Hey Startup! Want Funds in a Flash? Part I
“I don’t think we’re doing it better; I know we’re doing it better.”
That’s the kind of confidence you always want to hear from someone who’s heading a startup and in this case the guy making the statement is Vincent Bradley, one of the co-founders of Flashfunders. The story of his company is especially interesting because Flashfunders is a startup for startups.
There’s a lot to learn from the way Bradley and the team he works with have conceived and launched Flashfunders. But that’s not all: if you have a new business idea you’ve been longing to get started, their story might also open up an avenue for you to make it happen.
Unlike Kickstarter
First things first: Flashfunders is a crowdfunding site where accredited (high wealth) investors ante up seed money and get some ownership in return. It’s not another Kickstarter where you get a t-shirt or the promise of a product to be delivered at some later date.
I started this with a rather bold statement from Bradley so let me tell you what Flashfunders is doing that gives him the confidence to make that claim. We’ll look at this from the side of the startups as well as the side of the investors.
First, for startups to access real seed money, generally up to about $2.5 million, there’s a long list of regulatory and legal requirements they must meet. Bradley estimates that if a startup had everything else in order, it would probably cost about $10,000 to jump through all the hoops.
The paperwork is done
Flashfunders has essentially put together a “turnkey” system that startups can plug into (maybe instead of “turnkey” I should have said “plug-n-play” to avoid mixing metaphors, but I digress). It is also the only FINRA registered broker-dealer licensed to transact equity securities on the web. All the hard stuff that is really outside of most entrepreneur’s wheelhouse is already in place.
Flashfunders has been able to pull this off because they are backed by Europlay Capital Advisors, who were the initial investors in Skype; and Stubbs Alderton & Markiles, the legal team for Beats, LinkedIn Series A & Skype. In other words, they are working with folks who have been through this a number of times.
In the same way that Flashfunders hopes to provide a critical service to startups, it plans on meeting the demands of investors.
“There are 8.5 million accredited investors in this country and right now less than 3 percent invest in startups and we think that’s a problem. It’s a problem for the companies (startups) and it’s a problem for the investors,” Bradley explains.
Allows for diversification
“Investors should be diversified and that includes having a piece of their net worth, a piece of their assets, in the venture class, so we want to open up access,” he continues. Flashfunders makes it easy for this group to invest directly in startups, unlike the model used by others. Investors can also pool their money and invest via funds.
Do you see an opportunity for yourself here, either to get a new business going or invest some funds? Bradley has more to say, including what he and the team at Flashfunders look for to determine if a startup has a chance at successfully raising money.
I’ll cover these points – and tell you why Flashfunders’ service is free to both startups and investors (yes, free) – in part two.
