Two rounds through equity crowdfunding - lessons learned. By Andrew Christodoulides.

And today's a guest speaker who have Andrew crese to delete this founder and CEO Morrow.

That has raised 1 round through equity and is preparing to raise the 2nd round through equity crowd finding get.

So, in this episode, we'll focus a lot on equity proud, find how it works and specifically how republic works, because more raise their previous rounds through.

Republic and the 2nd, coming round is going to be raised through public as well. So, Andrew, let's kick it off by you giving us some background on yourself and on tomorrow.

Yeah, sounds good. 1st off, uh, thanks for the interim. Thanks for having me, uh, quickly. A little bit about me again.

My name is Andrew, suddenly to some Greek my parents are from Cyprus, and I lived there for a little bit as a kid, but mainly grew up in Queens, New York.

When I started college back in 96, I was also working full time for a family friend who was mentoring me as well. And during my 1st semester, my dad lost his job of 30 plus years.

And that incident became the catalyst for my 1st startup.

Within a couple months I'd left school and started a scene.

500 dollars I started a, um, an inbound call center outsourcing company.

At 24, 7, um.

Inbound outsourcing company at that I'm looking back. I.

I think I probably learned a lot more about business and leadership on the job over the 10 plus years that I grew that company that I would have in school and I sold it in 2008. today.

I'm living in Long Island, New York with my wife and 2 kids, and I'm working on Mara, which is my 3rd startup.

I'll give you a quick overview on on what what we're doing if, uh, that context would be helpful. Yes, that was my next question was go.

Cool. Yeah, so morrow's building a refundable visual search platform, which is driven by user generated content.

Our proof of concept is largely focused on the home category where 5, we've masked approximately 5M photos of people's homes.

Which will be distributed through search.
Content feeds and profiles with 3 primary objectives.

1 is for ideas and inspiration the way you might use a Google images or Pinterest or even to some extent 2 is connection and collaboration and then.

3 is shopping or product sourcing we've tested 2 business models, marketplace and affiliate. And we're in the process of developing an advertising interface as well.

Our belief is that the user generated content will continue to substantially outpaced.
On platform, availability of products and services.
Accordingly and despite the majority of revenues during testing coming from marketplace. Ultimately will primarily be an advertising business model similar to.

Facebook or Google, or or, or rather than the marketplace that we've been largely focused on to date and while we're continuing to grow the community and platform around the home category, we've also begun to.

Curate user content and data more broadly and we're organizing that content and data with a similar distribution model being planned.

Got it so, 1st, question about more is going to be, what do you actually do there? So, 1 of the things that I think sometimes founders confused is that.

1st of all founder has to be a CEO and secondly, what does it actually do? Because CEOs pretty much do everything but can you give us just like an outline of your average date?

Especially Pre fund raising. Um, yeah, so, um.

I have a very clear vision of what we're working toward the massive impact getting there. We'll have on all stakeholders as well as how the products who develop there at the heart of it all.

So, I try to allocate most of my time to the 2 things most critical to that.

1st is the team itself.

And then the product designing and managing the development of the product itself.

That said, as is typical in the start up environment, especially with the craziness going on in the world today.

And with team members, being scattered throughout many time zones, um, sometimes pulled in different directions.

Got it so now let's talk about equity profiling recently. We released an episode about reward based crowdfunding, specifically. Indiegogo. Now, let's talk about equity profile. Why did you decide to go that way?

And not the standard saves angels, angel groups, etc and, uh.

Not the standard way. Yeah, sure. I'm in the simple answer is we really like the idea of being able to give.

Any stage investor.
Staking something with the upset that we see from tomorrow.
As opposed to limiting it to, um, institutional investors or or higher networks, individuals.

Got it so looking back at your 1st fundraise I assume it was a success because otherwise, why would you raise the 2nd round through republic again? So looking at the 1st round, what do you think was

the best thing that you saw there for more.
Yeah, I mean, so, like I said, we've done 2 rounds so far. I mean.

2 parts of the seat essentially, we, we raised a 2M dollars in total of about a 1M through a convertible note from friend's family and.

Uh, high network individuals, some of which, and.

Started and built their own great companies and then.

A little over a 1M a 1000070 for safe offered on Republic last year.

And that's what enabled us to give a greater pool of early investors access to the deal.

I'm sorry, what was the other part of the question?

The other part of the question was.

Do I remember the other part of the question.

Hold up a thing, we'll cut that part here. Let me check that timing 6. that was a quick quick call with. You actually ask anything.

Oh, it was just no, I think you answered the whole question I was asking about. Okay what was the major? The best thing that you saw there for tomorrow?

