Investing for unaccredited investors

Since the early days of Republic and Wefunder, we've seen the equity crowdfunding industry grow to facilitate multi-million dollar raises for companies like Gumroad, Beehiiv, Vercel, and Mercury.

Today, we're seeing a new trend emerge that’s enabling unaccredited investors to participate in traditional venture rounds outside the constraints of Reg CF. 

Platforms like Power in Numbers (PIN) are using the unique legal framework around “investment clubs” to help groups of people—like Stanford GSB alumni, YC founders, and employee mafias—pool their resources and invest in startups they're passionate about.

To learn more about how universal APIs are accelerating developer productivity, we had a panel conversation featuring PIN co-founder and CEO Steph Mui and Headline investor Zehra Naqvi. Check out the full transcript below.

Key points from the conversation: 

Transcript:

Hello, we're live! This is Walter, one of the co-founders of Sacra. As you can tell, I'm not Adam, who typically hosts these events. Adam from Sandhill couldn't be with us today.

Sandhill and Sacra are partners on these live events, which we hold almost every Thursday at 3 PM Eastern. At Sandhill, they put on events, have a great newsletter written by Adam each week, and manage a large syndicate. It's a significant community of people interested in private markets and startups, so you should definitely check them out.

At Sacra, we conduct research on private companies and publish that research on our site. We team up on these cool events to discuss different topics and interesting developments in the startup ecosystem.

Our guest today is Steph Mui, the founder and CEO of Power in Numbers. We're talking about investing for unaccredited investors. Power in Numbers is a fascinating platform for community investing. For example, there's a Y Combinator founders group powered by PiN. They also work with business schools and similar organizations.

Steph herself is a Stanford GSB MBA graduate. At GSB, she started one of these investment groups. They're backed by some of the best investors in Silicon Valley, including Initialized. We're super excited to chat with her.

We also have Zehra Naqvi, an investor at Headline who focuses on consumer investments. She was previously the head of founder community at Republic, one of the largest equity crowdfunding platforms - a significant platform for unaccredited investors.

I want to bring Steph and Zehra on now because they can provide much better introductions themselves.

Those are great introductions.

Thank you, you're too kind. I tried to give a little introduction, as I'm super excited for this panel. But Steph, maybe you could kick it off and provide a better introduction?

The quick story is that I'm Steph, and I started my career in venture capital. That experience actually inspired much of what led to building PIN today. My journey with PIN really began back in business school. At the time, the intent was simply creating a side project for our class. We wanted to give 400 of our classmates, who were all excited about backing our fellow classmates, the opportunity to invest. The challenge was that 60% of them were unaccredited, and traditional fund structures often have caps on the number of people you can have in a fund.

For almost two years, we were working on a solution for ourselves, thinking it would just be for our class to start a legacy. I'm super proud that even today, there's a new version of this fund for every single class since we started it in 2020. On the personal side, that project has evolved into PIN, which is now my life's work and full-time company.

We were backed by Initialize and NDA, and now we work with all the top business schools, schools of all sorts, company alumni groups, accelerators, founders, and more. They're all using PIN to do something very similar to what we did – coalesce their communities together to invest in startups, usually those who are part of their community or have relevant expertise to what they're doing. I'm excited to share more about that, but I'll pause there for now.

Sweet! It was good stuff. Yeah, we met at a founder dinner in New York City. The guys from Prequel introduced us, so that was great. I'm super excited about it.

Great guys!

Yeah! Zehra, please continue.

First, thank you so much for having me. I love discussing unaccredited investors because it's a topic I care deeply about. To give you a quick background on myself, I started my career as a founder and operator. I was fascinated by entrepreneurship, so growing up in Hong Kong, I started an e-commerce business and scaled it to profitability. While it wasn't venture-backable, by the time I moved to New York, I wanted to understand how I could work with every type of consumer tech business. I would constantly ask founders if there was anything I could do to help, just to gain experience throughout my undergrad years. I worked for consumer social startups, consumer fintech startups that raised no money, and companies that raised up to $220 million.

That's where Republic comes into the picture. I interned at Republic, an equity crowdfunding platform, for a year during undergrad and then joined full-time. A large part of my motivation to join Republic stemmed from the lack of accessibility in investing. I thought venture capital was a very confusing, opaque world, and every founder I spoke to struggled with it.

Now, I have joined what some might call "the dark side" as a VC investor at Headline Ventures. We love consumer tech, and I love consumer businesses in general. I've spent the last few years angel investing, and I'm now investing in seed to Series A consumer tech companies.

That's awesome. Maybe we could start off with some context setting. AngelList, as you know, was meant to democratize investing in some sense, but one of the limitations was that you still had to be an accredited investor to invest. Then everyone was pushing for the JOBS Act, which came along and opened up equity crowdfunding. This gave the opportunity for Republic, which was spun out of AngelList. 

