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Indiegogo’s Founder Sla­va Rubin on Crowd­fund­ing and ICOs

When it comes to crowd­fund­ing, few peo­ple have as keen insights root­ed in deep expe­ri­ence as the Founder of Indiegogo, Sla­va Rubin.

Found­ed in 2008 dur­ing the mid­dle of one of the worst finan­cial crises the Unit­ed States has seen, Indiegogo aimed to change how star­tups raised cap­i­tal. Up until that point, fundrais­ing con­sist­ed of the tra­di­tion­al cir­cuit of fam­i­ly & friends, angel investors, pri­vate equi­ty, or ven­ture cap­i­tal. Some­one with a great idea for a prod­uct had to take on the enor­mous risk of secur­ing fund­ing them­selves while also attempt­ing to bring their dreams into real­i­ty.

Slavin Rubin

Sla­va Rubin, image via TechCrunch

In Decem­ber 2017, Indiegogo announced that they are adding ICOs and blockchain invest­ments on their plat­form. With an esti­mat­ed $4.9 bil­lion raised by ICOs in 2017, it seems like a nat­ur­al deci­sion for one of the world’s largest crowd­fund­ing plat­forms.

How­ev­er, Indiegogo’s ven­tur­ing into ICOs is more than just strat­e­gy. The ethos that Indiegogo and the cryp­tocur­ren­cy com­mu­ni­ty were found­ed on is essen­tial­ly the same: a decen­tral­ized “pow­er of the peo­ple” to play an active role in decid­ing on how they want the world to be.

Indiegogo

With thou­sands of inno­v­a­tive prod­uct ideas, Indiegogo has tak­en the con­cept of crowd­fund­ing and made it fun, inter­ac­tive, and main­stream. Now, they’re aim­ing to fur­ther legit­imize and pop­u­lar­ize ICOs.

One of the core com­po­nents of Indiegogo’s strat­e­gy is to help projects fol­low reg­u­la­tions by reg­is­ter­ing them as secu­ri­ties (in applic­a­ble cas­es). Start­ing small, small investors on Indiegogo will only be able to invest $10,000 in most projects, and projects won’t be able to raise more than $1 mil­lion due to restric­tions from the 2012 JOBS Act.

We had a chance to chat with Sla­va Rubin about crowd­fund­ing, ICOs, and the evo­lu­tion of the fundrais­ing space.


What’s it like going into the ICOs from crowd­fund­ing? What are some of the biggest chal­lenges you’ve seen?

We see this all as a nat­ur­al evo­lu­tion of what we were look­ing to accom­plish as Indiegogo from the begin­ning. We came up with the idea in 2006 and launched in 2008 to democ­ra­tize access to cap­i­tal.

At the time it was hard to use the Inter­net to be able to get the crowd to fund you. It was real­ly all about the gate­keep­er, know­ing the right VC, know­ing the right banker, know­ing the right per­son at gov­ern­ment orga­ni­za­tions.

So we start­ed with a perks-based mod­el. We want­ed to be able to do equi­ty crowd­fund­ing right away, but because of the Secu­ri­ties Act of 1933 and reg­u­la­tions, we weren’t allowed to.

Then fast for­ward to 2012. We were able to help pass the JOBS Act with Pres­i­dent Oba­ma, and then in 2016 in the US, final­ly equi­ty crowd­fund­ing went live. So we could do our crowd­fund­ing tech­niques that offered peo­ple finan­cial return.

In par­al­lel, blockchain was advanc­ing for­ward and bit­coin was becom­ing more main­stream. Then ICOs start­ed com­ing out right after equi­ty crowd­fund­ing. What was inter­est­ing is we start­ed get­ting a lot of inter­est from var­i­ous ICOs and blockchain-ori­ent­ed fundrais­ers ask­ing can they use our plat­form or our capa­bil­i­ties to be able to raise mon­ey. So for us, this is a nat­ur­al evo­lu­tion of try­ing to accom­plish our vision.

In the ear­ly days, I would call what we did crowd­fund­ing 1.0 which was a perks-based mod­el and then 2.0 which was a vanil­la equi­ty mod­el. Now you could almost con­sid­er a 3.0 where it’s a blockchain-based invest­ment mod­el. So that’s how we’ve evolved.

What’s the dif­fer­ence for some­one who is invest­ing in a project receiv­ing prod­ucts in return or equi­ty in return ver­sus some­one who’s invest­ing in a project for tokens?