So, we'll just forward that parts. We'll tie it out and. Gather my thoughts number.
Hello.
Demo now I lost my train of thought.

Okay, okay. Yeah, the best part of it actually, I started fundraising read it as a life show. We had like.

The 1st, we had 20 people and every episode, and that was stressful because I was just getting into this public speaking thing. It was horrible stress for me.

Every time I was just 1 on 1 1 now. So.
Nice got it. So my next question is, how did you choose? So what was your.

Thought process, like, when you were deciding, you know, between the equity crowdfunding versus reward based crowdfunding versus the standard path of.

Angels.
Honest we haven't considered any other type of crowd funding, other than equity crowdfunding. We, the reality is, we were doing.
But we're considering both in parallel and we considered republic early on and really as a,
we were,

we were interested in moving forward with it but as a result of having adequate interest from our own network.

We decided to put it off, uh, even after having everything in place to launch the campaign.

And when we wanted to do a follow on a seed round, uh, we decided to move forward with it again. I, I always liked the idea of being able to give up all types of investors access to the deal.

And so when we raised the 2nd 1M dollars, we decided to do it with public.

And, like you pointed out, we, um, we hit the target in fact, that, you know, at the end of around a singular, but a 1000 investors that unfortunately couldn't get in the deal because we had hit the maximum allowed by Reg CS.

Um,

and so,

yeah,

we,

we were happy we did the,

the,

the Capitals 1 thing having a network of 4000 plus investors that now have a stake in the company and are willing to support in other ways beyond the check that they wrote the,

their networks their expertise and really support in any way they can their voice.

Um, has been as valuable and in some cases, more valuable than the, um, the check from that same investor.

Right, absolutely. Actually invested, I think, 100 dollars through republic myself and since then.

I'm still in touch with the founder of that company and invested it a little bit more about that about using your investors network. That's the thing. I don't quite understand.

Can you give us an example of how, how does that work? So, do you send out an email to all your investors saying like, hey, we are we have achieved X Y, Z but here's what we need to get. So, let's say you need to hire a.

Creative designer, and you just put it out in that email and then wait for people to respond or is it doesn't work somehow differently.

Candidly, we've not done.

Any outreach on our own, the benefits have been offered to us by individual investors. We've had people reach out and say, look.

You know, I'm an expert in in patent law, so if you need any help, I'm happy to help. Uh.

Um, I've got a career in media, I've worked at ABC if, if there's ever anything that I can help you with I'd be happy to. And so or, you know, um, if I can, I've got.

I was in design and, or I was in contracting. I know a bunch of designers if it's okay. I'd love to share

what you guys are doing with them.

And so there's probably just based on those type of opportunities that fell on our lap a lot more that we could be doing.

Um, uh, more proactively, but we've not even done that yet and we've still seen a lot of.

Uh, benefit through the support that's been offered from some of the investors.

Got it so now a little more about the upcoming fundraised or public what do you decide to raise the 2nd round republic again through equity? Is it because you want to keep increasing the network, or.

What's the major reason for going the 2nd to save that? Yeah, I mean, so we decided to raise through a.

As I alluded to earlier in part, based on the fact that we had many investors unable to get in the last round because it hit the maximum limit allowed by. It was about a 1000 or so investors. I couldn't get in.

And additionally many of the investors from the last round had expressed interest in. Increasing participation and we wanted to give them a way to, uh, we did not commit to.

We're not obligated to, but, um, during last round, many investors asked, if they would have the right to increase participation and we told them that it's something we would be trying to.

Uh, uh, afford them and reggae was the way to do that.

And then as far as our partners for the round, we had a good experience with Republic we did speak to and we considered all the other major platforms and partners for the series.

A, the right guy, but ultimately, we decided to stay with the folks we knew interested.

And so we're doing this field for public again. Right? I've actually interviewed the CEO for public, like, a few months ago. Great guy absolutely loved him. So yeah, definitely. Great. Great group of people over there. And my experience with them.

100%, so now, let's talk about maybe some mistakes and some major takeaways from your very 1st round on Republic. So looking back at that experience, what do you see as, you know.

The major mistake something that you would never do again. Yeah,
I had a couple know at the risk of sounding over obvious,
uh,

a big 1 is and this isn't specific to Republic,
but this is more in general related to doing a an early stage.
Raise a big 1 for us was just realizing that nothing is more important than.

Having something worth investing in, you know, the more investable you are, the easier it'll be. People aren't gonna invest your harder money as a favor or because because you or the business needs it.