Zehra, could you talk about what equity crowdfunding looks like for unaccredited investors today? Additionally, could you discuss the other ways that unaccredited investors can invest in private companies?

I think it's both shocking and understandable that only eight years ago, when the JOBS Act was signed, did unaccredited investors even have the chance to invest in private companies. It's still shocking to think about because sometimes I wonder who gets to decide what we do with our money. The government implements security protocols to protect people, which is a whole other conversation we could have.

When that change came into effect, the founder of Republic, who I believe was general counsel or one of the lawyers at AngelList, set out to start the company. A huge part of that was to give access to companies for unaccredited investors, which I think is defined as having a net worth under $5 million or something along those lines. There's some arbitrary definition of what "accredited" means, which we can definitely discuss further.

The founder really asked how we can give access to companies but not have it be a free-for-all. I think that goes back to the idea of curation and selectivity. There was a concern that this could become a market with tens of thousands of companies all fundraising, which would be overwhelming for an unaccredited investor. How do you even make choices if you're not a VC? How do you assess these opportunities?

Republic was, I believe, the first equity crowdfunding platform to really double down on the selection process, mimicking the VC selection process. When I joined Republic as an investment associate, we had due diligence and investment committees. When we found a company we wanted to put on the Republic platform, we weren't necessarily writing a check into the company, but we wanted to make sure we could do our due diligence on it. This ensured all the investors on the platform had the information they needed.

It was interesting because we were able to marry the curation that was necessary in VC with the accessibility of investing in a startup as an unaccredited investor.

Steph, around this time you were starting your career in venture capital at NEA, and then you moved on to GSB. Could you talk about what made you excited about moving from traditional finance into venture capital, and then from venture capital into the space of unaccredited investors?

It definitely was very formative in how PIN even started. I think coming from banking on the East Coast to Silicon Valley VC was a bigger culture shock than I expected. I feel really fortunate for my time at NEA because without that professional experience of literally being forced to learn on the job, I would have been totally out of my element.

That was one inspiration for me when I went to GSB. Realizing that our 400 very talented classmates were in the middle of Silicon Valley, but still had so many questions and confusion around investing accessibility, really struck a chord with me. It made me even more grateful that I was forced to learn on the job itself.

Similar to Zehra, whom I met because of our shared passion for opening up accessibility to unaccredited investors, we're solving our own problems. It was never meant to be a bigger movement, but one of our biggest observations was that about 50 people from our class would start companies every year - around 20 companies on average. We explored everything from traditional fund structures to equity crowdfunding and found that forcing 20 companies to go through this equity crowdfunding process wasn't going to be the solution that worked for us.

I think what makes us different from what Republic or other platforms do for unaccredited investors is that they're an open marketplace for people looking for opportunities. For us, it was a huge community of people who wanted to support our community, and we wanted to create something that made it as easy as possible for founders. These founders naturally had a lot of choice and competitive rounds, and wouldn't want to deal with the extra logistics of setting up a channel just for specific people.

We wanted to create a structure that fits into a traditional venture raising round as seamlessly as possible. That's what birthed PIN and its expansion. I think part of the reason why I became friends with Zehra is our alignment on how excited we are about increasing accessibility in this area, and we hope it continues to change more in the future.

It's really interesting. I'd love to hear about your experience during the COVID era. We're talking about the period from around 2015 to 2019, when things started to go a bit wonky and crazy. You had Robinhood and WallStreetBets emerging at the same time. Republic raised funding at a $1 billion valuation and grew rapidly. Then you had these other products like Party Round come out. They grew like crazy from a marketing standpoint, though their underlying traction was questionable. Can you talk about your experiences during this COVID period, since you were both deeply involved? What were your key takeaways from that time?

I think that was the craziest time to have gotten involved in the conversation of angel investing and equity crowdfunding. It was such an exciting time with so much money available. I'm thinking about it as if it was a decade ago, but it was only 3 years ago. It feels like a decade because we're in such a different environment now.

It's interesting because, having been at Republic, we raised our Series A and Series B in a matter of months from each other and hit unicorn status. A huge part of the motivation and ethos of Republic was always democratizing access to investing. At that time, I transitioned to become head of founder community and then worked on growth. For us, having spun out of AngelList, we had many investors on the platform who were already accredited but wanted to diversify their options with non-accredited fundraisers that their syndicate leads weren't putting up on AngelList.

We realized at a certain point that if we're going to burst the bubble of the tech and VC ecosystem, education and community have to be part of this. When the market started going in a different direction, how could we expect unaccredited people to want to invest in private startups when they might not even be investing in the public markets? That's when I shifted to becoming head of community because a huge part of it for us was about education.

