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Roy Morejon:
Welcome, entrepreneurs and startups, to Art of the Kickstart, the podcast that every entrepreneur needs to listen to before you launch. I’m your host, Roy Morejon, president and founder of Enventys Partners, the world’s only turnkey product launch company that has helped over 2000 innovations successfully raise over $400 million in capital since 2010. Each week, I interview a crowdfunding success story, an inspirational entrepreneur, or a business expert in order to help you take your startup to the next level. This show would not be possible without our main sponsor ProductHype, a 300,000 member crowdfunding media site and newsletter that’s generated millions of dollars in sales for over 1,000 top-tier projects since 2017. Check out producthype.co to subscribe to the weekly newsletter. Now let’s get on with the show.

Roy Morejon:
Welcome to another edition of Art of the Kickstart. Today, we have a return guest from four years ago. We are speaking today with Kinsey Cronin. She is now the Senior Vice President of Business Development at FundAmerica. If you haven’t heard of FundAmerica, they are everywhere in terms of the equity crowdfunding side and the true infrastructure leader for FinTech innovators. Kinsey joins us today with now over a decade of experience managing sales and biz dev teams and five years of working on the cutting edge of FinTech. Prior to joining FundAmerica and Prime Trust, where she’s at now, she was Director of Business Development at StartEngine, which is one of the leading equity crowdfunding portals. So Kinsey, thank you so much for joining us today on Art of the Kickstart.

Kinsey Cronin:
Roy, thanks so much for having me back.

Roy Morejon:
Oh, any time. I think what’s really exciting for the conversation today that I’m most excited about is just the overall growth of the equity crowdfunding side. But we’ll definitely dive into that in a little bit. But if you would, given your experience in crowdfunding overall, talk to our audience a little bit in terms of your background and what led you to working with entrepreneurs.

Kinsey Cronin:
Okay. Let’s see, my background, I was working with entrepreneurs at a couple of startups, and I got this opportunity to work with hundreds of them at StartEngine, which I loved so much. It was something that I wasn’t sure I really was qualified for at the very beginning, because I didn’t know a lot about finance, I didn’t know a lot about investing or raising capital. But it turns out this new way of doing it was just so different from your standard methods, that StartEngine was looking for people who didn’t know anything, so they wouldn’t have any bad ideas. So, it was really such a joy to be able to find ways to help explain to these entrepreneurs who I just love so much because they’ve got these ideas and they’re willing to do so much and to try so many new things in order to make their goals and their dreams happen. And so that’s something I just probably never want to stop doing.

Roy Morejon:
Yeah, absolutely. So if you would tell our audience, because potentially many of them that are listening are more on the reward-based crowdfunding side, but talk to me a little bit about FundAmerica and Prime Trust and what problems they’re out there solving today.

Kinsey Cronin:
Well, so what we do at FundAmerica is we support equity or debt-based crowdfunding. So that basically means that instead of doing a rewards campaign where you’re going to give away, let’s say, a t-shirt or an early prototype of a product, you’re actually investing in the company in some way. Sometimes it’s not a company, sometimes it’s a real estate project. This is a new option for companies and for investors as of the 2015/2016 new JOBS Act regulations that came out. So it’s a growing young industry. In Europe, they’re about five years ahead. They got similar regulations about five years ahead of us. But it basically is the democratization of access to capital for companies that want to raise money and want to do it on decent terms and go out to their own community. And also for investors, so that regular people can get involved where previously they were barred from doing so by securities regulations.

Kinsey Cronin:
So at Prime Trust and FundAmerica, what we do is we actually do some of the backend stuff for a lot of the portals and some of the companies directly. We do the background checks on the investors. We create escrow accounts to hold their investments during the raise, and we make the disbursements out to the companies and the founders once they’ve raised their money.

Roy Morejon:
Incredible. Thinking about our audience, how can an entrepreneur today use equity crowdfunding to grow their business, whether they’re just starting off or maybe they have some traction already?

Kinsey Cronin:
It’s a good thing to note the range. We can see people successfully raising as little as, let’s say, $25,000 to get that very first seed started, or as much as $75 million because of some recent updates to the regulation, A+ regulations. And so it’s important to note that there’s cost associated with this, just like there is with any crowdfunding raise, for marketing, but also for legal costs to make sure you’re filing the right paperwork. And the less you’re raising, the less those costs typically are. And so the way that this is going to help companies grow is the same way that any investment will help you grow. You can take that money and put it into whatever’s going to make your business better and healthier. And one of the advantages of going with equity crowdfunding over rewards is there are more companies that it’s a good fit for because you don’t always have to have some kind of a reward or gadget that you’re giving out… or not giving out but kind of pre-selling, right?

