Genius founder Sam Bogoch of Axle.ai returns to the podcast to tells us the secrets of equity crowdfunding. Axle.ai helps enterprises with massive video files make them usable. The startup has found great success on Republic and Sam has wisdom to share.
Highlights:
Sal Daher Introduces Sam Bogoch Founder of Axle.ai Who Is a Returning Guest
Sam Bogoch’s Back Story Is on Another Episode Titled “Boy Genius, MD & Founder”
Axle.ai addresses the accumulation of video content in enterprises
What Axle.ai Does for Its Customers Such as Sports Venues
Enables Remote Work & Finding Relevant Parts on Massive Video Files
It’s a Big Problem and Companies Are Getting Acquired – Adobe Bought Frame.io for $1.3 billion
Video Files Grow Faster than Bandwidth, So Most of Them Are Still on Disk Drives, Not the Cloud
“...Amazon Web Services, when they're collecting very, very large data sets, they actually send out a tractor trailer-“
How Do Crowdfunding Investors Get Paid Out?
“We probably couldn't have gotten to where we are today had we not done that equity crowdfunding.”
Sam Bogoch and Axle.ai Had a Great Experience at Republic
Axle.ai Went Live Just Before the COVID Lockdown – Maybe It Helped Because a Lot of People Were on Their Screens
The Joy of Watching the Investments Come In on Real Time
Axle.ai Is Growing Fast But Not Fast Enough for VCs
“Today we have over 1,000 investors in our company.”
How Much You Can Raise on Republic?
Sal Daher Pitches Sponsors Purdue University Entrepreneurship and Peter Fasse Patent Attorney
Secret #1: Be a Business that’s “Crowdfunding-Ready”
Secret #2: Your Business Has to Be Easily Understood by People
Secret #3: Be Radically Committed to Communicating with Potential Investors
Republic Vets Startups Closely Which Leads to a Success Rate of 90%
Could a Life Science Company Succeed in Crowdfunding?
“You want to know what it takes to be successful, but you also want to see what flopped and understand what it was about the intersection of the platform, the audience, and the company itself that did not click.”
“...I do think that taken broadly, that this trend is going to change the way investing happens over the next 5 to 10 years.”
Relatable Companies Like Nanno (Uber for Nannies) Have Investors Who Use Their Services and Refer Their Friends – They Go Viral
“It's like Stone Soup at scale.”
Contact Sam Bogoch at sam@axle.ai to Get His Advice
Sam’s Company Axle.ai Is Raising Right Now So Check Them Out on Republic
Secret #4: Have a Really Catchy Video
Sal Daher Lost 70 Pounds Thanks to Plenity and the HMR Program
ANGEL INVEST BOSTON IS SPONSORED BY:
Purdue University entrepreneurship
Peter Fasse, patent attorney at Fish & Richardson
Transcript of, “Four Secrets of Crowdfunding”
Guest: Founder Sam Bogoch
Sal Daher: This podcast is brought to you by Purdue University Entrepreneurship and by Peter Fasse, patent attorney at Fish & Richardson.
Sal Daher Introduces Sam Bogoch, Founder of Axle.ai, Who Is a Returning Guest
Welcome to Angel Invest Boston, conversations with Boston's most interesting angels and founders. I am Sal Daher, your host who is eager to learn more about how to build better startup companies. Today, we are privileged to have you coming back to the podcast, an alumnus, Sam Bogoch, who is the founder of Axle.ai. Sam's going to give us an update on Axle and he's also going to talk to us about his success in funding his company on the crowdfunding platform, Republic. Sam, welcome back.
Sam Bogoch: Thanks, Sal, great to be here and great to be talking about some of the last few years in the past tense. I look forward to talk about the whole thing and it's actually been a fantastic experience for us in a number of ways, about which, happy to tell you more.
Sam Bogoch’s Back Story Is on Another Episode Titled “Boy Genius, MD & Founder”
Sal Daher: Well, listeners should know that there is an older episode which is titled Boy Genius, MD and Founder, a little ribbing of Sam because Sam really was a child prodigy, he's a brilliant guy, got a medical degree, then he went off into a business. He's the kind of person who can do anything. He can learn anything. He's learned something really cool, which is crowdfunding. Anyway, Sam, tell everybody who hasn't listened to that podcast yet, which they should listen to eventually, what is the problem Axle.ai is solving and how does it solve it?
