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X'Keep the American Dream Alive': Equity Crowdfunding Is Surging From an Appeal to Patriotism and Altruism
Ben Bergman is the newsroom's senior finance reporter. Previously he was a senior business reporter and host at KPCC, a senior producer at Gimlet Media, a producer at NPR's Morning Edition, and produced two investigative documentaries for KCET. He has been a frequent on-air contributor to business coverage on NPR and Marketplace and has written for The New York Times and Columbia Journalism Review. Ben was a 2017-2018 Knight-Bagehot Fellow in Economic and Business Journalism at Columbia Business School. In his free time, he enjoys skiing, playing poker, and cheering on The Seattle Seahawks.

When Christine Outram, founder and CEO of Everydae, a digital tutoring app, met with investors last year to try to raise a seed round she kept being told to come back in six months.
"I guess you can say we were turned down," she said.
Outram decided to try a different route, turning to equity crowdfunding, which allows mom and pop investors to dabble in something that until recently was solely the domain of professional investors. Her campaign proved successful – she raised $1.2 million from 1,586 people who wrote checks between $250 and $50,000.
"I've been really pleasantly surprised by the whole process," said Outram.
For reasons no one can quite explain, equity crowdfunding is having its moment during the coronavirus pandemic. Wefunder, the largest funding portal, recently had its best three months in the company's four-year history, with investor volume up 35% February through April. In early May, the site recorded $2 million of investment in a single day, a new record.
Wefunder had its best three months in the company's four-year history, with investor volume up 35%.
assets.rebelmouse.io
"I have been so confused," said Nick Tommarello, co-founder and CEO of Wefunder. "I don't know the answer. The big question for us was always how we would respond to a recession. You would assume that people would not want to invest."
Tommarello theorizes that more startups are turning to platforms like his as other sources of capital dry up, attracting casual investors who don't mind parting with what usually amounts to no more than the cost of an expensive meal to take a lark on a company. The median investment is $200 and 80% are less than $500.
"Our users aren't rich but they're middle class," said Tommarello. "People are not allocating it as an investment, but as discretionary income. They say they can go out for dinner or back someone and support them."
Brian Citizen, who lives outside Washington D.C., has invested in about a dozen startups through Wefunder usually at $250 a piece, including Everydae.
"It's become a passion of mine and something I really believe in and it's also fun because I get to help out entrepreneurs and be a part of the building process," said Citizen, who adds that COVID-19 has made him more excited to invest. "I think there's an opportunity to get better deals. The terms are going to be better for investors."
There is an oft repeated statistic that 90% of startups fail. Even professional VCs who have been at it for decades expect most of their portfolio to be a bust, so experts are wary about casual investors trying their luck in such a risky asset class.
"Some analysts even project that equity crowdfunding could surpass VC investments in the not-too-distant future," Waverly Deutsch, clinical professor of entrepreneurship at The University of Chicago Booth School of Business, wrote in a post warning investors. "This may be exciting news for entrepreneurs, and perhaps for people eager to help start-up founders that they know—but will likely lead to a start-up bubble and massive losses for the majority of individual investors."
Citizen says he is well aware of the risks and limits his total crowdfunding investments to about $2,000 a year. "I'm only willing to invest what I'm willing to lose," he said. "But the returns have the opportunity to be great."
Wefunder is upfront with users about the risks and avoids any impression that users will strike it rich, according to Tommarello.
"Our marketing is very blunt that you might lose all your money and most startups will fail," he said. "We say that over and over again. We don't even talk about our investment returns."
Instead of returns, the site tries to appeal to a blend of users' patriotism and altruism with a hopeful message on the homepage: "Keep the American Dream alive. Back founders solving the problems you care about and help their startups grow."
Equity crowdfunding was made possible by the SEC allowing anyone to invest in private companies in 2016, a privilege previously only accorded to "accredited investors" who made more than $200,000 per year or had investable assets of $1 million or more. A further loosening of the rules went into effect this year, which Tommarello says is likely contributing to the platform's popularity.
"A lot of the downsides have been taken away," he said. "The biggest crowdfunders previously needed to have thousands of direct shareholders on their cap table."
The SEC announced in May it would temporarily make it easier for companies affected by COVID to qualify. "In the current environment, many established small businesses are facing challenges accessing urgently needed capital in a timely and cost-effective manner," SEC Chairman Jay Clayton said in a statement.
Wefunder has backed 382 startups with $135 million, an amount smaller than many individual venture capital funds. Crowdfunding is still a niche, but it is gaining more widespread acceptance.
"I do think VCs are opening up to it more," said Kevin Morris, Chief Financial Officer at Wavemaker Labs, an early stage firm with offices in Santa Monica and Singapore. "Crowdfunding has been a bit of a bright spot in this economy so I think it would only help them."
Christine Outram, founder and CEO of Everydae, a digital tutoring platform.
Wavemaker invests in the pre-seed and seed rounds of companies and then raises follow-up capital via equity crowdfunding, a strategy that has worked well with Miso Robotics, a robotic kitchen assistant and Graze, which makes a roomba-type device that mows lawns.
