calls and things like that.

Where can they follow you?

You can follow me on my Beacons account, beacons.ai/raymond_brown. You can also find me on Twitter @Chandlers_investment. And then you can also reach out to me on my podcast page or on Instagram Money Clip Podcast. You can reach out to me on my LinkedIn. It's just Raymond Brown. 


Raymond's beacons page: https://beacons.ai/raymond_brown

Follow Raymond on Twitter: https://twitter.com/Chandler_Invest

Follow Raymond on LinkedIn: https://www.linkedin.com/in/raymond-c-brown

Hosted by Prashant Choubey- https://twitter.com/ChoubeySahab

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