Axle.ai addresses the accumulation of video content in enterprises
Sam Bogoch: Thanks. It's a huge problem and it is actually a bigger problem than the last time I spoke to you, which is the accumulation of video content, ongoing accumulation of video content among the hundreds of thousands of teams worldwide that are responsible for using it for marketing and other purposes. These teams typically go out and shoot very high-end content. Estimates are that about $30 billion a year is spent, for instance, on the high end, on the cameras that are used to acquire this content.
At the same time, about $15 billion a year are spent on the storage devices to capture the end results of that video capture. It's just a massive accumulation of material. Meanwhile, video, of course, dominates the internet. It's something like 85% of all internet bandwidth today. As a marketing vehicle, particularly since COVID, it has only accelerated in its importance so that even if you asked someone before COVID, they would say, "Oh, video is probably the top up and coming marketing vehicle," but now, get rid of in-person events, get rid of all these things. Suddenly, video is the primary way that people use to communicate with each other.
What Axle.ai Does for Its Customers Such as Sports Venues
Of course, it's playing a huge role. We have customers in areas like sports teams, political campaigns, three of the presidential campaigns last year used our software. We have sports venues, churches, universities, corporate video teams. It's basically anybody that has a message they want to get out, is shooting video these days. What our software does is it lets them, A, work remotely so they can collaborate through their browser and that's usually very hard to do with these large, heavy video files.
Enables Remote Work & Finding Relevant Parts on Massive Video Files
B, it lets them search the content automatically using AI and machine learning so that they can find the relevant parts of their content very quickly. Then C, it gives them all of that within a creative context. It connects up with things like the Adobe Creative Suite so that they can push material to Adobe Premiere or Photoshop or AfterEffects. That's what our software does. It's this creative hub, hence the term Axle. We're seeing a lot of growth. We were already growing before COVID, but then in 2020 and 2021, we've seen a very, I wouldn't say meteoric but very rapid ramp in our business.
Sal Daher: Excellent. Now listeners should get a sense. We see a lot of video online, so we assume that all video is online, but the people who are producing these videos have massive amounts of video that cannot be sent online. It cannot be transferred via the internet. They're just huge files. What we see in the internet is a very small drop in the bucket. It's the stuff that's been optimized for display on the internet. This stuff is raw footage that's taken with very high resolution and it's sitting on disc drives usually. Is that still the case?
Sam Bogoch: It is still the case.
Sal Daher: Two years later it's still the case.
It’s a Big Problem and Companies Are Getting Acquired – Adobe Bought Frame.io for $1.3 billion
Sam Bogoch: Oh yes. No, no, I'll be able to come back in two more years and it'll still be the case. The importance of the cloud is increasing. In fact, a cloud video startup was acquired by Adobe last month, Frame.io, for $1.3 billion. They're in a space just adjacent to ours. Mostly they deal with review and approval workflows, they don't deal with the core heavy files, but it shows that there's validation that the cloud is becoming more and more important in this space. We think that over the next decade, if you look at it today, it's probably 90% hard drives, 10% cloud.
Video Files Grow Faster than Bandwidth, So Most of Them Are Still on Disk Drives, Not the Cloud
Over the next decade, that will shift to at least 50/50, and maybe further in the direction of cloud, but it's a race, because the cameras keep getting bigger in terms of their formats. People keep shooting more material, people go off for a one-day shoot and come back with 10 terabytes nowadays. That's not unusual. Good luck uploading that to your favorite cloud provider. The minute you think you have the cloud bandwidth problem solved, along come even bigger and more numerous files to gum up the works. I expect this is going to be a long and interesting story.
“...Amazon Web Services, when they're collecting very, very large data sets, they actually send out a tractor trailer-“
Sal Daher: I like the little detail of Amazon Web Services, when they're collecting very, very large data sets, they actually send out a tractor trailer-
Sam Bogoch: Correct.
Sal Daher: - with a cable that hooks into your [chuckles] data storage and it downloads it to the tractor trailer, then they drive that to their server firm.
Sam Bogoch: Yes, it's the fastest way to get the material across.
Sal Daher: [laughs] It's so much data. That is unbelievable. Literally driving data around still, in the 21st century.
Sam Bogoch: They have actually done smaller and smaller versions of that. They have newer products that are briefcase sized, and then they have one that's toaster sized, I believe they're called Snowcone and Snowball, because their main storage is called Glacier. It's like, "Well, if you need a little bit of Glacier, it's a Snowcone and you copy your stuff onto the Snowcone," but that still has to get to FedEx. The Snowcone does not automagically do anything. It has to be physically conveyed to an Amazon facility for copying.
Sal Daher: Amazing. Tell me where Axle.ai is today in terms of revenue, or do you discuss that at all in public?