"Both of these businesses were always well suited for crowdfunding but what we've seen in COVID is businesses in the automation space are doing even better," said Morris. "With crowdfunding in general you can get slightly higher valuations than you would from a VC and in a business that is consumer facing you're not only getting capital but you're building brand ambassadors."
Marketing her virtual tutoring app has been one of the most appealing parts of equity crowdfunding for Everydae's Outram, but she says attracting investors took considerable effort. Most campaigns, including hers, see a spike at the beginning but trail off after the initial excitement.
"My job was to always have new news to draw eyeballs to the page," she said.
Outram posted a steady stream of content to her Wefunder page and appealed directly to podcasts and groups centered around education and investing. She also bought ads on Instagram and Facebook, which proved to be worthwhile when a Facebook ad led to a $150,000 commitment.
"What a lot of founders don't realize Is that equity crowdfunding is as much work as other kinds of fundraising," she said.
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Ben Bergman is the newsroom's senior finance reporter. Previously he was a senior business reporter and host at KPCC, a senior producer at Gimlet Media, a producer at NPR's Morning Edition, and produced two investigative documentaries for KCET. He has been a frequent on-air contributor to business coverage on NPR and Marketplace and has written for The New York Times and Columbia Journalism Review. Ben was a 2017-2018 Knight-Bagehot Fellow in Economic and Business Journalism at Columbia Business School. In his free time, he enjoys skiing, playing poker, and cheering on The Seattle Seahawks.
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Rivian Stock Roller Coaster Continues as Amazon Van Delivery Faces Delays
David Shultz is a freelance writer who lives in Santa Barbara, California. His writing has appeared in The Atlantic, Outside and Nautilus, among other publications.
Rivian’s stock lost 7% yesterday on the back of news that the company could face delays in fulfilling Amazon’s order for a fleet of electric delivery vans due to legal issues with a supplier. The electric vehicle maker is suing Commercial Vehicle Group (CVG) over a pricing dispute related to the seats that the supplier promised, according to the Wall Street Journal.
The legal issue could mean that Amazon may not receive their electric vans on time. The dispute hinges on whether or not Commercial Vehicle Group is allowed to raise the prices of its seats after Rivian made engineering and design changes to the original version. Rivian says the price hike from CVG violates the supply contract. CVG denies the claim.
Regardless, the dispute could hamper Rivian’s ability to deliver electric vans to Amazon on time. The ecommerce/streaming/cloud computing/AI megacorporation controls an 18% stake in Rivian as one of the company’s largest early investors. Amazon has previously said it hopes to buy 100,000 delivery vehicles from Rivian by 2030.
The stock plunge marked another wild turn for the EV manufacturer. Last week, Rivian shares dropped 21% on Monday after Ford, another early investor, announced its intent to sell 8 million shares. The next few days saw even further declines as virtually the entire market saw massive losses, but then Rivian rallied partially on the back of their earnings report on Wednesday, gaining 28% back by Friday. Then came yesterday’s 7% slide. Today the stock is up another 10%.
Hold on tight, who knows where we’re going next.
David Shultz is a freelance writer who lives in Santa Barbara, California. His writing has appeared in The Atlantic, Outside and Nautilus, among other publications.
Snapchat’s Attempt to Protect Young Users From Third-Party Apps Falls Short
Kristin Snyder is an editorial intern for dot.la. She previously interned with Tiger Oak Media and led the arts section for UCLA's Daily Bruin.
Some Snap Kit platform developers have skirted guidelines meant to make the app safer for children.
A new report from TechCrunch released Tuesday found that some third-party apps that connect to users’ Snap accounts have not been updated according to new guidelines announced in March. The restrictions, which target anonymous messaging and friend-finding apps, are meant to increase child safety. However, the investigation found a number of apps either ignore the new regulations or falsely claim to be integrated with Snapchat.
The Santa Monica-based social media company announced the changes after facing two separate lawsuits related to teen suicide allegedly caused by the app. Over 1,500 developers integrate Snap features like the camera and Bitmojis. Snap originally claimed the update would not affect many apps.
Developers had 30 days to revise their software, but the investigation found that some apps, such as the anonymous Q&A app Sendit, were granted an extension. Others blatantly avoided the changes—the anonymous messaging app HMU, which is now meant for adult users, is still available to users "9+" in the App Store. Certain apps that have been banned from Snap, like Intext, still advertise Snapchat integration.
“First and foremost, we put the privacy and safety of our community first and expect the products built by our developer community to adhere to that standard in addition to bringing fun and positive experiences to people,” Director of Platform Partnerships Alston Cheek told TechCrunch.
The news is a blow to Snap’s recent efforts to cast itself as a responsible social media platform The company recently announced Colleen DeCourcy would take over as the company’s new chief creative officer and CEO Evan Spiegel to recently made a a generous personal donation to graduates of Otis College of Art and Design. The social media company currently faces a lawsuit from a teenager who claims it has not done enough to protect minors from sexual exploitation. In April, 44 attorney generals sent a letter to Snap and TikTok urging the companies to strengthen parental controls.