I think the way you should look at it is the perks mod­el which is no finan­cial return. It’s all about back­ing a per­son. We don’t even use the word invest­ing for back­ing a per­son or pre-order­ing a prod­uct, val­i­dat­ing an idea. That’s more about want­i­ng to sup­port the per­son, want­i­ng to get the good, or just being part of a move­ment.

When you look at equi­ty crowd­fund­ing or any of these blockchain rais­es, it’s often more about want­i­ng to par­tic­i­pate in the finan­cial upside, whether it’s rev­enue share or get­ting a piece of the com­pa­ny. So it’s a lit­tle bit dif­fer­ent of analy­sis. It’s not about so much the indi­vid­ual or get­ting a prod­uct. As it relates to vanil­la equi­ty or these blockchain offer­ings, I think they’re very sim­i­lar in terms of the analy­sis. It’s like if I put a dol­lar in, is it a good invest­ment? Will I get more than a dol­lar out? Obvi­ous­ly, there are dif­fer­ent types of orga­ni­za­tions and you need to research it appro­pri­ate­ly, but I think the analy­sis is pret­ty sim­i­lar.

The explo­sion of ICOs in 2017 cooled down a bit this year. The length of time between projects doing a pri­vate pre­sale and a pub­lic ICO is decreas­ing, and some projects don’t even ICo at all. How do you guys plan on evolv­ing with the space?

So 2017 def­i­nite­ly had a lot of activ­i­ty. There was an uncer­tain reg­u­la­to­ry envi­ron­ment and the var­i­ous issuers didn’t exact­ly know how they need­ed to nav­i­gate it, but there weren’t clear rules or chal­lenges back, so there was a lot of activ­i­ty. In Q1 of 2018, the SEC and FINRA clear­ly mes­saged that all these issuers need to make sure they’re doing things by the book and a lot of them poten­tial­ly are secu­ri­ties as opposed to avoid­ing the secu­ri­ties exemp­tion.

Indiegogo

As part of that, a lot of issuers in the Unit­ed States had to rethink their approach­es and yes, some of them have lim­it­ed their pub­lic sales and gone more with a pri­vate mode. We have done that as well to ensure that we’re stay­ing with­in reg­u­la­tions. So we do have some pri­vate offer­ings as well as oth­er offer­ings that are clear secu­ri­ty tokens and are able to com­ply with the secu­ri­ties exemp­tion so they can be pub­lic when­ev­er they decide.

Could you tell us a lit­tle bit about what ICOs have gone through Indiegogo so far? The Fan Con­trolled Foot­ball League (FCFL)  has been pret­ty suc­cess­ful with the plat­form.

They were the first orga­ni­za­tion that was look­ing to raise with us. Since then you’ve got a mas­sive amount of inbound, whether it’s on the issuer side as well as on the investor side. Also, there’s been large enter­pris­es that we’re now work­ing with as well. We actu­al­ly do have some oth­er offer­ings that are in var­i­ous stages of pri­vate rais­ing right now before they go pub­lic. Again, those aren’t pub­lic so we’re not dis­cussing them.

What’s the vet­ting process look like for the ICOs that you host on the plat­form? Because there are a lot of more shady projects out there. How do you guys weed out the qual­i­ty from the crap?

The perks mod­el is very open. We have hun­dreds of thou­sands of entre­pre­neurs that use the orig­i­nal Indiegogo. Then when we launched in late 2016 with our equi­ty-based mod­el, we def­i­nite­ly had to revis­it that because as part of hav­ing a reg­u­lat­ed por­tal, we had to make sure that we were doing all the right dili­gence to ensure against fraud and oth­er chal­lenges.

So we actu­al­ly have less than 2% of the com­pa­nies that apply actu­al­ly get list­ed right now on the equi­ty por­tal. We have the high­est aver­age raise because we’re doing such a good job of fil­ter­ing through the noise and mak­ing sure that we’re hav­ing high integri­ty com­pa­nies.

Most of the com­pa­nies, not quite hun­dred per­cent, but most of the com­pa­nies of the over 50 com­pa­nies that have raised on Indiegogo, have hit their min­i­mum tar­gets, which should show that if you get picked by Indiegogo to be able to raise, that it’s going to be a pret­ty good result for you.

Slava Rubin

Sla­va Rubin (sans beard) via CNBC)

Now that’s on the vanil­la equi­ty fund. We’ve used many of those same tech­niques in terms of dili­gence and then moved that over to the blockchain offer­ings. A lot of the research is very sim­i­lar. It’s about the team, it’s about the busi­ness mod­el, what’s the finan­cial posi­tion, what are the expect­ed results, things like that.