Sam Bogoch: Oh, sure, no. One of the things about equity crowdfunding is it's all out in the open. Absolutely. We're going to do somewhere around $1.2 million in revenues this year.
Sal Daher: Good. Wow.
Sam Bogoch: We're targeting about 2 million in revenues next year, maybe higher, depending on the outcome of our next fundraise. We're doing a priced equity round rather than the convertible notes that we've been doing in equity crowdfunding. If we're successful with that and we're raising about $1.5 million, then I think we can go towards the high end of projections for next year probably closer to $2.5 million for [unintelligible 00:07:43]
How Do Crowdfunding Investors Get Paid Out?
Sal Daher: Wow. What's your outcome for a crowdfund investor? Do they see an exit?
Sam Bogoch: Well, these are convertible notes, they're SAFE notes, so they would see an exit when we do. Another new development is that we've had two acquisition offers in the last two years. We did turn them both down, but we gave them both very serious consideration, and the second one was from a public company, so we would have had publicly priced equity to show for it.
It would have been a nice exit for all of our current stakeholders, but we decided to double down, and it wasn't a great exit. It was 2X or 3X, depending on when you got in. More importantly, we would've all had to go work for a big boring company. We got our advisory board together, and it pretty much came down to a coin toss, but we felt very comfortable that we were better off continuing to see what we could do independently, and I think the last year has borne that out.
Interestingly there's been a spate of M&A in our industry over the last year. Not just the Frame.io deal, but actually 14 other companies that either compete with us or are adjacent to this space, have all been acquired. Almost one every couple of weeks. It's like I basically open my browser in the morning, and wait to see what the newest one is. A couple of weeks ago there was one called Levels Beyond that was purchased. Another one called CatDV was purchased by Quantum. There's just this flurry of acquisitions, and we've been in a healthy enough state financially that we've been able to stay independent.
“We probably couldn't have gotten to where we are today had we not done that equity crowdfunding.”
Although I will say that the equity crowdfunding has been super helpful in that. We probably couldn't have gotten to where we are today had we not done that equity crowdfunding. We'd either be in a much less capable state or we would've been acquired.
Sal Daher: Wow. The equity crowdfunding had been of strategic value to you.
Sam Bogoch: Absolutely.
Sal Daher: They've allowed you to pursue a different strategy from the one that you might have had to pursue in the absence of equity crowdfunding.
Sam Bogoch: That's right.
Sal Daher: Okay. Well, tell us about your history of crowdfunding.
Sam Bogoch: Sure thing. Early last year, in early 2020, we decided that it would be an interesting thing to try to partner with Republic; we'd been approached by them. We had had a previous near miss with equity crowdfunding with another company that I probably won't mention, and that experience was a pretty mixed bag. There were issues like the timing of the offering, the amount of communication that was possible with the investors that participated, the ability to modify the information as the offering went on, all of which turned out to be really essential, if you're going to have a successful equity crowdfund.
More than anything, it's about, if you will, product-market fit. You need to be talking to the investors, telling them about your offering, which in this case is equity or convertible notes. Then explain to them why you think it's a good investment, and why you're putting your time, in some cases money, into the company. It's very hard to do that in a unidimensional deck or presentation, because they'll always come back with questions and it's your ability to respond to those questions in real time that makes it go. Anyway, we'd had a previous experience that wasn't so great, but we thought with Republic, that they had all the ingredients and they're a fantastic group to work with.
Sam Bogoch and Axle.ai Had a Great Experience at Republic
I didn't intend this to be an infomercial or anything, but I will say everyone from the founder / CEO on down, was a pleasure to work with, very professional, and also no BS. As you could imagine in any crowdfunding endeavor, there's a lot of hype, there are a lot of people that are applying various sales tactics including some high-pressure sales tactics, either to the entrepreneur as to why they should be on their platform, or to the investor as to why they should invest in this particular deal and we wanted no part of that.
What we wanted to do was simply get our story out to the widest possible audience, and see who invested. That's what we were able to do last spring. Actually, our crowdfund went live on March 15th of 2020. Probably not an ideal time for getting people's attention.
Axle.ai Went Live Just Before the COVID Lockdown – Maybe It Helped Because a Lot of People Were on Their Screens
Sal Daher: The only thing going on, everything was going off and your crowdfunding platform was going on, perhaps at a very good time, because this is an online world, the crowdsourcing world, right?
Sam Bogoch: That's true. Everybody had plenty of time in front of the computer that spring. It started out quite slowly but then as the dialogue increased and more people came in, we ended up raising the maximum that was allowed by the SEC for a transaction of this type, because at that time all we had was self-provided financials. We had not gone through a formal financial review or audit, and so it turns out that at that time the SEC limit for that was $107,000.