Spinning out of AngelList was a great blessing. We had a huge user base of accredited users or just users that were VC-adjacent and unaccredited, but they knew how to assess opportunities. For the last year and a half I was at Republic, which was post the insane 2021 high, we really doubled down on how to reach net new users who don't know anything about private markets, who have never watched Shark Tank, and actually educate them on what these opportunities mean.

Naturally, I think "community" is also a superfluous word - it means so many different things to different people. But I think we really doubled down at that time, thinking about how we can't exist in this bubble anymore. If we're going to be category-defining and continue living up to the unicorn status, we have to expand to new users who need to be educated on what these opportunities might mean for them.

For us, I feel like COVID-19 definitely played a significant role in our company's inception. People often talk about the "why now" of when companies start, and COVID-19 was undoubtedly a huge factor for us. As I mentioned, PIN was never supposed to be a company; we were really doing our own thing for our purposes. Interestingly, I actually graduated from GSB working on a completely different startup in the fitness space, which was a classic peak COVID stereotype.

It wasn't until our 2020 fund launch in June 2020 that we found people of all sorts reaching out, interested in using our product for their purposes. We saw a lot of alignment, whether it was with people learning about investing for the first time via Robinhood, or the DAO movement in crypto getting people excited about community investing. There were also new ways of creating or running organizations by crowdsourcing different aspects, including funding and organizational responsibilities.

All of this coalesced into organic demand, not only from our community but even from business schools, which are obviously close to us, and groups of all sorts. That's really what gave us the inspiration and excitement to push forward and made us believe that PIN could be a full company.

Another macro trend that inspired us was people starting to realize that while there's a lot to be gained from public markets and crypto, historically, much of the returns have been capitalized in the private markets. Especially with the democratization of access through platforms like Robinhood or crypto, people started feeling excited about the idea of accessing this category that had previously been inaccessible.

For us, we noticed these COVID-related trends blending together to create an awesome opportunity, and that's how we got started.

It's an exciting topic, and Zehra, you were emphasizing the education component. We've talked about community a bit, but what do you think about the statement that became popular during this somewhat crazy era? In the cold light of day, how do you react to the idea that "everyone should angel invest"? Do you still agree with it, or are you slightly embarrassed that we might have suggested that?

I think I was never quite brave enough to say everyone should angel invest, as I had been very cautious from the start about making such broad statements. Angel investing is a privilege, requiring the ability to understand and observe trends, speak with founders, and make decisions about where to put your money. This is different from investing in public companies, where we have much more information available to make decisions.

We're at an interesting point in time. For me, angel investing has never been a requirement for everyone, but it naturally comes up as you continue to invest in public markets and generate wealth. In recent years, venture capital and startups have become alluring career paths, especially for Gen Z. Steph, I'd love to hear your thoughts on this.

I've found that many of my Gen Z friends in various fields, like law or pre-med, are asking me about angel investing in relevant tech companies much earlier in their careers than people would have a decade ago. This is likely because there's so much more information available about VC now compared to 10-15 years ago. The bubble has burst in that sense.

For me, it's about timing. Ideally, everyone reaches a point in their career when they can start thinking about what they're passionate about and what they want to invest in. I began angel investing in beauty companies because of my past experience and comfort in that area. Then I moved into consumer fintech due to my time at Republic, and now I'm investing with a broader perspective in consumer social because I've thought a lot about what I want to see exist in the world.

I hesitate to say that I ever claimed everyone should angel invest. Perhaps that sentiment existed in 2021, but now I definitely emphasize that it's a privilege. It takes time and different life paths to reach a point where you feel comfortable enough to do so.

I have to say I really resonate with that. While I don't feel qualified to speak to Gen Z trends on NBC specifically, we have generally noticed a strong alignment of people wanting to invest in those they know in their communities or in areas where they have unique expertise or value for founders. In terms of our inspiration for building PIN, that was what we saw as the huge win-win. Obviously, it's not only allowing uncredited investors or operators to access great deal flow from these companies, but on the founder side, we're also enabling them to tap into communities of people who can meaningfully help their businesses. So in terms of everything you shared about trends we're seeing and people's interest in it, I'm personally really excited about that future of matching more founders with relevant people who can help them and giving everyday people the opportunity to get more involved in helping great folks too.

Yeah, Steph, I'd love to talk a little bit more about community. We've been using the term "community" frequently, but there are two points I'd like to address. First, can you explain what enables unaccredited investors to invest on the PIN platform? It's my understanding that it's not equity crowdfunding, but something else. Second, I'd like to discuss the centrality of the notion of community and what that means.

That's a great question. In terms of the logistics of what we are, I mentioned earlier that one of our goals was to make this as easy as possible, not only for the leaders forming these vehicles but also for the founders accepting this money. In our mind, our gold standard was to create something as similar to a fund or angel group as possible, so founders can accept money alongside their rounds as usual.

