20 VC FF 025 Crowdfunding Gimlet Media and Why The Nature Of Startup Equity Is Changing with Erin Glenn, CEO @ Betaworks' backed, Quire



In the latest 20 minutes vc episode, the host discusses the evolving landscape of seed funding with John Borthwick from Betaworks company Happy and Erin Glenn, CEO of Choir, a platform that enables communities to invest in companies. They delve into the significance of the SEC's Jobs Act, which democratizes crowdfunding, and Choir's role in raising $275,000 for Gimlet Media. The conversation also touches on a Mattermark and Choir report on diversity in crowdfunding, revealing that despite high education and financial savvy, many are barred from investing due to accreditation limits. Erin shares her entrepreneurial journey and Choir's mission to allow venture-backed companies to raise funds from their community with a minimum investment of $2,500. The episode concludes with a quick-fire round, highlighting Erin's admiration for Tim Cook and her excitement for companies like Gimlet, Kano, and Jewelbots, underscoring her vision for Choir to transform financial services globally within five years.

Summary Notes

Introduction to Choir and Erin Glenn's Background

  • Choir is an alternative form of seed funding.
  • Erin Glenn is the CEO of Choir, with a diverse background in finance and consulting.
  • The conversation takes place amidst new SEC crowdfunding regulations.

"Choir is changing the way companies are owned and built. And joining us from choir is the CEO Erin Glenn, who prior to being choir was CFO at SF based video game maker Kixai, an investment banker at Morgan Stanley and UBS, and a management consultant in the US and Southeast Asia."

Erin Glenn has a multifaceted background in finance and gaming, bringing a rich set of experiences to her role as CEO of Choir, a company innovating in the field of company ownership and seed funding.

The Concept of Choir

  • Choir allows communities to invest in and collaborate with companies.
  • It represents a new model of company ownership.
  • The discussion is timely due to new SEC regulations affecting crowdfunding.

"Choir create a way for communities to invest and collaborate with companies and their founders."

Choir is a platform that enables community members to become investors in companies, fostering a collaborative relationship between companies and their supporters.

Erin Glenn's Journey to Choir

  • Erin has been an entrepreneur since childhood.
  • Her career includes management consulting, investment banking, and working in the tech industry.
  • She was attracted to Choir's concept of community investment.

"I've been in love with New York City since I was a kid growing up in Oklahoma and came out here, started meeting with companies, met the Betaworks guys, and really fell in love with choir, which was alphaworks at the time."

Erin's entrepreneurial spirit and love for New York City led her to meet with Betaworks and ultimately become enamored with the concept and community behind Choir.

Choir's Business Model

  • Choir is an equity crowdfunding platform.
  • It targets venture-backed companies and allows a portion of their funding to come from the community.
  • Community members include customers, fans, and individuals who support the founders' visions.

"So choir right now is an equity crowdfunding platform, and we work with venture backed companies to enable a portion of their raise to come from their community."

Choir offers a unique crowdfunding model where community members can invest in venture-backed companies, thereby participating in the companies' growth and success.

Investment Details and SEC Regulations

  • Minimum investment in Choir is $2,500.
  • The platform caters to accredited investors, a small percentage of American households.
  • There is anticipation for changes in SEC regulations to broaden investor eligibility.

"Our minimum investment is $2,500. So again, despite the accreditation limits and the fact that only 3% of american households can invest, it is an approachable amount that makes it easy to support founders and then will support larger investments."

Choir sets a relatively accessible minimum investment threshold, but current SEC accreditation limits restrict the pool of potential investors.

Erin Glenn's First Week at Choir

  • Erin's first week at Choir was marked by recording a podcast with Gimlet Media.
  • The discussion reflects on the regulatory environment and investor protections.

"Oh yeah, I love Gimlet, too. And by the way, we recorded that podcast on my fourth day on the job."