Kinsey Cronin:
In this case, let’s say you had a software tech company or a biomedicine company, and you just think people are going to want to back you because they think you’re going to be successful, not necessarily because they need the software or the product that you’re developing. That’s also the case sometimes for some environmental projects, maybe you just are passionate about helping companies like this succeed, and you want to have the benefit of having a piece of it. Every entrepreneur knows that it takes money to make money, right? This is just a different way of going about it.

Roy Morejon:
Absolutely. I know before, when you were at StartEngine, you were running all the business development there, and then now over the past few years you’ve been working more closely with your employer there currently in terms of FundAmerica. What have you seen in terms of the evolution of crowdfunding over, let’s say, the past five years?

Kinsey Cronin:
Well, I think a really key thing that I’ve seen is… Aside from general growth, there’s been a ton of growth. The total amount raised in 2020 was double the total amount raised in 2019, and there was about 75% more investors involved in that money that was getting raised. But I think the most important key difference is that the more traditional institutional investors have started to look at raising money this way differently. In the beginning, there was a bit of a stigma about this being really for the companies that were having trouble getting VC money, having trouble getting institutional money for whatever reason, or maybe the founders just were more difficult to work with or were more stubborn and wanted to do things their way and didn’t want to have anybody else involved.

Kinsey Cronin:
Now there are VCs and angel investors who actually encourage their invested companies, their portfolio companies, to go out and take some of the money that they’ve given them, and then raise more from the crowd. One of the reasons for that is because there’s such a dedicated community that comes out of it. You’ve literally got people invested. Let’s say you have the choice between Uber and Lyft for a ride, right, and they’re pretty much the same, most people will go on and check both and see which one’s going to be the cheaper ride, right? If you’re invested in one, that’s the one you’re going to use every time. And that’s kind of the idea behind getting that community of invested customers.

Roy Morejon:
In terms of the landscape itself, most of the companies that we’re seeing today that are launching using equity crowdfunding have some sort of established customer base or a tribe, a community that they can tap into. Where else are you seeing success in terms of companies using this as a vehicle to raise capital and engage in their community?

Kinsey Cronin:
I mean, so of course it’s great if you have an existing community, but it’s definitely a method for growing. I think in certain cases I’ve seen the fact that this company is willing to be community owned in general is a selling point for the company, because they’re saying, “Hey, we have a mission, and we’re going to stick to it because we were not selling out to big money.” It’s actually a selling point for the product itself. But we do see that many of these companies that are raising money this way, they’re raising the profile of the product, because marketing for the raise is marketing for the product as well, right? It’s two birds with one stone.

Kinsey Cronin:
So if you can get radio interviews, if you’re doing paid advertising, if you’re having influencers talk about you, and they’re talking about why people should invest. And the reason why is usually because the company is so great, and they’re going to tell you what the company is doing and why it’s doing it. So it’s a great way to spread the word. I mean, I guess pretty much all of these companies, when they are doing these raises, they’re seeing an uptick in customers as well.

Roy Morejon:
Absolutely. I know before we started the recording we were talking a little bit about how blockchain has been playing into the future of the equity crowdfunding or just funding companies in general. How do you see this blending more into the future of the retail investors coming in and looking at these opportunities, and how are these platforms evolving?

Kinsey Cronin:
I mean, they’re growing right. They’re growing, and they’re enhancing the user experience all the time, and they’re gaining more and more companies. Like I said, you’re doubling between 2019 and 2020, you’re seeing an increase in total amount of companies that are getting listed. But I think one of the most interesting things they’re doing is starting to launch secondary trading platforms. That’s really interesting because we’re seeing the opportunity isn’t just now in, “Hey, make your investment. And then, where’s the way out, right?” Is it an IPO? Is it the company’s going to get sold? Are they going to start providing dividends to their investors? Probably not that because they’re going to take any profits and reinvest them into the company, right, and keep it growing.

Roy Morejon:
Right.