Given all the regulations around traditional funds, that wasn't exactly what we needed to do. We ended up iterating to something called an investment club, or a refined investment club, which allows for people to participate. There are rules around the types of people who can participate. Unaccredited investors are allowed, but certain states permit them while others don't. Unfortunately, there are some states in the US where unaccredited investors can't participate. Another example is that a group has to have some strong relevance to each other and show some sophistication. A random person who joins our newsletter and wants to join a random club, for example, wouldn't be able to do that.

There's also a strong voting component. They invest similar to a fund in the same SAFEs or alongside the same rounds, but the main difference between being an LP in a traditional fund versus a member of an investment club is that there's visibility into the underlying investments and the opportunity to vote before an investment is actually made. That's what our structure looks like. Functionally, it's very similar to a fund, and from a founder's perspective, it's also very similar. Those key differences in how we screen and how investments are made and processed are the main differentiators from a logistics standpoint.

Regarding your point on community, I think community is a buzzword in many ways. What we have found is that people really do want to connect with like-minded folks. It started off focusing on existing communities of people who knew each other in real life, whether they went to the same school, worked at the same company, or shared the same profession. Now we're finding more groups of people who may not know each other personally but have a strong affinity with the people they're investing with. For example, they might all be doctors, climate scientists coming together to invest, or people who've met online via games and are passionate about making gaming investments.

It's interesting to see how the cultures of those communities have formed. One universal aspect is strong leadership and vetting of members. We have some communities on the platform that are more open and allow almost anyone who wants to invest to participate within the rules we mentioned. Others are more curated and vet for loyalty, engagement, or other factors, and actually have application processes and other requirements to participate. It's been fascinating to see the different cultures that emerge from that. I wouldn't say one's better than the other, but a strong leadership team and intentionality upfront over what they're there for – investing together, serving great founders, and learning together – is always great at seeing the best communities flourish in that way.

Zehra, I understand you have a Gen Z-related side project. Steph has sworn off knowing about Gen Z trends, but can you tell us about this? Is there a generational aspect to it? When we talk about Gen X versus Millennials versus Gen Z, and then perhaps Gen Alpha, do we see a continuation of the trend? Is Gen Z actually more excited about investing in startups? How do you see this playing out?

I think it's a function of how much easier it has become to educate oneself on various topics now. Even before TikTok became popular – I'm on the older end of Gen Z, and it became popular when I was about 19 – I consider how it has affected my younger brother, who was around 14 when TikTok became popular. It's much more formative in disseminating information.

My favorite example that contextualizes why Gen Z is perhaps more aware about angel investing beyond just the VC Bay Area bubble involves a hair care company. This company sold a minority stake to a private equity firm. The product, a hair oil that supposedly helped your hair grow faster, had gone viral. As soon as the news about the private equity stake broke, TikTok was flooded with comments and videos from Gen Z users – 18, 19 years old, even younger – saying, "Now that they've sold a stake to private equity, the formula is going to change. They're going to make everything cheaper."

I don't think 10 years ago, the 14 or 15-year-olds of that time would have been able to make that judgment or assessment. Because of this increased awareness, there are now influencers who have gained their following by talking about being angel investors and VCs. A decade ago, we didn't have beauty guru YouTubers discussing angel investing, but now we do. There are influencers with hundreds of thousands or millions of followers who talk about angel investing and VC.

I think it's just a result of more information being available, and because of that, Gen Z is more aware of where their money goes and how that affects the products and companies they want to see in the world. This doesn't necessarily mean every Gen Z individual is going to be an angel investor, but I think it means Gen Z is more cognizant of who owns the companies they're purchasing products from, who their investors are, and what's happening with these businesses. This level of awareness, especially at a young age, is not something you saw just a couple of decades ago.

Steph, do you have Gen Z communities on PIN, or is it mostly professional communities like your GSB or YC type groups?

I'll be honest, now that I'm thinking about it, I think our group is a little bit older than Gen Z. But I've been trying to get Zehra on the platform with her for a really long time, so this teams me up perfectly to convince her.

Yes, definitely. Zehra, do you have a community that you should be making on PIN?

I actually feel like we should address this topic. We've talked about it for a long time, and I'm still learning the ropes of being a VC. However, I think it's interesting that I have many friends outside this ecosystem who tell me they want to invest in the companies I'm excited about from an angel investor perspective. I believe there's a unique platform here. I love what Steph is doing with PIN, and I think there's a lot more that should, and hopefully will, happen there from a Gen Z perspective. We'll definitely continue this conversation.

Yeah, I'm curious - Steph, do you often get into these conversations? And Zehra, I'd be interested in what you think. People ask, "Should I be making a community on PIN? Should I be starting a syndicate on AngelList? Should I be doing SPVs with [specific entity]?" How do you advise folks in these types of conversations?