Lawmakers are considering new policies that would hold social media companies accountable for the content on their platforms. One such bill would require social media companies to share data with independent researchers.
Snapchat recently rolled out augmented reality shopping features and influencer-led original content to grow its younger base of users.
Snap Inc., Snapchat's parent company, is an investor in dot.LA.
Kristin Snyder is an editorial intern for dot.la. She previously interned with Tiger Oak Media and led the arts section for UCLA's Daily Bruin.
When we list the attributes most associated with successful founders, investors, billionaires, and industry leaders, we often think of things like determination, grit, fortitude and even obsessiveness. The winners are the most relentless, the ones who work the hardest, know the most, start the earliest in the morning on four hours of sleep and won’t accept no for an answer.
While discussing the venture capital world, and his upcoming technology conference in Santa Monica, The Montgomery Summit 2022, March Capital co-founder and Managing Partner Jamie Montgomery doesn’t necessarily contradict this formula for success, but adds a new attribute to the mix that’s sometimes left out: curiosity.
Montgomery’s a believer that there’s no one right way to go about things, and no surefire process for success. Sometimes, the best company emerges from not just the best data and team but the most creative approach. “If something isn’t clear, invert,” Montgomery explained. “Then invert again. Soon the subject becomes clear.”
The best investors and leaders have an innate inquisitiveness about the world around them, and seek out opportunities not just based on market trends but genuine observations about problems in desperate need of solutions.
“You sort of have to be a very heuristical thinker,” Montgomery said. “Sometimes I find some people I talk to are very smart and interesting, and I think, “That person’s very thoughtful. They’re going to be a good investor.’ Sometimes you meet people and you think ‘Well, they come across smart, but they’re always preparing what they’re going to say in response to what you have to say, they’re not really listening.’ Being a good investor, you’ve got to be a good listener. You’ve got to figure out, what’s the signal and what’s the noise? Filter out the noise and say ‘What’s real?’”
Thoughtfulness, attentiveness and curiosity are typically the sort of attributes that we think of as innate, as opposed to skills you can improve via on-the-job training. Montgomery noted, “I always ask entrepreneurs why rather than what. You get a more interesting answer.” Reading and research and investigation can help, but innate curiosity remains an essential ingredient in business success.
“I think, to be an investor, not just a VC but an overall investor, one benefits from an incredible amount of reading and knowledge,” Montgomery explained. “You have to have a voracious appetite, so it’s really a high-level curiosity. Some people have it, some don’t.”
March Capital Founder Jamie Montgomery.
Illustration by Dilara Mundy
One subject that’s on Montgomery’s mind these days is quantum computing, and its potential impact on cybersecurity, a major area of focus for March. His process starts by asking core questions about the next 5-10 years and what they’ll look like, before even considering potential solutions.
“If you’re investing, you have to look at something that’s inevitable,” Montgomery explained. “Is it gonna happen or not. If it’s inevitable, then the question is, is it imminent? And is it investible? Start with inevitable. Eventually you’re going to have quantum computing, and that’s gonna create an existential threat to cybersecurity. Is that imminent?... What is the post-quantum cyber world like, with all this information that’s been siphoned out of America by China… what do they have and how do we prepare for a post-quantum cybersecurity? It’s almost existential.”
This holistic question-based approach also drives Montgomery as he plans and organizes the annual Montgomery Summit, the largest such event of the L.A. tech calendar year (Montgomery refers to it as the “Rose Bowl of Conferences.”)
He expects around 1,200 people to attend this year – the event’s big return post-pandemic – for panels and sessions that don’t just cover areas in which March Capital specializes, but a vast and diverse variety of subjects and topics, designed to intrigue and inspire curious minds.
Over 175 speakers in total have signed on for the 19th annual Montgomery Summit, to be held on May 24 and 25, from the worlds of technology, economics, geopolitics, public policy, the sciences and beyond. Montgomery gets animated as he tells me about the voluminous range of topics being covered, from the Federal Reserve’s response to inflation to the war in Ukraine to the stories behind companies like Bill.com and CrowdStrike. One session will feature Chapman University Presidential Fellow Jack Horner, one of the world’s leading paleontologists and a key inspiration for the “Jurassic Park” character Dr. Alan Grant.
“It’s the interaction, the entrepreneurs with the investors and the executives,” Montgomery told me. “It’s fantastic, it’s enjoyable, it’s fun, and it’s candid. There are no big egos. The speakers will actually come and talk to you, they don’t come in the back door and leave through the back door. You actually can go to any one of seven sessions, and it’s going to be interesting, and they’re all short. 25-45 minutes each.”
The shorter 25-45 minute sessions help to stave off boredom and mean that attendees can sample a wider range of subjects and sessions than they might at other conferences. It helps keep things moving and makes them fun, a theme Montgomery returned to a few times in our discussion.
“There’s a lot of conferences that are very professionally run or research-driven or they’re very commercial. People come here and they’re gonna have a blast, right?”
The Montgomery Summit runs May 24th-25th at Santa Monica's Fairmont Miramar Hotel & Bungalows. Find out more information on their website.
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