The Joy of Watching the Investments Come In on Real Time
It built, built and built, and then almost in the last 72 hours, we just zoomed through it, and it was a fabulous feeling. We had it again this year, just refreshing your browser and watching it go ka-ching, ka-ching, ka-ching as the investments came in. We had until 3:00 AM on, I believe, a Monday night, and the round ended up being fully subscribed at about 11:30 PM.
There were people who wanted to get in who couldn't. Friends called me up and said, "I thought I had another couple of hours. Can I--" The round was oversubscribed, and it was a great experience. We took from that the takeaway that this would be worth doing with reviewed financials. We got reviewed financials, got another year further into it, and did another one this spring.
Axle.ai Is Growing Fast But Not Fast Enough for VCs
Again, in this case came close to being oversubscribed. We ended up raising officially $375,000, but one investor wanted to put in an extra 25, so we took that as a note later on, so we ended up with 400 out of a possible 428. Between the two, we raised a half million dollars, and our company has not yet shown itself to be investible by a traditional VC that's looking for the true hockey stick growth. We know that we’re capable of growing our business between, say, 50% and 150% a year, but for most VCs, that's a slowpoke. They want the 300%, the 400%, and I don't think we have an argument that we can back up for that kind of hyper-growth right now.
It's great to be able to go in front of what essentially is an angel audience, who are investing in it on the merits and saying, "This may not be the next Google, but this is a well-run company with some great customers." We have customers like Madison Square Garden, NBC Universal, and Warner Brothers. They see that and they're like, "Wow, okay, this is a cool company." Also, at this point we have 22 people in the company, including several people with real pedigrees in the industry and management experience.
“Today we have over 1,000 investors in our company.”
I think it came across quite well, and again, you get to engage in this dialogue so that as you're going, people ask you to justify your numbers or explain whatever pros and cons you've already laid out there. It's fascinating. Today we have over 1,000 investors in our company.
Sal Daher: That is fantastic. That is fantastic.
Sam Bogoch: Thanks.
Sal Daher: I would not be surprised if, let's say 8% of those investors are people who might be able to influence adoption of your product. There's probably some of that too.
Sam Bogoch: There is definitely some of that. We had some industry people. We also had some very highly qualified family offices, and people who are not in our industry segment, but for instance, Tejpaul Bhatia, who was from Google, and is now at a space-- he's the Chief Revenue Officer for a space startup that is doing-- they're basically managing the International Space Station for commercial purposes. That's pretty wild. Anyway, he invested -
Sal Daher: That's cool
Sam Bogoch: - and I didn't even know he'd invested. I've met him once or twice around New York. I saw him just downtown. He said, "You know, I invested in your company." [chuckles] I was like, "Whoa." Actually, just earlier today, I was visiting a family office that's managing extremely-- multi-billion dollar portfolio for a large family. The guy said, "Hey, I put in $500 in your last round." I didn't even know that either.
Sal Daher: This is someone who works at the family office or the family office?
Sam Bogoch: Not the family office properly. He just did it for fun.
Sal Daher: [chuckles] That's a New England family office, we're going to be $500-- [laughs] Very thrifty.
Sam Bogoch: No, no, no. In this case, it was just, I think, exploratory for him. A lot of people have not tried out these platforms. It's just fun, you put in your credit card, and you can make an investment, and then you get quarterly updates and all this stuff. I do think a lot of the investment that goes on there is not from serious people, if you will, but people who just have a little extra cash and want to be able to tell their girlfriend or significant other that they just invested in a particular [crosstalk]
Sal Daher: It's a great conversation piece. Oh, yes. [laughs]
Sam Bogoch: Exactly. Whatever it is, it's a pretty fabulous thing. I do think it's opening the floodgates for a lot of investment RobinHood-style that is not channeled through these highly evolved and successful, mind you, algorithms for what is VC, or what is institutional debt, because at the end of the day, those are things that have worked, but they're not the only things that work. I think you see another example of that recently with Sequoia's new fund.
I don't know if you heard, but they just announced that they're going to have an open-ended fund that is not going to have an end date and is not going to have the same criteria for investment as their traditional funds. The reason in their case, is that they saw a lot of their most successful companies get huge multiples after their exit.
Sal Daher: Oh, yes, that's right. I've read about it. When they go public, they remain invested after they go public. I'm doing something like that right now. One of my proudest investments was leading the angel round in SQZ Biotech, that's SQZ, on the New York Stock Exchange.