Yes, all the time. That's like our number one thing I feel I'm always talking about. I think, besides the very practical reason for us, which is allowing for uncredited investors to participate, our goals are a bit different. I admire AngelList so much and the syndicate product they built, especially from a utility perspective. I've invested in more than my fair share of syndicates and RUBs and all that kind of stuff, so from a utility perspective, I think they're an amazing investing platform and someone we look up to in that regard.

I think for us, and why we feel differentiated besides the uncredited piece I mentioned, is our focus on that win-win scenario I mentioned earlier. I'm a part of a few syndicates myself, but I don't feel like it's a true community. I know that word is very vague, but it really feels more like a passive activity where I can opt in when I want. I get these emails with interesting opportunities, and it's definitely more focused on the utility of investing.

Where PIN is headed is this win-win scenario of how we coalesce communities. They're almost like extensions of memberships or group chats or alumni groups that you would want to be part of socially, and also around the shared passion for investing. We're asking how we can actually unite communities together in an engaged way to empower founders and help them meaningfully.

That had always been the thing missing for me with using AngelList and syndicates. Even now as a founder, you have a very strong relationship with the lead but not necessarily with the people underlying the syndicate. I feel like that's a huge missed opportunity that the culture of syndicates just doesn't allow for as much.

For PIN, even just the simple fact that everyone puts money in upfront and is invested in the same companies together changes how people think about something like this. Their excitement when they get a request from a portfolio company founder, how much time they spend on something per week, their likelihood to show up to events - all of that is impacted by the fact that people are willing to put their money where their mouth is.

So I think our groups have been historically very different. Over time, certainly, I think we'll "compete" more, but we've found that our approach resonates with a lot of groups that maybe wouldn't have started syndicates to begin with because of that focus on community.

Zehra, that's really interesting. I'm curious about the flip side of this. As an established VC now, one of the concepts I'm thinking about is how emerging managers start out. For example, someone might begin by creating a syndicate or building a community on platforms like AngelList. They build their reputation and network, do some good deals, and then potentially bootstrap that into raising a fund or joining a VC firm. How do folks at Headline think about the unaccredited investing space? And from the perspective of a legitimate VC, what's your view on this progression?

I think this is an exciting development. When I first started at Republic in 2020, we were a pre-seed/seed stage company, and we were constantly fighting for VCs to take us seriously, let alone the companies on Republic's platform. I believe that all changed in 2020 when Sahil Lavingia's company, Gumroad, raised on Republic. It was the first $5 million deal to ever have been raised on an equity crowdfunding platform. At that point, you could only raise about $1 million on these platforms, but the cap was increased to $5 million in 2021.

I think that kind of changed the game. Now, even as a VC myself, I reflect on my time at Republic. Many of my friends worked at firms like NEA, Insight, and Andreessen, and our conversations about startups were always from the perspective of wanting to meet as many companies as possible. I think we've finally gotten over the hurdle of the perception that companies doing Reg CF rounds aren't as good. If anything, many of my VC friends used Republic and our deal flow pipeline last year as a way to keep up with companies and source new ones. Even now, I check in with the Republic team regularly to find out what companies they're looking at and the deals they're seeing.

We've always seen it as just a new way to meet founders. I think there should be no hierarchy of financing - VC shouldn't be seen as better than debt, and it shouldn't be seen as better than an angel round or an equity crowdfunding round. It's all capital that helps you build a successful business. I don't think it matters where it comes from, as long as you're able to build that business successfully.

That's really interesting. I'd be curious to hear Steph's take on this, because I feel like one of the issues you have to deal with every day is the notion of stigma. Someone might say, "I don't want community investors on my cap table because it could be a negative signal." But on the flip side, PIN has the argument that their communities are better in some sense. You have groups like Air Angels, the Airbnb alumni group, the Lyft alumni group, and YC founders. So it's a different flavor of investor than potentially the general public. I'd be curious what you think about the hierarchy of capital quality, both in terms of what it should be and what it actually is.

Actually, it's funny because that exact problem is what we were trying to prevent. To your point, I feel like there has been a stigma around taking unaccredited investors in the past, or frankly, taking money from non-institutional or non-A-plus angel investors. That was our concern. 

I remember originally we were planning to have all the companies in our class open these RegCF rounds or syndicates or something else. Besides the unaccredited piece of it, people didn't want to because of not only the logistical work but also the stigma around it.

That was a big driver of why we structured PIN in the way that we did. We wanted to specifically set up incentives and a structure that allowed the best founders out there to take money from these groups without any hesitation around signaling risk or other issues. I think it's been so effective for us because we're really focused on communities that have a strong sense of purpose or reason to not only be investing together but to invest in the companies they're investing in. 

For us, there's usually very little hesitation. You're either part of this community yourself and want to give back to it, or these people have already helped you so much, which is the case with our Stanford group or many of the founders' groups that we see.

