Navigating the New Frontier: Crowdfunding and the Future of VC Financing

Josh (00:00:02) - Good day, everybody. We got seven minutes on the clock. We're going to talk today with Mr. Woody about the future of VC financing. Welcome to the show, man.

woodie (00:00:12) - Hey, it is great to be here. Excited. Let's get going.

Josh (00:00:15) - Yeah, man. So you're. We don't have a lot of time, but you're an expert in in in the world of crowdfunding, you were there with Obama and and kicking that off and and now you've seen it evolve over the years and how it helps VC groups, family offices, foundations. Right. So you've seen this incredible things. But give us a glimpse into what is crowdfunding and where is the future of it heading.

woodie (00:00:38) - Yes. So crowdfunding sort of came in to fill a void in the marketplace. That was this gap from 25,000 to $250,000, where an entrepreneur can self-fund it. But after that, they need to go externally and find capital. That's where we created the law that allows people to go out and raise up to $5 million from their friends and family community through what's called regulation crowdfunding.

woodie (00:00:58) - You have to do it in a structured approach, but it works really well for these startups and pre-IPO businesses. What we realized when we were doing that is there's a pivot that's happening in capital, in the capital markets where entrepreneurs are going from the self-reliance to putting out a branch of trust to a community of backers, and they're taking money in from those backers in exchange for the vocal message that they can have. They can get this megaphone out there and then, of course, send out a brand message about a company. This is inserting its way into the private capital markets privacy stage. And so now we're having this community building, this brand awareness for a company, bringing in marketing and sales for a company that is really getting a company to the next level. That allows VCs now to come in and be like, okay, they've raised millions of dollars from a community of people. Why are all these people in the deal? What do they see in the deal? Why should we be looking at this deal? So it raises the bar and profile of these companies so that they can get access to really deeper pockets and, and networks that can allow them to get to the next level.

woodie (00:02:06) - Yeah.

Josh (00:02:07) - So as you say this, you know, an investor, you know, I was in VC and we're looking at a potential opportunity. You've got investor validation where you're like, why are all these people investing in it? And then you have like, did you actually have customer validation? Maybe you could explain maybe the differences of the investor validation. People are investing in this versus customer validation. People are buying this. Like what are your thoughts on that?

woodie (00:02:29) - I think it's a merge of the two actually. So what you have is these companies that have these prototypes and these products, and they start to get customer traction. These customers then become brand advocates. And they're like, I love this company. And then the company says, hey, you like our you like what we're doing. We think we really can grow. We need your we need you on board as our investors. So these are we call them investors. And they're in customers that are investors in a business. And they play in a very active role.

woodie (00:02:56) - They're not a passive. It's not like when you're buying stock in Apple or, you know, Google and you just sit there and wait for, you know, Google to do something great. You are an active participant in this private company, and you are actually doing work on the company to help them achieve these milestones that they've said.

Josh (00:03:12) - Yeah, now, I've seen I've seen a lot of groups go through, you know, crowdfunding and and it seems to, you know, like the people who are great at sales and marketing tend to get this, like traction on the investor side, what advice do you have for people to attract more investors to their crowdfunding campaigns? Because now you're not only marketing your material to customers, but also these best sellers investors.

woodie (00:03:38) - Yeah, well, you know, the one thing I always say is you can't crowdfund without a crowd. So it's really, really important before you get started to actually build that crowd. So you either have customers or you actually need to get that crowd through social media awareness.

woodie (00:03:51) - So you need to be actively out there creating messages that engage people in what you're doing, because those are the people you're going to convert into investors once you have them. It's about leveraging the power of that crowd to get to the next level. So that could be, hey, introduce me to angels, introduce me to VCs. What family offices are in our area that are very interested in helping promote entrepreneurship and innovation in our regions and our communities, and leverage those connections to get to those people? Because the family offices, they're really focused, you know, of course, they're focused on much bigger things, but, you know, they've got priorities that go all the way down to, you know, small businesses. And how do we help level the playing field for women and minorities. And this is where women and minorities really have the opportunity to excel, because Silicon Valley is not thinking about them. the crowd of course, will back them because they look like them. And now it's leveraging that community to get those other people engaged in what you're doing.

Josh (00:04:44) - Yeah. So how does this affect the future of VC? Because you said there's a big gap between, you know, mom and pop. Check writings to VCs. Crowdfunding kind of filled that, that, that that space. What do you think the future of crowdfunding will be?

woodie (00:04:58) - So what we're seeing right now in the data, and we have this 100% complete data set on every single company that's raised money through crowdfunding is, VCs are now coming into the marketplace, and they're doing these parallel offerings to syndicate the deal to the crowd, because they realize the benefit of having the crowd on the cap table can bring to the company. And so what I've seen just in the last two months, April, March and April have been two of the highest months in terms of capital commitments for these offerings. Is the like it's 30% of the money is VC money, so 60% of it's the crowd. But we're seeing the growth of VC capital coming in and what that means to me is we're starting to see this shift where we're going to see more of these deals that are going to be syndicated out there to the crowd with VC participation, and the crowd gets to ride along the coattails of the VCs, which is going to be great, because we're going to have a lot of people that look like you and me, average Americans that are going to get rich.

Josh (00:05:56) - Yeah. Super cool at first. I'd love to hear your opinion. And at the end, you could wrap it up and tell people where to go to connect with you and do a deal. We've got a minute left. At first, I think VCs were a little nervous around this world of, you know, crowdfunding. Like they wouldn't even touch it if it was it. But you're saying that there's a shift where VCs are now getting involved at a 30% or, you know, capital rate? Like what? What is your opinion of that? And then close this out of where people could connect with you.

woodie (00:06:25) - You know, it was the unknown before. People didn't know what kind of quality companies are going to be in this whole data set. But now we're seeing very strong companies. 65% of the data set is over three years old. They're doing over $1 million in revenue. This is early stage financing where the lowest valuations are to be found, and VCs deal flow is the hardest thing for them to get.

woodie (00:06:44) - So by following our data set, by following these companies in there, you can really get in there. So if you want to get to what we're doing, just follow us at Crowdfund Capital advisors.com. You know follow me at Woody and what I mean at Twitter. but we've got tons of reports and information on the entire industry.

Josh (00:07:02) - Cool. And we did that all in seven minutes or less. As always, reach out to our guests. Hey, thanks for being on the show. If you have a deal that you'd like to talk about the deal, scout.com, fill out a quick form, maybe get you on the show next. Till then, talk to you all on the next episode. See you.