Erin's early days at Choir were highlighted by involvement with Gimlet Media, showcasing the company's media engagement and highlighting the novelty of her position at the time.

Equity Crowdfunding Environment

  • The UK equity crowdfunding scene has matured, giving the SEC confidence in its stability.
  • Platforms like Choir take their intermediary role seriously, knowing that poor vetting could jeopardize the industry.

"And I think the maturity of the uk equity crowdfunding environment has given the SEC some confidence that that's not going to happen."

This quote explains that the maturity of the UK's equity crowdfunding market has positively influenced the SEC's confidence in the system's stability and potential success in the U.S.

Regulatory Barriers and International Competition

  • UK crowdfunding companies see U.S. regulations as a significant barrier to entering the market.
  • Title III could be prohibitive for foreign companies, but some are still interested in entering the U.S. market.

"So do you see any competition from other countries? Or do you think the regulation is such a barrier to entry for everyone."

Erin Glenn suggests that regulatory hurdles are a major concern for UK companies considering expansion into the U.S. equity crowdfunding scene.

Investor Study Insights

  • The study conducted with Mattermark revealed a gender gap and a high level of interest from minorities in investing.
  • Many financially sophisticated individuals are barred from investing due to regulations based on income and net worth rather than knowledge.

"And the first is for your listeners who aren't familiar with Mattermark Mattermark's CEO, Danielle is also a woman."

Erin Glenn highlights the gender diversity issue in tech and investment, noting the low percentage of women and minorities among investors despite their interest and financial sophistication.

Utilizing Investor Study Findings

  • The study's findings can help Choir grow by attracting site support and suggesting companies for the platform.
  • Title III's implementation is seen as transformative for tech startups and broader small and medium-sized businesses.

"And then when title three rules are implemented, which we're highly optimistic that that's going to happen tomorrow, actively participating with us in equity raises for a whole range of companies."

Erin Glenn discusses how the upcoming implementation of Title III could greatly benefit a range of companies and encourages active participation in equity raises.

Challenges in Equity Crowdfunding Marketplaces

  • Choir focuses on quality deal flow and building its investor base through companies.
  • The challenge lies in attracting high-quality companies willing to turn their investors into owners.

"In a marketplace, we've really focused on quality deal flow and have built our investor base through companies."

Erin Glenn emphasizes the importance of quality over quantity in building a successful crowdfunding marketplace and the challenges of attracting both investors and quality companies.

Potential of Crowdfunding to Replace Traditional VCs

  • Crowdfunding is seen as having a collaborative rather than a competitive relationship with VCs.
  • Crowdfunding could complement VC investments in companies, rather than replacing VCs entirely.

"And do you think then that with the rise of crowdfunding in the last few years, it has the potential to replace vcs and more traditional investors?"

Harry inquires about the potential for crowdfunding to disrupt traditional venture capital, suggesting a future where both could coexist and support different stages or aspects of company funding.

Role of Venture Capital and Crowdfunding in Business Growth

  • Venture capital (VC) is critical for businesses to grow and scale.
  • VCs provide not only capital but also guidance and advice to founders.
  • Crowdfunding can coexist with VC, where VC leads the round and the crowd provides part of the financing.
  • This hybrid model of VC and crowdfunding is expected to continue to grow.

"And I think vcs provide important seats at the table, roles in helping guide founders and provide advice as they go through those stages."

This quote emphasizes the multifaceted role of venture capitalists in supporting business growth beyond just financial investment. They offer crucial advice and guidance to founders.

Increase in Crowdfunding Participation

  • Traditional finance methods can be challenging for capital acquisition, leading to the rise of crowdfunding.
  • Crowdfunding offers a deep pool of capital for business growth through various means like peer-to-peer lending and rewards-based funding.
  • Technology has disconnected relationships, and crowdfunding helps people find connection and support causes they believe in.

"It's really difficult to use traditional forms of finance to find capital. And the crowd has provided a huge and deep pool of capital to help businesses grow..."