One of the other early company groups that came onto PIN was early Coinbase employees investing in crypto companies. Founders were so excited about that because you have a bunch of these early Coinbase employees who have expertise across products, security, tech, business development, and more, all under one roof. 

You can take a check from them very easily alongside a round where you already have institutional angels, etc. It serves a very different need, whether it's amplification on social media, helping you crowdsource a great hire, or finding someone within that group who has expertise or feedback that could be helpful in a new product launch.

We've been fortunate to not have as much of an adverse selection issue because of the way we designed everything upfront and the curation of the communities themselves.

I'm curious, Steph and Zehra, what advice you might have for founders when you talk to them. Let's consider your typical founder or maybe a high-flying founder who's doing really well. Is the advice something like, "For your Series A, consider opening up a small portion for accredited investors"? I noticed Ankur, the founder of Carry, just announced they raised $10 million and are also opening up a Reg CF alongside for unaccredited investors. What type of advice might you give founders to maximize their control, the quality of their cap table, and the optics around their round? How can they also incentivize people to participate, get excited about the company, and be in for the long term? How do you talk to founders about that?

I love telling founders that this is absolutely an avenue they should consider. We're already seeing it happen with multiple Series A and Series B rounds. Beehiiv, for example, did a $5 million raise on WeFunder, I believe. It was interesting because their Series B was such a huge, monumental deal with NEA, which is a highly respected VC firm. As part of the Series B, they also did this Reg CF equity crowdfunding to give some of their newsletter writers who aren't accredited investors the opportunity to be part of Beehiiv's success.

I think we're absolutely seeing this become a trend. Two to three years ago, when I told founders it was something they should consider or do, it was met with a lot of hesitation. Now, if anything, there are multiple Series A fundraises happening in consumer tech products, and every single founder I talk to is telling me that from a lead perspective, they want to do an RUV and SPV or a Reg CF round. It's becoming industry standard.

Part of that is because, from my experience with angel investments, even if I'm the smallest check in an SPV or an RUV, typically the angel investors are the most vocal, the most helpful, and always there to bounce ideas off of the founder. This has oddly enough become industry standard, not necessarily specific to Reg CF, but specific to the notion of having a group of investors participating as part of a larger Series A or Series B round.

That resonates a lot with me. Being on the founder side of things now, I have realized that one of our biggest advantages is our cap table. We're able to tap into a huge group of people who are incentive-aligned to help us and want us to succeed. This is especially true at the early stages. I say this from my experience at NEA, where working with a Series D company versus a Series C or Series A company, you naturally have much more impact at the Series C and A stages. Things are much more uncertain then; they literally have less staff and resources.

When I talk to founders, especially at the earliest stages, about how to set themselves up for the most success, I think forming your cap table when you're fundraising is incredibly important. Everything you mentioned, Zehra, resonates with us. For us at PIN, we're passionate about what we're doing because these groups are already curated around something that people need or understand. It's similar to how you go to business school to build out your network so you can tap into a huge group of expertise when you need something.

We see this as where the world is going in the future, and we want to build a marketplace of amazing pins. Regardless of what you're building, there would be at least one, if not multiple communities on our platform that would be amazing co-investors alongside a traditional institutional round, angel round, party round, or whatever you're doing.

I'd be curious to hear your thoughts on scale, Steph. For PIN, are you imagining that everyone in the world participates in some kind of investing community? How do you think about this? Perhaps this is too granular, but I'm asking in the context of what Party Round tried to do, which was to use a wedge strategy to build a financial services stack around banking and other services. How do you approach this concept at PIN?

We're certainly starting off with the most obvious groups. If you look at the suite of people on our platform, they're probably not all that surprising. They're from top business schools, growth-stage to exited companies and their alumni groups, founder groups, or VCs forming communities and co-investing alongside them. It's very tech-centric right now.

I think it's only been in the last half year that we started seeing more people outside of tech who still have expertise to offer. We're seeing climate groups, biotech, science, and gaming interest groups forming communities to get involved and help startups growing in these areas.

We see this as where the future is heading. We're obviously concentrated right now on bringing on people who are the most obvious users of our product, but even in the example you mentioned earlier, Zehra, there are so many amazing people who would be exceptional investors for the next rising beauty companies. Imagine a group of influencers, makeup artists, or retail experts.

We generally think that more companies in the future will be funded by their community members or industry peers, rather than being subject to the fates they might face if they only had institutions or angels to lean on. We envision a future where more people are not only funding but really supporting companies that they personally use or are closely affiliated with, which might not otherwise get started without their support.

So we're starting off with the most obvious groups, but our vision is much bigger than that, to your point.

