2014-04-24

Co.Labs

Now That Anyone Can Invest, Startups Are Rethinking Investor Marketing

A design trend turns out to have an ingenious use as a fundraising widget.



"I should be able to tell users they could be an investor in this company," says Sandi MacPherson, founder of Quibb, a referral-based network for professionals sharing industry news and commentary. "The people itself make the product what it is."

Like a handful of other daring entrepreneurs, MacPherson did just that earlier this year—soliciting interest on Quibb in a post that would have been illegal before the passage of the Jumpstart Our Business Startups (JOBS) Act in 2012.

"I’ve always thought of each of you as a ‘mini-advisor,’ and I’m really looking forward to having Quibb members as investors too," she wrote to her audience of 10,000-plus from her base in California.

Across the country in New York, a new platform for "community funding" was looking at startups like MacPherson's and wondering: What if you could make a public "call for investment" into a widget?


Need Money? Send A Card

Click to expand

Here's what it looks like: A simple, embeddable piece of JavaScript that allows would-be investors to indicate the amount they’d like to invest and hit enter. Vetting and follow-up is handled on the back end.

Quibb is the first startup to use the invest card, which was built by Alphaworks and deployed on April 23, with the goal of raising $100,000 from Quibb members as part of a $750,000 round led by traditional venture firms. The widget is a new use case for the trend toward using small "cards," rather than entire web pages, as the atomic unit of web design.

"Raising capital is a very significant moment in a company's life. We just want to be plumbing so that Quibb can focus on telling their story," says Nick Chirls, CEO of Alphaworks. With Alphaworks tools, he says, "Investors will be able to reserve an allocation like you reserve a restaurant table."

How It Works

For the time being, the Invest Card is a snippet of JavaScript designed for startups to add to the landing page of their choosing. But down the road, as Alphaworks builds out its API, Chirls says that the Invest Card will take on the properties that have made the format so attractive for everything from Google Now’s weather and traffic content to Spotify’s "Discover" feature.

"These are a tool for a private company to understand investment demand from their community. Those communities live everywhere, and ultimately we see these cards living everywhere," he says, mentioning social networks like Facebook, Pinterest, and Twitter in particular as sites that could integrate Invest Cards, depending on their terms of service.

Since Twitter introduced cards last spring, companies have been experimenting with integrations that take advantage of user information already known to the hosting platform. MailChimp, for example, has developed Lead Generation Cards designed for marketers buying promoted tweets; when a logged-in Twitter user clicks a call to action, the user’s email address is automatically added to the relevant MailChimp list. It’s not difficult to imagine a future in which an espresso lover could take a small equity stake in his neighborhood coffee shop with a single thumb swipe.

Being Neighborly Pays

Until the last remaining pieces of the JOBS Act go into effect, Quibb (or any other startup raising capital from the "crowd") is technically still limited to engaging with accredited investors. Even with that qualifier, the Quibb community responded to MacPherson’s initial announcement en force. It probably didn’t hurt that MacPherson has been disarmingly honest about her goals and challenges throughout the life of the network, a posture that has granted her a neighborly relationship with users happy to offer feedback.

"In my typical ghetto fashion—resourceful is a better word—I linked [the post] up to a Google Doc for people who were interested in investing," she says. When 100 members quickly expressed interest, she knew her bootstrapping days would soon be over.

MacPherson says she could have closed the round by relying on the traditional investors that have since signed on—betaworks, Bloomberg Beta, Lightbank, and a set of active Silicon Valley angels. But it seemed natural to seek out a way to include a broader set of backers who "are already sitting at the table and really believe in the long-term vision."

Quibb and other companies will be able to accept non-accredited investor money later this year.

Creating Newbie Angels

One of those community investors will be Vinay Gupta, a London-based entrepreneur who joined the service in its early days after being invited by a friend. "It's a nice way to be connected to something you support," he says.

Gupta says he has donated to projects on Kickstarter, but as an individual has never before taken an equity stake in an early-stage company. His confidence in Quibb has been shaped by his interactions with MacPherson as she evolved the product. "I didn't really get it at first," he says. "We kept in touch intermittently because she's so open to feedback."

Now the value of the site is far more clear: "Because Quibb is a curated network of individuals there's a good discussion," he says. "Not everyone has the time or inclination to write a blog post. It's something between writing a blog and posting a tweet."

Filtering For Quality

That kind of customer engagement is exactly what Alphaworks is looking for as it helps another 10 to 20 companies execute similar campaigns over the next year.

"We're very specifically focused on companies that have passionate communities," says Chirls. "We're simply facilitating the sale of equity from the company to that existing group of people."

Eligible companies must also have an Alphaworks-approved sponsor prepared to lead the round, as a way of preventing Invest Cards from being perceived as a tool of last resort for troubled businesses. When a company closes a round, Alphaworks will package sponsors and community investors into a special purpose vehicle, and then invest the capital via that consolidated entity. Like AngelList, Alphaworks charges a small carry on the company’s profits; in the case of Quibb, it will be 3%. (Betaworks, a co-sponsor of the Quibb round, is taking an additional 7%.)

Looking ahead, MacPherson plans to build a product team that can help her solve user experience issues related to engagement and retention. "Quibb has been growing virally, with people bringing in people like themselves. I want to accelerate that," she says.

Thanks to a community invested in that outcome, she won’t be doing it alone.

[Image: Flickr user Mark Strozier]




Add New Comment

1 Comments

  • Len Kendall

    You address this in the post, but I'd be careful with mentioning "anyone" in your headline. In reality we're talking about a very small population that would be considered accredited. Hopefully the latter part of the JOBS act will get constructed soon so truly everyone has a shot at supporting companies they believe in. I certainly would do with Quibb if I could.