Kinsey Cronin:
So what’s great is having the secondary trading platform. It’s essentially a stock exchange. The term stock exchanges is protected within finance, so they can’t be called stock exchanges unless they have a specific license. But for the average person, that’s what it is, a place where you can buy and sell these stocks in companies, but they’re private companies. And so StartEngine has launched one, and we’re also seeing several other platforms developing them as well. And then we’re starting to see tokenization as well, which means that the stocks have the same values that they had when they were simply book entry, just logged in a database, right? But people are actually attaching tokens on blockchain, so similar to cryptocurrency, similar to Bitcoin. That is really interesting, because what that does is it creates liquidity on these trading markets. And the more liquidity you have, the easier it is to get the right price for that stock. So the easier it is to sell it for cash, which is encouraging for more people to buy them in the first place. So creating a really robust secondary market, that’s something that you really don’t see on the reward side of crowdfunding, right? That’s going to be very unique to equity crowdfunding, and it’s going to be very interesting to see how that develops over the next five years.

Roy Morejon:
Yeah, I think the only place you see it on the reward side is people reselling their product on eBay if they eventually get it, right?

Kinsey Cronin:
Right. But then that creates a problem sometimes, because if they resell it for cheaper, or I guess if they’re trying to sell it for more… It’s not the same thing as a stock market, reselling on eBay.

Roy Morejon:
No. I mean, in terms of this secondary exchange and adding in the blockchain elements of it, equity crowdfunding has seen tremendous growth, as you said, over last year during this pandemic. What do you see as being some of those signals in terms of why are they growing so fast? Why are these platforms seeing such great success over the last 12 to 15 months?

Kinsey Cronin:
Well, I think they were on track to grow anyway. The pandemic is one thing that certainly put more people in front of their computers and had less people in rooms together, but it was on the track to grow. I think the difficulty for travel made other ways of raising capital a little bit harder, so harder to go and shake hands. People just have more time to sit at home and be on their computers. And that’s usually most of the work for an equity crowdfunding raise is going to be done online.

Roy Morejon:
Absolutely. Let’s talk a little bit about tips, and I always love to touch on the marketing side of things. Any just tips in general in terms of an entrepreneur that’s out there listening to this in terms of what’s the process or things that they should be thinking about in terms of pre-campaign or pre-launch of their equity crowdfunding campaign? What are some of the things that they have to do?

Kinsey Cronin:
Well, okay, so they have to make sure they do their research first, explore the different platforms. If they’re in a specific niche, if they’re focused on real estate, environment, tech gadgets, you want to make sure you’re finding the right place to launch that. And considering how much money you want to invest in the raise and how much money you’re looking to raise, and finding the right way to do it is going to be important. So the where and the how. At FundAmerica we actually have an Invest Now button that can be embedded into the website of your choice. You don’t actually have to go through a portal or you can work with a portal.

Kinsey Cronin:
You’ll want to decide if you want this to be a non-accredited raise, which means that non-accredited investors can participate. And that means everybody can invest, right? Because about 90% of Americans are not accredited. It’s about how much money you have. And then the top 10% of investors by wealth or income are accredited. And so you can decide, do I want this to be just for that top 10% of wealth, or do I want to make this open to everybody? And then the things you need to do is consult with a lawyer, potentially consult with an accountant, depending on how much you raise. If you’re raising more than $250,000, you’re going to need an accountant to do at least a review, if not full audit of your finances. And that’s easiest if you’re a younger company with less on the books. But it’s not terribly painful either way.

Kinsey Cronin:
And then you need to definitely consider your marketing process. Are you going to work with a marketing company? Do you have a great marketing team on staff that can develop an amazing campaign plan? Who is the face of your raise? It doesn’t have to be one person, it can be a couple, but that human element is pretty important. You can have a celebrity influencer in your campaign video if you want to. If you have a very charismatic CEO, that’s the most common path, is a leader, a founder who has a lot of personality and is willing to go ahead and go on camera and talk and spread the word. But you need to think about what’s the right way in for you. And it’s a creative thing. There’s a lot of different ways in just like there are for rewards crowdfunding. And so you want to consider where your strengths are as a company and as a team.

Roy Morejon:
Absolutely. I know the raise rules or the rules in general were updated earlier this year around equity crowdfunding. Please share with our audience a little bit about what’s changed now just over the landscape in the last six months.