This quote explains how traditional financing difficulties have contributed to the rise of crowdfunding as an alternative capital source for businesses.

Motivations for Crowdfunding Investment

  • Investors in crowdfunding campaigns are motivated by more than just financial returns.
  • Supporting a company's mission and founders is a significant incentive.
  • Spurring economic growth and innovation is a key reason why people invest in crowdfunding campaigns.
  • Americans show a commitment to growing the economy and helping others realize their dreams.

"We found that almost every respondent had two reasons, if not more. One, in addition to financial return, and a really big one, was supporting the company's mission and the founders..."

This quote highlights that investors are often driven by dual motives, including financial returns and supporting the missions and founders of the companies they invest in.

Benefits of Crowdfunding for Startups

  • Crowdfunding provides moral and psychological benefits to businesses.
  • Early adopters and customers who invest in a business tend to spend more, refer more, and are more loyal.
  • Crowdfunding creates a positive reinforcing cycle where customers support and promote the business.

"Customers who are owners of a business spend more, they refer more, they talk about the business more, and they're more loyal."

This quote outlines the tangible benefits of crowdfunding for startups, indicating that customer-investors contribute significantly to a business's success.

Implications of SEC Rulings on Crowdfunding

  • The SEC's decisions on crowdfunding rules significantly impact businesses waiting to utilize this form of financing.
  • A negative ruling would lead to disappointment and delay opportunities for businesses.
  • Despite potential setbacks, companies with strong backers, like Betaworks and SB angel lair Hippo, will continue their operations and support technology startups.

"There will be a lot of disappointment. And again, the disappointment is the SEC will have passed again and missed a mandate on passing these rules..."

This quote reflects the anticipation and potential frustration tied to the SEC's rulings on crowdfunding, which are critical for businesses planning to use this financing method.

Advantages of Accelerator Studios for Startups

  • Being in an accelerator studio like Betaworks provides a creative and technical problem-solving environment.
  • Access to feedback from a design-oriented and visually stimulating community is beneficial.
  • Startups can test new ideas and products with a knowledgeable base before wider release.

"It's a blast and it's fun to be in an environment where there are so many other creative and technical problem solvers..."

This quote captures the dynamic and supportive atmosphere of accelerator studios, which is advantageous for startups seeking collaborative problem-solving and feedback.

Personal Journey and CEO Evolution

  • Erin Glenn joined choir on October 15, 2014, after moving to New York City.
  • The CEO role is challenging but rewarding, with daily challenges and learning experiences.
  • Over the course of a year, there has been personal growth in the CEO role.
  • Comparing startup ecosystems, there are distinct differences between San Francisco and New York.

"I joined October 15 of 2014 after arriving in New York City two days earlier on the red eye from San Francisco with merely two suitcases, a blow up air mattress, and my dog."

This quote provides a personal account of Erin Glenn's move to New York and the beginning of her journey with the startup choir, setting the stage for her evolution as a CEO.

Startup CEO's Tendency and Team Contribution

  • CEOs, especially in startups, often believe they have all the answers, which is not the case.
  • It's a slow and lonely process trying to solve all problems as the sole decision-maker.
  • The nature of equity in startups is evolving due to the team's significant contributions to problem-solving.
  • The team's involvement in generating solutions makes the process more enjoyable and effective.

"I think it's a natural tendency for ceos, particularly in startups, to think they have all the answers and you don't."

This quote emphasizes the common misconception among startup CEOs that they must have all the answers, highlighting the importance of team collaboration.

"And it's one, a really slow and lonely process if you're the one trying to solve all the problems."

Erin Glenn points out the difficulties and isolation experienced by CEOs who attempt to tackle all challenges alone.

"And then two, there was a recent blog post just talking about the nature of equity in startups is really changing because your entire team is really contributing to solve these problems."

Erin Glenn notes the shift in how equity is viewed within startups, acknowledging the whole team's role in problem-solving and value creation.

