Since the last section of the JOBS Act was enacted in 2016, startups have been allowed to acquire funding through online portals from non-accredited investors. Average Joes can take advantage of this new process — known as regulation crowdfunding or equity crowdfunding — by picking a private startup, investing their money and cashing out superb profits should the company become the next unicorn.
Which brings us to a problem: How does Mr. Average Joe know which startups are worth investing in?
KingsCrowd, one of the 10 fintech startups in this year's summer cohort of the DCU FinTech Innovation Center, wants to provide non-accredited investors with startup investment research and analytics—as investment research agency Morningstar does with fund and stock analysis. To raise its first round of funding, the company relies on the very same crowd it hopes to educate; on Wednesday, it launched an equity crowdfunding campaign on Netcapital.
The round, which co-founder and CEO Chris Lustrino said he's not allowed to say how much is worth, is not the first capital that the company has under its belt. Part of the initial investment in KingsCrowd comes from John Fanning, founding chairman and CEO of Napster, who cold-called Lustrino in February 2018 after having seen Lustrino's fintech blog.
"People ask me about which private companies to invest in all day long," Fanning wrote in an email statement. "It's great to have a place to direct them now in KingsCrowd, where they can get awesome reliable credible advice."
Lustrino, who previously ran finance operations at travel tech startup Freebird, said that since 2016 there has been vast demand to invest in the equity crowdfunding space, but also a huge market gap in resources to support people's investment decisions.
"What we're looking to become is the Morningstar ratings agency of the equity crowdfunding market," Lustrino said.
KingsCrowd will support its business as a website via targeted advertising and by selling subscriptions to access investment research. Currently, the website provides top deal recommendations across all the portals where startups can launch campaigns, including SeedInvest, StartEngine, Netcapital, Republic and Wefunder.
Pay attention: these portals have nothing in common with portals such as Kickstarter and Indiegogo, where people give money almost like a donation. With equity crowdfunding, Average Joes act like angel investors and gain an equity position within the startup (and the same amount of risks as startup founders).
Launched in March 2018, the company has a team of two core people, two interns and one developer. Over the long run, Lustrino said that the company will add how-to guides, analytics for seed-stage or Series A-stage deals, recommendations from an expert network, startup founder profiles and market research.