Sam Bogoch: Great. Congratulations!
Sal Daher: They went public, and since they went public, I bought more. I don't have any insider knowledge about the company, but I have knowledge from before they went public, and I know the projects they're working on. I'm pretty well primed on what's happening with them. I think it's a very nice lottery ticket. They have six or seven different programs that they're working on. If one of them-- if they get positive results, the stock will do very well.
I'm well in the money right now. I could just cash out and make money, but I think I'm going to make even more money by far when one of their therapies goes to scale. We'll see. This is very exciting. Now, Sam, tell me a little bit about the compliance side of things. You are in effect a public company-
Sam Bogoch: In some ways, yes.
Sal Daher: -like a junior public company.
Sam Bogoch: That's right. Yes.
Sal Daher: That means you need to have audited financials.
Sam Bogoch: Well, you can do it without those. That's the interesting thing.
Sal Daher: You're limited to $107,000.
Sam Bogoch: I think that may have doubled since, but yes, $100,000 or $200,000. If you provide reviewed financials which are close to audited but don't cost as much, that can be in the $5,000 range to get your financials reviewed, then you can raise up to a half million dollars. If you provide audited financials, you can go to $2 million and beyond.
Sal Daher: Beyond? Okay.
How Much You Can Raise on Republic?
Sam Bogoch: Beyond, yes. I'm far from an expert, but I believe the current limit is $2.14 million, but that's under Reg CF, and then there's also Reg A+, which is really unlimited. You can go into the tens of millions of dollars. The cool part is that all of this is very similar in terms of its paperwork requirements. You have to fill out an SEC Form C, you have to get all the legal stuff validated. You have to really provide a lot of details about your cap table and financials, but it's nothing that any private investor wouldn't ask as part of due diligence. As you point out, it is almost like an IPO, because it's all there in the public record now.
Sal Daher: Right. Your previous investors would become public so that your cap table becomes public. People who invested prior to equity crowdfunding round, those people would be revealed.
Sam Bogoch: They would, unless they've invested through LLCs or something. Luckily, we have a pretty good roster. We have Jason Calacanis as an investor, we have people like Stadia Ventures and Quake Capital. They don't mind. They like it. It's good marketing for them.
Sal Daher: Yes, sure. In terms of your operations, for example, I know a public company, every time they release information, they have to do an SEC filing. It's like every statement they issue, they have to do an SEC filing. It's not just a 10-Q and 10-K, it's all the time reporting. Is there that kind of burden?
Sam Bogoch: No, there's not. There's some guidance as to, you have to provide at least an annual update to the SEC, which is general financial update, the state of the company, but you do not have to provide a blow-by-blow statement for review, things like that. Of course, if you end up being a public company, those are the built-in obstacles that come with it and cost of doing business. No, at this level, I think they're just happy if you're transparent on your financials. Also, you need a section where you lay out the risks, someone who'd come out and put you out of business, the economy could go south, all the usual disclaimers.
Sal Daher: Sure. One of the concerns that public companies have, one of the reasons they have to do these SEC filings is that it not be considered insider trading. That information be disseminated all fairly at the same time and that people don't have inside information on the company. Presumably since these shares are not tradable, I imagine if someone wants to, because of death or something like that, what happens in that situation? Can they transfer the shares to someone else or to an estate or something like that? Do you know that aspect of it?
Sam Bogoch: I believe right now there are very limited mechanisms for transferring ownership of these securities, but they're very limited. That is the number one challenge, I think, for the industry right now, is the challenge of liquidity. I don't think that's a unique insight. It's true of angel investing overall.
Sal Daher: Well, absolutely. Angel investing even more. You don't have a thousand holders. When you have a thousand holders, you might have someone who might buy a secondary position from you right? When you have 15 or 20, it's very hard.
Sam Bogoch: Exactly. I've always been struck talking to successful angel investors like yourself, even the most successful struggle with liquidity questions. I would love to see that problem solved and there have been some experiments by some of the other equity crowdfunding companies on providing secondary markets. The SEC is allowing this and actually Republic just raised $150,000,000. Kendrick, the CEO, stated that one of the big goals is to use that funding to start creating secondary markets for the securities, which if they pull it off--
I haven't seen it done well yet. If it were done well and it was like a mini stock exchange and you could buy and sell, that takes so much pressure off of investors. It's a much easier decision. It's like if I invest $5,000 today, if it's a disaster, I can still sell for $3,000 in a couple of months. Or maybe if it goes well, I could sell for $8,000 in a couple of months. It becomes more like a normal transaction where you can buy and sell as your personal needs and compass guide you to, rather than locking yourself into this thing for who the heck knows how long.