So, my advice is again, at the risk of sending over RVs set out to build something truly great.

And demonstrate clearly and verbally how you're the right team to get to it to do it. Also, I learned specific to the crowdfunding effort that.

Uh,

it's,

it's important to stay focused on the outcome and relentless in the effort,

but not to get too caught up with exactly how the process is gonna go and how long each step will take,

you know,
when we launch the republic round.

I don't remember the exact time, but it was, you know, a fair amount of time weeks, perhaps over a month that there was no movement on the campaign. And that was tough to deal with. We didn't go into it prepared.

We hadn't done any warming up of investors and so we were off to a very slow start and that was that was.

Challenging, but like I said, stay focused on the outcomes, stay relentless in the effort and played a long game and, you know, that worked out for us.

Yes, there is a head bandied on that specific fundraising. I'm curious here now.

When was that turning point? When was it?

That the campaign was not slow anymore, but the traction. So would.

Did you change something your strategy you start reaching out to more investors in the new way, or what was new? What changed the way? You know, I went into the the raise.

My understanding was that you were not supposed to be communicating the offering before it was live.

And so we hadn't done any communication prior to the ray's going live. And so we were really starting from.

Scratch after the campaign had lost, and it takes a little bit of time to do outreach to, to have the dialog that results in the investment starting.

And so there wasn't really a turning point. It was just a slow process to. Build up interest and it was probably.

I don't know a month or so before we hit the minimum required amount before the deal started getting some prominence on the site and between that and the.

Uh, outreach that we were doing, um, it was a, there was a snowball effect from there. Nice. That's love snowball.

Effects in it, so let's talk about a little bit more about comparison so it will look back at your 1st, race the republic and preparing your 2nd race. Where are the major differences that you see there in terms of approaching those.

Yeah, so we haven't finalized the terms, uh, for this yet, but with the series, a, or the, that we're going to be doing through Republic.

Uh, we're going to try to give our existing investors early access to around. At will likely be a discount on the evaluation.

Another thing we're thinking about doing is it's raising, I mean, fundraising in general is a very time consuming thing.

Uh, it was especially time consuming raising through the, um.

The crowd, you know, there were a lot of redundant conversations really felt like another full time job and.

Candidly, I enjoyed building the business and the product much more than fundraising. So another thing that we're.

We're thinking about doing is not offering the same terms and valuation for the entire round and not offering.

The same minimum investment amount for the entire around. So we want to allocate a piece of the deal to our existing investors and to all types of investors that might be that better.

Investing significantly less than institutional investors will or more sophisticated, higher net worth investors will, but rather than doing that for the entire duration, we're thinking about limiting.

That portion of the offering, because of how time consuming it can be to manage all of those. Conversations again in a, in a way that feels pretty redundant. Sometimes.
Right. That's actually very fair. So we'll talk a little bit more about comparisons and.

Let's go back in time to your previous company. So looking back at those, I'm looking now at Morrow. What are the major differences that you see there of your personal approach to building those company?

Um, so.
My 1st startup was acquired by the market leader we self funded, um.

Like I said, started with 500 hours, built a company sold 10 years later to then, and still market leader in the space and a original pad. My E, commerce business essentially became.

The, we grew that company, um, to revenue beyond what we achieved in the, in the 1st, start up. But never achieve profitability that company became the,
what we had developed this part of that company to begin the foundation for tomorrow,
which started development a few years ago with the same core team as well as the.

Product and proof of concept developed in the prior, start up.

Um, by normal standards, my, my 1st company was the greatest test because again, we grew it and exited.

However, in my view, we had an exponentially better outcome with the 2nd startup. Over the 5 or so years that we were operating the commerce business, we identified. What we consider to be major issues with online search and shopping norms. Particularly in the homeless category, but also the applicable more broadly.

And during that time, we worked on several solutions and ultimately developed and validated a model for vastly improving the experience. And again that model became the basis for.

For tomorrow, so the takeaway after my 1st startup was that. If I work hard, even on something mediocre.

I can succeed and while that may have been true. It's also uninspiring and its success potential is limited.

What I left my 2nd startup with was clarity and validation for a model that I genuinely believe can put a dent in the universe. I, I really believe we'll vastly improve.

How people search shop and connect to 1 another online.

And that's something that likes me up almost every day and.

It makes it a hell of a lot easier to get up and keep going. Any kind of things are tough.

It's also a primary driver for why we've been able to attract amazing talent. Why we've had success with our fundraising and why we've established a lot of the partnerships that we have.

We really we wouldn't be here today. Those opportunities would not exist today.