Startup Ecosystem: San Francisco vs. New York

  • New York's startup ecosystem is smaller than San Francisco's but matches in vibrancy, intensity, and enthusiasm.
  • There is a competitive spirit in New York to outdo Silicon Valley as the innovation capital.
  • New York's startup culture is characterized by collaboration, with frequent offers of help and introductions.
  • The diverse industries in New York foster a collaborative environment due to their historical interconnectivity.

"And then comparing the startup ecosystem in San Francisco versus New York, it's obviously so much smaller here in New York than it is in San Francisco, but the vibrancy and the intensity and the enthusiasm are absolutely equal."

Erin Glenn compares the startup ecosystems of San Francisco and New York, noting that despite New York's smaller size, it competes in energy and passion.

"There's a real competitiveness to make it happen, but there's a level of collaboration here that has been remarkable to me."

Erin Glenn observes a unique blend of competitive drive and collaborative spirit within the New York startup scene.

Prevalence of Female Founders in New York

  • New York has a higher number of female founders compared to other places.
  • The presence of multiple industries with women in senior roles provides more examples and encouragement for female entrepreneurship.
  • The evolution of the tech sector from purely technological problem-solving to technologically enabled solutions has opened opportunities for addressing real-world issues.

"And then there are many more female founders in New York."

Erin Glenn highlights the notable presence of female founders in New York's startup ecosystem.

"Yeah, I think there is, again, because there's so many industries here, finance, fashion, media, that have had women in senior executive roles."

Erin Glenn suggests that the diversity of industries with female leadership in New York has contributed to the rise of female founders.

Erin Glenn's Personal Preferences and Opinions

  • Erin Glenn's favorite book is "Magic Mountain" for its psychological insight and historical context.
  • Tim Cook is the CEO Erin Glenn most admires.
  • Fred Wilson's blog or newsletter is Erin's favorite for its brilliance.
  • Erin is particularly fond of three companies funded by Choir: Gimlet, Kano, and Jewelbots, for their teams, vision, and innovative missions.

"Magic Mountain? And it's just an interesting psychological look at what was going on in Europe kind of in advance of the outbreak of World War II."

Erin Glenn shares her favorite book, "Magic Mountain," appreciating its deep psychological and historical perspectives.

"Tim Cook."

This is Erin Glenn's succinct response when asked about the CEO she most admires, implying respect for Tim Cook's leadership.

"Of all of the above, there are probably three that are near and dearest to my heart. So that's the closest you're going to get."

Erin Glenn expresses her fondness for three companies in the Choir portfolio, indicating her close connection to their success and missions.

Future of Choir and the Financial Services Industry

  • Erin Glenn envisions Choir transforming the financial services industry globally in the next five years.
  • The passage of the JOBS Act by the SEC is seen as a significant milestone for Choir and the crowdfunding revolution.

"Next five years at Choir we will transform the financial services industry globally."

Erin Glenn confidently predicts Choir's impact on the global financial services industry in the coming years.

Acknowledgements and Resources

  • Erin Glenn expresses enjoyment of the podcast and appreciation for being a guest.
  • The host, Harry, congratulates Erin and Choir on the success with the JOBS Act and crowdfunding.
  • Listeners are directed to follow the podcast on Twitter and visit their website for more content and resources.
  • Loyalty Bay is mentioned as a tool for building detailed profiles on individuals from their email addresses, offering a 30-day free trial.

"It's been my pleasure. It's an absolute blast and I've really been enjoying listening to your podcasts."

Erin Glenn thanks Harry for the opportunity to be on the podcast and shares her enjoyment of the show.

"And I would like to say a massive congratulations to Erin and to Choir with the recent knowledge that the SEC has passed the jobs act and it looks like everyone will be joining the crowdfunding revolution."

Harry acknowledges Erin and Choir's achievement related to the JOBS Act and the implications for the crowdfunding industry.

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