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- New York City
- Equity crowdfunding for non-accredited investors
- Low investment minimums
- Strong company vetting gives backers reassurance
- High fees
- Can’t collect funds if you don’t hit your funding goal
- Republic is exclusive — not for small startups
Republic is one of the pioneering companies in the new world of open-to-all equity crowdfunding. Does their approach suit your crowdfunding needs?
Title III of the JOBS Act of 2012 legalized equity crowdfunding for non-accredited investors — also known as Regulation Crowdfunding — but Title III didn’t actually go into effect until May of 2016. Thus far, it hasn’t quite worked out as hoped. However, the example of Wefunder (see our review) demonstrates that it’s possible for an equity crowdfunder to be effective in this arena.
Enter Republic. Founded by AngelList alumni Ken Nguyen and Paul Menchov, Republic is equity crowdfunding with an idealistic bent. Taking advantage of the legalization of equity crowdfunding for any and all investors, Republic states a desire “to democratize investing and level out the fundraising landscape for founders and investors alike.” On their About page, the company pitches itself as focused on providing opportunities for those underserved by traditional VC investing, namely women and minorities.
Republic also proclaims an affinity for “mission-driven startups” that “start with a vision of the better future — the future they will create.” Clearly, Republic seeks to align itself with progressive aspirations and create distance from the image of investment as a game for the elite.
Read on to see how Republic’s socially-conscious conception of equity crowdfunding works.
Table of Contents
Republic is a platform on which US-based companies — C-Corporations and LLCs, specifically — can raise up to $1.07 million over a (maximum) 12-month period from registered investors. Most companies crowdfunding on Republic use a financial instrument known as a Crowd Safe. In Republic’s words,
A Crowd Safe gives the company flexibility over if and when its crowdfunding investors become its shareholders or owners of record.
Though they don’t provide the raw numbers to back up this data, Republic claims that 95% of the companies that have used Republic have met their funding goal. Compared to rewards crowdfunders like Kickstarter (see our review), which has a success rate of about 37%, Republic would seem to be a remarkable platform indeed.
However, Republic’s stats have to be evaluated in light of the fact that they are a much more exclusive platform than the aforementioned rewards crowdfunders. Only 17 companies have had successful equity raises with Republic, and only 13 companies are currently raising funds on the platform.
Republic lists three “core criteria” for determining a company’s suitability for the platform:
- Nobody involved with the company can have a conviction for financial crimes on their record (the “no bad actor” requirement)
- When combined with any other crowdfunding earnings in the 12-month period prior to launching a Republic campaign, a company’s funding goal can’t exceed a million dollars (this is a legal requirement)
- The company must be US-based, offer products or services, and must have a plan to deploy more capital into its venture
Beyond these three core criteria, these are the additional factors Republic takes into consideration when assessing your company’s worthiness:
- Experience of founders and management team
- Products, services, and market
- Revenue and growth
- Customer base and demographics
- Fundraising needs
- Offering terms
- Business plan
- Financial health
- Recordkeeping procedures
Terms & Fees
These are the terms and fees for Republic’s equity crowdfunding campaigns:
|Funding Duration Limit:||one year, but most Republic campaigns last 30-60 days|
|Republic Platform Fee:||7% — 5% of the funds raised in cash plus 2% as a Crowd Safe|
|Payment Processing Fee:||3.5% for payments made via credit card|
Along with the fees charged by Republic, there are additional costs associated with equity crowdfunding. Filling out a Form C is a legal requirement for equity crowdfunding, and getting help in completing this form can cost about $1,500. Another legal requirement for companies is that they have an escrow agent — this can cost another $1,500. Furthermore, Republic offers a service through a partner in which an attorney both files your Form C and helps you with other legal aspects of your campaign for $1,500.
With all crowdfunding, but particularly with equity crowdfunding, you have to spend money to raise money.
It should be noted that a company raising money on Republic can offer rewards to backers in addition to equity.
If your company meets Republic’s three core criteria, the company will consider the secondary factors I previously mentioned: “in a holistic manner.” Campaigners are expected to have a lawyer, an accountant, and a transfer agent. Republic doesn’t offer access to these professionals directly but will provide referrals if needed.
Sales & Advertising Transparency
Equity crowdfunding certainly isn’t the simplest field to navigate, but Republic provides plenty of information about their services on their website.
Customer Service & Technical Support
Though the Republic team will obviously need to be in touch with you if you’re accepted onto their platform, the only way to contact them “cold” is via email or social media.
Reviews & Complaints
I couldn’t find any user reviews or opinions on Republic, and I was only able to find a few brief reviews of the company posted by professional reviewers with both reviews being geared towards investors. One reviewer liked the low minimum amount for investments (as little as $10) and the investor education materials on Republic’s site but noted the relatively low levels of investment occurring at the time of the review and the inherent “high risk, low liquidity” nature of equity investment.
As a platform, Republic seems to have done well by the companies that have thus far been able to campaign on their site. The small number of companies that have chosen to take advantage of the platform, however, raises the issue of just how broad the reach of equity crowdfunding is going to be under the current regulations. Equity crowdfunding, in its current state, certainly doesn’t seem to have anywhere near the appeal of rewards crowdfunding to either backers or campaigners. However, this is a knock on equity crowdfunding generally and not a specific criticism of Republic. For the (very few) companies that have made the leap and attempted Regulation Crowdfunding with Republic, the results have been quite positive.
Hopefully, the still-in-its-infancy equity crowdfunding landscape will evolve in a direction more broadly welcoming of companies and investors.