Sal Daher Pitches Sponsors Purdue University Entrepreneurship and Peter Fasse Patent Attorney
Sal Daher: That would be tremendous. Sam, I'm going to take a little bit of a pause right now to do a plug for my sponsors. I have sponsors of the podcast. There's a big difference from when you were on last time. After the sponsor message, the question I'm going to ask you is, if you're a startup, what are your tips for running a successful crowdfunding campaign? In the meantime, I just want to tell investors that our podcast is sponsored by Purdue University entrepreneurship and by Peter Fasse, patent attorney at Fish & Richardson.
Purdue University, I didn't have any personal connection to them, but I invested in a company, Savran technologies, and I got to find out just how supportive of their inventors, their scientists, their engineers, who invent stuff Purdue University is. This is like if you think you could become a professor somewhere, Purdue is a good place if you want to be an entrepreneur. If you're a busy professor, they'll send somebody from the entrepreneurship center over to the office of the faculty member and give them a primer on starting a company, what it's like. It's like a mini entrepreneurial MBA.
Then they're very supportive in terms of technology transfer. They even have a fund that invests in some of the startups, there's the Purdue Foundry. This is the Purdue Foundry, it's the entrepreneurship center there. They're just unbelievably committed. They have this 500-member engineering faculty. It's like the top five engineering school in the country. Usually, professors are evaluated on their publications, on how many citations the publications get, grants, things like that. Well, in addition to that, at Purdue, they're evaluated on patents that they get issued and on startups that they start. It really is remarkable.
Sam Bogoch: Fantastic.
Sal Daher: I'm very proud to have them as a sponsor and I'm also proud to have Peter Fasse as a sponsor, who's a top patent attorney here in Boston. Patent law is really, really essential to the success of a startup in the biotech area in which I invest, because that's how they build value. If you have a really good patent strategy, it could really be valuable. I think that founders should consider particularly in the biotech space, getting the best patent advice and Peter Fasse at Fish & Richardson is tremendous. I'm very grateful to these really excellent sponsors.
Sam, now tell me, what's the secret to success in the world of equity crowdfunding?
Secret #1: Be a Business that’s “Crowdfunding-Ready”
Sam Bogoch: That's a great question. I wouldn't say there is one secret to success. I think it is a multi-dimensional thing, and could probably make a list of maybe the top half dozen things. The first is to be ready in the sense of your business. You do not want to go on these platforms with a speculative business that might make money someday or might have some revenue someday. I think the criteria are very similar to the criteria for any angel investment pitch. You need to have a clear growth story, you need to have a big market opportunity, you need to have a team together. Common sense stuff, but that being said, it helps a lot if whatever you're doing has broad appeal to it. We actually do not qualify for that.
Secret #2: Your Business Has to Be Easily Understood by People
We do very specialized software for high-end video people, but I think even lay people can get their head around it and think, "Yes that sounds cool. I'm interested." What really does well on equity crowdfunding is things that have the B to C component where the average consumer can relate. I have one friend; her company is called Nanno and they're actually raising again on Republic. When she went out on Republic a couple of years ago, actually her experience was one of the things that made me decide to try it. Her name is Liz Oertle and they raised almost immediately the full million dollar maximum that was allowed at that time, $1.07 million.
What is her service? It's a marketplace for babysitters. It's like AirBnB.
Sal Daher: Very needed.
Sam Bogoch: It's genius, and who can't relate? If you haven't had a babysitter or been a babysitter or hired a babysitter, you're probably not even a human being. Everybody has some interaction with babysitters over the course of their life. It was highly relatable and as a result-- and a good business, actually. She was also in the Quake accelerator that I went through and she was super impressive there. Anyway, kudos to her. I guess what I would say is, those kinds of companies just crush it. Those of us that aren't so fortunate and have a little bit more of explaining to do about our business, can still do well, but you need to be able to really polish up your marketing and explanations of what you do.
That's another level.
Sal Daher: Excellent. Okay, so accessible?
Secret #3: Be Radically Committed to Communicating with Potential Investors
Sam Bogoch: Yes, the other thing is be ready to communicate and be ready to commit a significant chunk of your time for the duration of the crowdfund to answering and following up on all of the questions that people will fire at you. These are normal due diligence questions. You would have gotten them from any investor, but here there's a lot more eyes on it and so they'll watch what each other's questions and answers are and follow them up. In Republic, on the platform, they have a very nice format for exhaustively answering these questions as they come in and creating more conversations. It's like a little mini social media thing.