Kinsey Cronin:
Sure. Okay, so the primary regulations that are used for this type of crowdfunding are called Regulation D 506(c), which is just for those top 10% accredited investors. Then there’s regulation A+, which is for everyone, and regulation crowdfunding, which is for everyone. A+ allows you to raise up to $75 million, which is a recent change. It used to be $50 million until March 15th of 2021, and it was raised up to $75 million. And then there’s Regulation Crowdfunding, which is for a smaller raise. It used to be capped at 1.07 million, but as of March 15th, it’s now capped at 5 million. So that’s one of the things we’re going to see a lot of growth in, because now these companies are allowed to raise more money. The updates of March 15th also included a few things to make it a little bit more streamlined, a little bit less clunky. Just some fine tuning of the original rules.

Roy Morejon:
Amazing. I know you get to speak with founders every day in terms of discussing the opportunities with equity crowdfunding. I mean, I’m really interested to hear your take, because entrepreneurship is a tough road, and certainly raising capital is always difficult as well. How are you seeing most founders stay focused through the pandemic and move forward and make progress on their raises?

Kinsey Cronin:
Oh, I think they are having an easier time staying focused because of the pandemic. I just think they are growing. All of them seem to be growing fast. They’re focused, and they’re communicating and interacting very regularly with the investors and potential investors who are asking them questions, whether that’s on Twitter, whether that’s directly on their campaign page, whether they’re doing things like ask me anythings or Clubhouse rooms, they’re just constantly in dialogue with people who have invested or are interested in investing. One thing we find is that investors have a tendency to invest more than once. They have tendency to go back and get excited and put more money in again. The issuers, the entrepreneurs that are raising money, they have a tendency once they have one successful raise to do another one. They’ve now grown a little bit as a company, and now it’s time for another round. They have a tendency to really want to go back and do this again. You don’t see too many that decide, “That was a lot of work, we don’t want to do it again.” It is a lot of work, but once you’ve done it once, you now have this great community of evangelists to help you do it again, and I think it gets easier. If you keep applying the same amount of work, then you’re going to keep getting good results.

Roy Morejon:
Absolutely. Well, I can’t wait to keep seeing these results roll in and all these truly innovative startups use this equity crowdfunding vehicle to raise continual cash for their companies and continue to grow and engage the crowd of users that are using their products and their services and their brands. So a really exciting time for the equity crowdfunding side and what you’re doing over there.

Kinsey Cronin:
Yeah. I’ve heard it said by some people who work closely in this industry that they foresee a future where customers will be resentful if they’re aren’t given the opportunity to invest, right? I don’t know if you watched the GameStop hearing. So there was all that GameStop craziness earlier this year, and there was a hearing where they had the CEO of Robin Hood and one of the investors and whole bunch lawmakers. One of the lines of questioning was, “Hey… ” This was to the Robin Hood CEO, and Robin Hood is a company that allows people to invest in the stock market using an app. The questions were coming in and saying, “Why don’t you let your investors, who are your customers, why aren’t you letting them invest in your company? They’re the ones that are making you successful, these people that are using your app. Why can’t they be invested in Robin Hood itself?”

Kinsey Cronin:
And the answer is, “Well, because we’re a private company and we’re not allowed to do that.” And that’s not true. They can do it, but they have to go through this equity crowdfunding process, right? And so there is some thought that at some point there will be a sense of resentment if you’re not letting your customers in on the opportunity to profit as they help you grow.

Roy Morejon:
Yeah, no, I think actually that line of questioning came from one of our congressmen here in North Carolina, Patrick McHenry, [crosstalk 00:21:47]-

Kinsey Cronin:
It did, yes [inaudible 00:21:48].

Roy Morejon:
… meeting with and talking with. He’s very involved in that. I’ve spoken at length with him about crowdfunding in general at a few different events that we both spoke at. So it’s great to see this conversation happening now, whether it’s in front of Congress or just you and me on a podcast.

Kinsey Cronin:
Yeah. Yeah, it’s cool. He was also very, very involved in promoting the idea of crowdfunding during the time that they were putting the JOBS Act together. He had his own section of the JOBS Act that he was working on and was really trying to encourage this as the future of how companies get funded and how people are able to participate so that there’s not as much of a difference between the regular person and the person who’s making companies live or die.