Had we not gone through the challenges of the prior start up.

Or, obviously, if we had given up because of those challenges.

Right. That's actually that's very accurate for pretty much a startup founder. So great question was there and.

I've only seen for me for at least 2, plus episodes you'll know how much I like talking about failures, previous mistakes, et cetera, et cetera and how I like to discuss the.

Downsides of pretty much anything so we've talked a lot about upsides and benefits of working through equity. Now. Let's talk about the downsize.

So, you know, looking back at that, 1st, fund race and going about to be going to the 2nd fund raise through Republic, what do you think is the major downside of that?

Yeah, again, I think the only downside that I can think of is how time consuming a process was, we would have the same conversation.

Um, many times with many individual investors, and that was spread out over the course of the 6

months that the campaign was live.

I think having the experience with the Reg CS, there are ways we can circumvent that on the following round.

I, I mentioned limiting the amount of time that we keep the deal open to the crowd, rather than having individual discussions with hundreds or thousands of investors.

We can do weekly webinars where we address the more common questions all at once. So,
uh,
you know,

like anything else,
it wasn't easy that I would say was probably the biggest downside to, um,
to casting such a wide net,
keeping the deal open to so many investors,
as opposed to filling around with a much smaller group of institutional.

All right, that's very accurate. Sounds like a decent downside, but sounds like you have come up with a solution. So, next question is about your personal advice to early stage founders who are trying to raise money right now, what would you recommend them doing?

Who should who do you believe should go your same weight the same way as you have gone through equity funding?

Um.

I would do I would do it over again if that's what you're asking. I, I, my advice would be based on the challenges that we face is to go into it a little bit more prepared.

Of course, even before going into any type of fundraise, we.

This is based on 1st hand experience also while we were struggling with the prior E,

commerce business,

we thought about raising capital,

and we had to come to terms with the fact that we were not building anything exciting enough.

To warrant outside investment, you know, at best we were building a, a meat to business and so before going out to do a fundraising of any kind, I think it's important to really, um.

Be building something that's worthy of investment that's worthy of investment whether it's from friends, family, institutional investors, or to the crowd. Um, without that I think it's very hard to get anything off the ground.

And once you have that, and maybe that goes without saying, once you have that.

Uh, based on my experience, uh, equity crowdfunding is a path, I think, is absolutely worth going down.

And if you better prepare, uh, there, where you can probably do it without it being as much of a, a workload.

Um, and in general challenge, uh, early on as it was. You know what I'm doing now?

I mean, even with the experience that I have, I'm in constant contact with, uh, other founders that have been down that path before that have done, and we're forming a plan for how we're going to manage.

The different facets of the raise, the different stages of the rays.
And, like anything else, so better prepared, you are, uh, more success you're going to have the, uh.

The less of a challenge, it'll be nice. Yeah, speaking of the preparation, by the way, I forgot to ask you what your commands founders to hire.

Someone who's actually experienced in that who is qualified who has gone through several of those, something like marketing agency or something like that or.

Do you think founders can actually handle that by themselves?

You know, I mean, of course, it'll vary from team to team, depending on what the internal resources are.

I would say most if you have the, the bandwidth, the skills required to manage it, manage it internally are not so complex.

So, it's just a matter of whether you have the time to do it or not. What I highly recommend is that you've any founder that's considering going down this path and admitted list.

This is not something I did, but anybody that's considering going down this path, start to connect with other founders that have.

Already had the experience, and especially those that have had success with it.

Um, I found that most of them are are generous with their time and their, uh, and sharing of their experiences.

And that makes it a whole lot easier than reinventing the wheel as you go.

Right. That's actually very true. And founders are very supportive of other founders as long as you chose numbers back and try to help them. So.

At this positive point, we are moving on to the last question after this episode, which is a call to action. So, Andrew, what's the 1 thing you want to listen to do? Right after that is.

Well, the rounds that open, you know, we'd love for your listeners to follow us on social where we are Morrow.

On Instagram, and, um, if I can be of any help, anybody has any thoughts or questions. They could email me directly into Andrew Mara dot com.

And Sandra com, and of course, anybody wants to be notified when the round is open.

Email me, and I'll be sure to keep them in the loop. Perfect, great call Tyson and the thing 1 is as bad as spelling things as I am. I'll make sure to leave a link to all the things that Andrew just mentioned in the description of the episode.

So if you're curious to read more, if you're curious to follow this story off tomorrow definitely take a look at the description of the episodes. A lot of info is going to be there and yeah, that's going to be my call to action. Usually go to subscription of the episodes.

Find interesting stuff there and have a good date.