Crowdfunding has come a long way. It’s far more diverse and interesting than it was just a year ago. There are investment portals that now offer a way to buy and sell shares of startups whose raises have ended. There are portals that offer crowdfunders shares of startups that are raising from angel investors and venture capitalists on the same terms. And one portal has even expanded its offerings to video game companies and real estate.
That last one is Republic. It’s not the oldest portal. It’s not the biggest one either. But it just may be the most innovative. The New York City-based company does a nice job of finding top-notch startups. And they just started offering investors real estate deals through their collaboration with Compound in addition to video game deals through their partnership with Fig.
We’ve recommended our members invest in more than a dozen startups that raised on Republic (sign up for First Stage Investor to see which ones). Most are doing great. We do our best to derisk startup investments by doing thorough research on every recommendation we give. We take due diligence seriously.
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But there’s another way to avoid risk, thanks to Republic’s latest innovation. On July 16th, Republic will be offering a new kind of crypto token called the “Republic Note.” Owning these Notes gives you a share of all of Republic’s various profit streams (and there’s a number of them). Here’s how it works, in Republic’s own words…
“When startups and private equities that raise with Republic later sell or go public, Republic earns cash based on predetermined carried interest rates or commissions. We pay out a share of profits from successful exits that we receive to Republic Note holders proportional to how many tokens you own.”
If you’re interested in learning more, Republic has all the details right here. For a more detailed explanation, I suggest you download the whitepaper and at least skim the 43-page document. Pay particular attention to pages 23-24, where the tokenomics is explained.
This offering stands by itself. Other portals have given access to their own company’s equity to investors. But none have presented investors with the opportunity to share in the profits of all the companies through a token or any other means. Republic’s way has these main advantages…
1. Less waiting. Waiting typically comes with the startup investing territory. You invest early. You wait years for a company to either go public (IPO) or get acquired. The Republic Note will still involve some waiting. But it’s likely to be a lot less than we’re used to. Several big IPOs from Republic’s private capital platform could happen as soon next year. No promises, of course. IPO plans have a habit of taking unexpected detours. But it only takes $2 million of profits to trigger a Republic Note disbursement. And Republic has reserved the right to disburse smaller sums if it chooses.
2. No effort diversification. Buying a Republic Note will be like investing in the SPDR — the exchange-traded fund (ETF) that follows the S&P 500. For a small amount of money, as little as $100, you’re buying into hundreds of investment deals. The big difference is that ETFs are funds. A few portals do offer funds that enable you to invest in many startups at once. But what Republic is doing is different. This isn’t a fund. Buying a Republic Note doesn’t just give you access to a select number of investments that are chosen according to pre-defined criteria or a manager’s decision. No, this dividend-paying token gives you access to every single investment Republic has. It’s not only instant diversification at scale, it’s also instant derisking.
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3. Be part of Republic’s future success. It’s simple: If Republic is making money, so should you. This is a way for Republic to make sure nobody is left behind. Its tokens don’t expire. The token you buy today (or on July 16th) lasts forever. That allows Republic to more closely align its success with the happiness of its investors. An equity investment in a portal tries to do this but doesn’t always succeed. If the portal doesn’t grow fast enough or dominate its space to the degree expected, it may not reap the rewards that its equity investors look for. Too many things can go wrong. A token like the Republic Note that provides a mechanism to share profits is safer and a more reliable way to benefit investors.
On July 16, Republic will be selling up to $8 million worth of tokens. Each Note will go for 12 cents (up to 66 million Notes will be offered). The price is 16.66% more than what the 13 institutional and other accredited investors had to pay in last year’s private sale… a modest and reasonable increase.
Republic is expanding and innovating at an aggressive pace. It’s quite likely that not all of its current and future initiatives will pan out. Not all of them have to. But if its Republic Notes are to rise in value then most of them will need to be successful.
We think it’s a risk worth taking. But what matters is what you think. If you’re not familiar with the Republic site, poke around a little. There’s a lot of attractive crowdfunding opportunities there. Republic anticipates 124-140 startups will crowdfund on its site this year. Next year, that number will increase to 200. The Republic team has shown ample growth and a penchant for successful innovation without sacrificing on quality. Its new token initiative looks like another winner.
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