You have to really be ready to invest in that so that people don't just put out suppositions about your business that you know are incorrect. You have to come back and say, "Well, that's not exactly the way it is, because of this and this and this," and they rate you on the quality of your answers to those.
Sal Daher: Okay. That is very interesting. Being an accessible business is really important. Being able to explain it very clearly. The business has to be well developed, you have to have growth, you have to have revenue.
Sam Bogoch: These are not absolutes, but this has just been my experience. I will also say that Republic and to some extent, the other platforms as well, do a lot of screening. You also have to-- you can't just, raise your hand and say, "I want to do one." Republic actually has a success rate of well over 90% for the people that raise on its platform. As you can imagine, they want to protect their brand.
Republic Vets Startups Closely Which Leads to a Success Rate of 90%
If they're going to put an offering on their platform, they want it to be able to raise some money. It's a little bit of chicken and egg, but you have to convince them that you're going to be able to make this work and then once they buy into you, you have to keep the dialogue going with them because they'll also put out updates to the-- they have about several hundred thousand investors out there. Their email blasts and updates to that demographic are critical in getting the thing across and we would always see a big spike every time Republic would send out one of these notices. They go round robin, but you have to make the most of your opportunities when you get them.
Sal Daher: I guess it's a little bit like the top MBA programs. What they're doing is they are picking the very capable candidates to come through their program.
Sam Bogoch: Right and then they say how successful they were.
Sal Daher: Yes, how successful they are. Yes, look at how we've made them successful, but in reality, they just picked some very capable people, they brought them in and of course they try very hard and all that stuff.
My focus now is on life science companies. I'm on the board of one life science company and invested in a whole bunch of them. Could a life science company have success in one of these equity crowdfunding sites, do you think?
Could a Life Science Company Succeed in Crowdfunding?
Sam Bogoch: I've seen a number of them and they've done decently well. By decently, I'd say raised hundreds of thousands. I think a couple of them have gotten into the millions. You'd have to really ask the-- there's basically Republic, there's SeedInvest, there's StartEngine, and there's a couple more, but-- Wefunder is the other one that probably comes to mind. That's the other thing, is, if you have a company, go look at the comparable companies that have raised money on these different platforms and dig around, because what you want to see is not only the successful ones, but the unsuccessful ones.
“You want to know what it takes to be successful, but you also want to see what flopped and understand what it was about the intersection of the platform, the audience, and the company itself that did not click.”
You want to know what it takes to be successful, but you also want to see what flopped and understand what it was about the intersection of the platform, the audience, and the company itself that did not click. I would say, get out there and start looking at these platforms on a weekly basis, taking notes for yourself and you will see healthcare companies, you will see service companies, technology companies, and consumer product companies.
There's people like artisanal coffees and beers and all this stuff, but get your own impression about what works well on which platform and then how you position yourself within that. Just imagine if your company were out there, how you think you could do and how you think you could do better than what you see being done. It is very much a like-for-like thing and if you see somebody that's just cratering out there and they look a lot like your company, you have to ask yourself, why do I want to follow in their footsteps?
“...if you see somebody that's just cratering out there and they look a lot like your company, you have to ask yourself, why do I want to follow in their footsteps?”
Sal Daher: Wow, tremendous, tremendous. Okay, Sam, any other thoughts?
“...I do think that taken broadly, that this trend is going to change the way investing happens over the next 5 to 10 years.”
Sam Bogoch: Well, I do think that taken broadly, that this trend is going to change the way investing happens over the next 5 to 10 years. I'm just really struck by the opportunities it's creating for knowledgeable, but not necessarily professional VC type people, but people who know about technology, know about consumer product goods, know about the various services to put money where their mouth is. The one thing I was going to mention about Liz and Nanno, is that not only is it relatable, but of course when people invest in your company, they're very likely to be your customers as well. They're very likely to tell their friends about it.
Relatable Companies Like Nanno (Uber for Nannies) Have Investors Who Use Their Services and Refer Their Friends – They Go Viral
It's like, "I just invested in this babysitting company, check it out." They show you on their phone, next thing you know, you're signing up. It can be a viral thing if it's B to C, where you can get a huge groundswell of people that are your hardcore fans and not only do you not have to pay them like influencers, they gave you money. That's when it really has an amazing effect. I want to see what happens.
I would love to see some liquidity opportunities, but I think those are going to start happening broadly across the space. I think it'll start to fill a gap out there which is underserved, which is where companies need to raise less than VC amounts of money at less than VC levels of risk.
“It's like Stone Soup at scale.”