Roy Morejon:
Absolutely. Well, Kinsey, this has been amazing. This is, as you know, our launch round, where I’m going to, rapid-fire a handful of questions at you. I’ve changed them up a little bit, so you’re good to go?

Kinsey Cronin:
All right, let’s do it.

Roy Morejon:
All right. So what inspired you to work with entrepreneurs?

Kinsey Cronin:
I had drinks with a former boss who told me he had an opportunity for me, and in three months I was either going to hate him or I was going to have my career path changed, and it was the latter.

Roy Morejon:
Nice. I know that you’re hosting your own podcast or mini series, should we say, In Crowd, a podcast about securities-based crowdfunding and the ways that entrepreneurs are using it to grow their business. But I’d love to know if there’s any other resources or people, newsletters, podcasts in general that folks should be listening to stay up to date on these things.

Kinsey Cronin:
Sure. There is a very cool series coming up, and we talk about it on my podcast, it’s called Going Public. It’s a reality show, essentially, that will be on entrepreneur.com. And it follows, I think, five companies as they do regulation A+ raises. A few of them directly go into public offerings, they IPO. And so it follows their process with documentary style, I think it’s an eight episode series. And that will be really interesting. It’s called Going Public on entrepreneur.com.

Roy Morejon:
Nice. That’s with Darren Marble, right?

Kinsey Cronin:
Yep. That’s Darren from Issuance.

Roy Morejon:
Yeah, that’ll be awesome. Great recommendation there. Kinsey, what do you think are the top three skills that every entrepreneur needs to be success?

Kinsey Cronin:
Oh gosh. Okay. Well, I think the first thing is resilience or thick skin. The second thing I think is optimism. And the third I would say is work ethic.

Roy Morejon:
Nice. If you were to write a book about your entrepreneurial journey, what would you name it?

Kinsey Cronin:
I don’t know. I would have to come up with something really clever, but it would probably have something to do with falling off a horse and then getting back on it.

Roy Morejon:
There it is, Giddy Up and Go.

Kinsey Cronin:
That’s what it’ll be called, Giddy Up and Go.

Roy Morejon:
Nailed it. All right, last question, Kinsey, and I love this because you’re so in the space itself. I know we talked about this a little bit before, but really interested to hear your take on what does the future of equity crowdfunding look like.

Kinsey Cronin:
Well, we talked about it a bit here. I think that the future of equity crowdfunding, specifically, is it’s going to be mainstream. I think that it’s going to be something people have an understanding of. It’s going to be normal for, especially, the younger generations to have at least a small portfolio of a few companies they’ve put some money into. I think that the secondary trading of these private companies, whether or not it involves the blockchain or crypto space, I think it’s going to alter the way our traditional markets work. I don’t know exactly how, but I think there’s going to be enough backing on this private side trading. You’re going to see a narrowing difference between what is a private company and what is a public company.

Roy Morejon:
Absolutely. Well, Kinsey, this has been amazing. This is your chance to give our audience your pitch. Tell people what you’re all about, where they should go, and why we should check you out.

Kinsey Cronin:
All right. Well, if you’re looking to learn more about equity crowdfunding in general, I do have a mini series podcast called In Crowd. You can catch us on Twitter @incrowdpod or look up In Crowd anywhere you get your podcasts. If you’re interested in raising a round of capital using equity crowdfunding, we have a resource page at incrowd.fundamerica.com. And you can always reach out to our team atinfo@fundamerica.com.

Roy Morejon:
Amazing. Audience, thanks again for tuning in. Make sure to visit artofthekickstart.com for the notes, the transcript, links to everything we talked about today. And, of course, thank you to our crowdfunding podcast sponsors, the Gadget Flow and ProductHype. Kinsey, thank you so much for coming back on the show, we really appreciate it.

Kinsey Cronin:
Thanks for having me, Roy, always a pleasure.

Roy Morejon:
Indeed.

Roy Morejon:
Thanks for tuning in to another amazing episode of Art of the Kickstart, the show about building a better business, world, and life with crowdfunding. If you’ve enjoyed today’s episode, show us some love by giving us a great rating on your favorite listening station. And, of course, make sure to visit artofthekickstart.com for all the previous episodes. And if you need some help, that’s what we’re here for. Make sure to send me an email to info@artofthekickstart.com. Thanks for tuning in, and I’ll see you on the next episode.