In that context, Zehra, I'd be interested to hear what you think. Are we talking about mostly consumer companies or companies with some broad consumer interest? There's a slight irony here. I think the number one equity crowdfunding campaign I invested in was Customer.io, in terms of how well they're doing. It was interesting to see the contrast between the interest in Gumroad and the interest in Customer.io. Gumroad was a more accessible creator economy company, while Customer.io, an email automation business, was a little harder to understand. Despite that, it's a really strong business. I'm curious about the long-term trajectory. Are we really just focused on consumer-esque businesses when we talk about unaccredited investors investing? Or is there a world where we're all going to be like fantasy football, but with Customer.io, Braze, and not Amplitude but maybe Mixpanel or something similar?

Fundamentally, all of the most famous or best-performing companies from Reg CF raises are B2B SaaS, like Beacons, Gumroad, and Beehiiv, which is technically a subscription service for newsletter writers. 

Even if these feel like consumer tools to us, at the end of the day, these are businesses. I would bucket all of these companies, including Customer.io, into the same category. Mercury, which raised on WeFunder, is also fundamentally B2B. I know they're launching a consumer product now, but they were B2B when they raised.

If anything, I think there is a misperception that a company has to be consumer-focused. My friends who have no visibility into VC as an ecosystem consistently say they would only invest in a consumer brand if they knew it was performing exceptionally well, not just to invest in a consumer brand because they understood it.

This goes back to the notion that the consumer companies that end up doing the best on Reg CF platforms are the ones that, similarly to these B2B companies I listed, are just excelling in terms of revenue. I think it's a misconception because people understand the opportunity in B2B, but I also think consumer brands will be the easiest gateway to investing as a first step for people who aren't in VC and aren't in this industry.

That being said, I think it's always going to lead with consumer as probably what people feel initially comfortable with, but the numbers have shown that there is a lot of enthusiasm towards B2B SaaS when it comes to Reg CF.

Yes, that's interesting. Also, I guess there's probably the rise of some of these AI companies that are hard to understand, maybe some of these AI infrastructure companies. People are really excited about them. 

Steph, do you have any insight into the underlying companies that people aren't investing in? What is interesting within this investing paradigm?

Honestly, there's probably nothing super unique compared to what you've been seeing. Interest in AI is definitely at an all-time high, and that's universal across all of our groups, regardless of how they've come together. But I think I'm touched by the trend of seeing people become more and more excited about investing in their friends and people in their community. 

Personally, I've made a small handful of angel investments in some of my close friends. It's too soon to tell financially if it's been rewarding, but regardless, I think the camaraderie of being able to say that you're an investor in someone and really put your money where your mouth is is special. It's a different level of commitment. 

And vice versa as well – the few friends that I've allowed to invest in us, I take that as a huge honor. To your earlier point, it's not about the check size; it's really just about the signal of what that means and the mutual commitment to riding this journey together. It's been incredibly rewarding, so I really love seeing that as an overall trend.

Yes, it is fun to invest in your friends and to support them. It's also a sort of regret minimization strategy because if your friend becomes a multimillionaire...

That's true, exactly.

Yeah, it would be a little embarrassing to be like, "Oh yeah, I passed."

Yes.

Can folks do secondary trading on PIN? For example, can you say, "We discovered that one of our community members is an employee at OpenAI. Let's all buy some of their stock."

That's a great question. We have not seen that yet. What we have seen, which was actually a big part of our original vision and something we're still excited about for the future (although we have to prioritize other things now), is people selling part of their stakes on PIN. The biggest use case for that was when people would miss out on investing. 

For example, in our Stanford case, we had to cap the number of people at some point and close the official round. People who felt FOMO afterwards were unable to participate, so some early investors have sold parts of their original stake or investment in PIN to other people. We haven't seen much secondary investment yet, but it's maybe something to explore in the future.

Definitely. At Sacra, we publish research primarily focused on pre-IPO companies. We rank quite well in search results, so we get a lot of search volume around companies like OpenAI and Anthropic, even for some of the more obscure names such as CoreWeave or Lambda Labs. It's interesting to note that, for example, NVIDIA has become a household name, even though it's somewhat difficult to understand well. I mean, it's easy to grasp what they do, but it's still not a consumer product unless you're a gamer. Nevertheless, NVIDIA has certainly captured the mindshare of the average consumer.

Yes, absolutely.

I'd love to hear your thoughts on an open-ended question: What does the future look like for unaccredited investors? Do we still believe the future is in retail investing, or are we dialing back our ambitions in that area? What do you both think about this?

I think the future is really emblematic of what Steph is working on. If AngelList focused on accredited investors, what they did really well next was branding the RUV and the syndicate lead, making that a concept. Then Republic and some of the other equity crowdfunding platforms really nailed down the non-accredited investor opportunity. I think in general, the third wave is going to be individuals who are able to curate communities of like-minded people to be these powerful mini-groups - literally exactly what PIN is - and to curate these investments. 