Sal Daher: Yes. I see a lot of potential for not technology businesses like yours, but just small, medium enterprises that are-- you mentioned the breweries and so forth. Those kinds of businesses that could benefit very much from this kind of amazingly clever type of funding. This is so fantastic. It's like Stone Soup at scale.
Sam Bogoch: Yes, it's pretty awesome. It all dates back to the Jobs Act under the Obama administration actually, where they made this stuff possible.
Sal Daher: It was the one bi-partisan achievement of that period.
Contact Sam Bogoch at sam@axle.ai to Get His Advice
Sam Bogoch: Just fantastic stuff. By the way, I'll put out my email address, if that's all right. If people want to contact me, it's sam@axle.ai, A-X-L-E.ai, I'm happy to talk about not only the equity crowdfunding that we've done and we're likely to do more in the future, but also we are raising this priced equity round right now, and we have about half of it committed out of the $1.5 million. If folks are interested, by all means, give me a call or drop me an email.
Sam’s Company Axle.ai Is Now Raising A Priced Equity VC Round
Sal Daher: Very good. Doing the videos and so forth, was that an important aspect of your--?
Secret #4: Have a Really Catchy Video
Sam Bogoch: We had a really catchy campaign video that we shot in the studio. Yes, that made a huge difference. Having a catchy video is absolutely a major, major booster for this, and we benefited from that, but so can any company, you just have to put your thinking cap on about what will be as close to viral as you can make it.
Sal Daher: Sam, unless you have anything else that you want to say.
Sam Bogoch: I will say one thing, have you lost weight? You look great.
Sal Daher Lost 70 Pounds Thanks to Plenity and the HMR Program
Sal Daher: [laughs] Yes, I've been using a product that I invested in 12 years ago. I'm going to give a plug to one of the companies. It's called Plenity. It's a pill that expands in your gut and then passes, and it helps control appetite. It was an on-ramp for the structured program that I was on called HMR. It's medically supervised and I've taken off 70 pounds. I plan to take off another 50-something pounds.
Sam Bogoch: There you go. That's awesome.
Sal Daher: I'm going to look as trim as Sam Bogoch.
Sam Bogoch: I've gone the other way during COVID. I'm so sedentary. I usually run around all day, I'm doing this, I'm doing that. I'm just sitting like a lump in front of my screen all day, so I've put on like 15 pounds. It's terrible.
Sal Daher: Sam, Sam, Sam, the world is divided between people who were fat kids and people who were not, you were not a fat kid.
Sam Bogoch: I was a fat kid. You had me all wrong.
Sal Daher: You were a fat kid? Oh, wow.
Sam Bogoch: I lost it all in adolescence. Basically, when I hit 15, I just-- [crosstalk]
Sal Daher: All right. When you were an adolescent, you were not fat. I was a fat adolescent.
Sam Bogoch: Okay. My sympathy. That's a crappy time to be a fat kid.
Sal Daher: Not a grossly fat college student, because it's hard to put on weight at that time. I was probably 30 pounds overweight or something like that. I've always tended to put on weight and the weight has always been a struggle. I am very, very grateful to these two companies. I'm an investor in Gelesis. By the way, they're going public via SPAC. They're the people who did Plenity, and also HMR, which used to be owned by Nestle and now they're a private company. It is just the best if you need to lose a lot of weight. There's nothing better than HMR. They're not a sponsor of this podcast [crosstalk]
Sam Bogoch: [crosstalk] this is one-on-one. This is not podcast material!
Sal Daher: Sam, I'm going to put this on the podcast because they--
Sam Bogoch: Oh, no!
Sal Daher: Why? Do you want to take it out?
Sam Bogoch: No, it's okay. I don't mind admitting that I was a fat kid, but I don't know, it's [crosstalk]
Sal Daher: I was admitting I was not only a fat kid, but a fat teenager.
[laughter]
Sam Bogoch: Oh, my goodness.
Sal Daher: It's been a real blessing. That's great. Sam, I want to thank you for making time to do this.
Sam Bogoch: Thank you.
Sal Daher: It's a lot of fun to have a chat with you the last time when we did the studio thing and then we did another online, so tremendous. Once again, Sam Bogoch, thanks a lot for coming on. Founder of Axle.ai, a company that has found great success on the equity crowdfunding site, Republic.co.
I am Sal Daher and this is Angel Invest Boston podcast.
I'm glad you were able to join us. Our engineer is Raul Rosa. Our theme was composed by John McKusick. Our graphic design is by Katharine Woodman-Maynard. Our host is coached by Grace Daher.