Obvi­ous­ly, there’s dif­fer­ent nuance relat­ed to eval­u­at­ing the tech, eval­u­at­ing the token eco­nom­ics, and all those things are dif­fer­ent than vanil­la equi­ty. We fac­tor that in towards the dili­gence process. Again, the ratio of com­pa­nies that end up rais­ing with us ver­sus apply­ing is well below 2%.

How would you say that ICOs are behav­ing dif­fer­ent­ly in the US com­pared to Europe, Asia, Africa, etc.?

It def­i­nite­ly depends. Each region I think is dif­fer­ent, but the US def­i­nite­ly is tak­ing a more con­ser­v­a­tive approach as it relates to being pub­lic with your offer­ings. I think that’s why since Q1 you see some of these ICOs going a lit­tle bit more pri­vate with their pro­mo­tion as well as look­ing a lit­tle bit more inter­na­tion­al over their expo­sure.

Do you have any favorite projects in this space that haven’t nec­es­sar­i­ly gone through Indiegogo?

I think there are lots of great com­pa­nies. I think that it’s very ear­ly. I think right now there’s a lot of peo­ple that are still focused a lot on the tech. I think it will be great once there is a lot more con­sumer-fac­ing appli­ca­tion and usage.

Right now there’s still a lot of invest­ment into the soft­ware being built. I’m look­ing for­ward to the con­sumers actu­al­ly using the soft­ware with­out even notic­ing it.

I’m also look­ing for­ward to the point where entre­pre­neurs stop using blockchain as a buzz­word and just real­ize it’s just a tech­nol­o­gy.

Exact­ly. It’s like say­ing, “Oh I’m using the Inter­net.”

Ama­zon is cool, Face­book is cool, YouTube is cool; the Inter­net itself is not cool by itself.

What indus­tries are you most excit­ed to see a change in whether it’s blockchain or some com­bi­na­tion of blockchain and what­ev­er the next com­bi­na­tion it’s going to be?

That’s like ask­ing me what am I excit­ed about the Inter­net chang­ing. I think blockchain has the oppor­tu­ni­ty to change every indus­try, it’s just a mat­ter of tim­ing. Some will move faster than oth­ers.

Which ones do you think will be the first to real­ly see rapid change?

I think any­where where there’s a trans­ac­tion, which there are lots of places where there are trans­ac­tions, whether it’s Fin­tech or mar­ket­places, sup­ply chain, logis­tics, iden­ti­ty; any­where where you need to track the integri­ty of the trans­ac­tion. When you’re mov­ing hands on a dia­mond, or on your cof­fee, or your fish, or your iPhone, any­thing short of the integri­ty of it is what it is. I think there’s a lot of oppor­tu­ni­ties across the sup­ply chain, across Fin­tech, ensur­ing that trans­ac­tions hap­pen on time in the right place, it’s not fraud­u­lent. Com­pli­ance, iden­ti­ty.

You once said that every project deserves the oppor­tu­ni­ty to fail, which I think is a very keen insight that can be applied to the ICO world. Not nec­es­sar­i­ly a ques­tion, just ram­bling on my end. But good quote, I love it.

Thank you.

How can some­one read­ing this help Indiegogo’s ven­tur­ing into the ICO world suc­ceed?

We’re a clas­sic mar­ket­place, so either of the two sides. If there’s peo­ple in your audi­ence who are look­ing to raise mon­ey and want to explore how best to nav­i­gate all the reg­u­la­tions, and how best to turn them and the pub­lic audi­ence into investors, we’re hap­py to work with them.

We’re one of the only plat­forms out there that has 10 years of expe­ri­ence, has a bro­ker deal­er in-house, and has real­ly strong rela­tion­ships with reg­u­la­tors with a proven track record. So we’re hap­py to work on the issuer side. We’re also very keen to con­tin­ue to build up our investor book. If peo­ple are inter­est­ed in learn­ing more about our oppor­tu­ni­ties of what they can invest in, they can obvi­ous­ly go onto the site.

If peo­ple want, they can even email me, Slava@Indiegogo on either side of the mar­ket­place, and I’ll make sure to talk to them.

Well all right, Sla­va. I appre­ci­ate your time. Have a great rest of your day.

You too.

_____

Inter­view con­duct­ed by Alex Moskov and Steven Buchko.

Arti­cle First Appeared on Coin­cen­tral

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