So I feel very bullish that that's what we're going to see next in the ecosystem. Then phase 1 and phase 2 with the hypercuration and the really well-branded products, I think we're all going to culminate in phase 3 in a combination of accredited opportunities but then also non-accredited opportunities. I think there's just a lot more that can be done in that space, and I feel like Steph is at the forefront of a lot of it.

More than that, the only other thing I was going to add is that I feel one of the major criticisms people have when they talk about uncredited investors or retail investors in general getting involved with private investments or startups is, "Oh, well, there's such little information and transparency compared to the public markets." It's always so interesting when people say that because, in my mind, 99% of people don't look at the public statements of these companies, whether you look at GameStop or other situations that outline this. It's often FOMO-driven or based on other non-rational, non-financial reasons.

Even in the public markets where you have more information, I think the cool thing about startups, especially in venture capital and angel investing, is that there usually is a deep emotional reason for people to want to invest. Whether it's because they have expertise or deep care for the person that can actually help them, or they just really align with the mission, or other factors.

So I'm also really bullish on seeing that play out in this world. Of course, I'm very bullish on this asset class in general, even just looking at the high-level returns it's driven over the last decade compared to public investing. I generally think, as a principle, that should be available to everyone. But also, realizing there are tons of reasons why people would want to invest in things that aren't just purely financial. I find that criticism to be frustrating sometimes, and I'm just excited about allowing more people to invest in the companies they want and support them both as investors and consumers.

I'm interested in how Republic has approached this, especially because their business model has become quite complex. They now offer equity crowdfunding, a special tier for large investors, and they've ventured into cryptocurrency. I wonder if the future of alternative investments is heading towards this kind of mashup approach. Instead of focusing solely on unaccredited investors, it's more about catering to a diverse group of people and offering them various investment opportunities. Obviously, the goal is to offer quality investments, not just any random offerings. How do you view this hybrid world of alternative investments? Do you see it as preferable to a single-minded focus on unaccredited investors participating in private company investments?

I think it's such a fair point. I feel very bullish on whoever decides to stick with unaccredited investing, bring that to fruition, and continue onboarding new users who are outside of the VC ecosystem. As I mentioned earlier, I think Wefunder has been doing a lot of really competitive deals, such as Beehiiv's Series B. There's a lot to observe there.

In my opinion, whoever does Reg CF and non-accredited investing opportunities the best is going to be the winner. I think that focus is super important to continue going forward. I'm not sure who that's going to be right now, given how competitive the ecosystem has become. However, I think Republic was monumental from the start in getting VCs to take the industry more seriously as well.

I'm impressed with Wefunder's evolution. I felt they were initially somewhat second-rate compared to Republic, but their branding has improved significantly. They've secured several competitive deals, such as Beehiiv, as you mentioned. Other notable names that stand out are Vercel and Mercury, I believe. They've really attracted some impressive companies.

Yes.

Yeah, Steph, what do you think about this hybrid approach versus the focused approach?

It's challenging, but I'll say I admire how quickly they've been able to do that. Even from our experience, we get contacted all the time by people who want to use some kind of community-oriented structure for investing in various things, whether it's real estate, crypto stuff that we can't touch, or other opportunities that may or may not have merit. 

It's tempting, I'll admit, but in the few times we've explored that, we've found it to be incredibly logistics-, legal-, and tax-heavy. Even just getting our best operations team focused on our main product is challenging enough, let alone all these other potential ventures. So I'm just inspired by what they've accomplished. Hopefully, one day we can emulate something similar.

You'll get there. Cool, I'd love to. Do you have any parting words or advice for our audience? And how can folks reach out to chat with you?

I think my parting words would be that there remains optimism in both the accredited and non-accredited investor space. As individual investors, it's remarkable to consider that just 8 years ago, non-accredited investors couldn't invest in private companies. It's even more astounding to realize that only 4 decades before that, venture capital had just been invented as a nascent industry. The progress and accessibility we've seen in less than a century of this ecosystem's development is truly extraordinary.

I always like to remind people that we're still very early in this story, and it's going to be fascinating to see where it goes. To connect with me, you can search for Zehra Naqvi on LinkedIn and Twitter. I have several links in my bio on those platforms. I should probably use Beacons for that, but for now, you can find me there.

Yes, that's great. That's good stuff, Steph.

I don't have any final last words.

There's

My name is Steph Mui. You can find me on LinkedIn and Twitter. I'm also a Beacons angel investor—definitely want to give them a shout-out as well. You should definitely use it.

Sweet, I'll check out your link in bio. Awesome. That's also at getpin.xyz/ for folks. Well Steph and Zehra, thank you so much. It was great to get your insights on this stuff, and I'm grateful to you both for coming on. Thanks everyone for tolerating Adam's absence, and come back next week for more live events!