Have you ever wondered what it takes to revolutionize an industry and make a significant impact on society? In this thought-provoking episode of The Angel Next Door Podcast, we explore the world of entrepreneurship and the potential of innovative technologies to transform the way we invest and participate in private markets. Our guest, Kendrick Nguyen, is the founder of Republic.com, an equity crowdfunding platform that aims to democratize access to private market investing. With a background in law and traditional finance, Kendrick's journey into the world of tech entrepreneurship was sparked by changes in securities laws related to crowdfunding in the United States. In this episode, Kendrick shares his insights on the evolution of equity crowdfunding and its potential to encompass diverse investment options beyond tech companies. He discusses the challenges faced by Republic during its early days, competing with established platforms, and the importance of building a strong company-customer relationship. Kendrick and Marcia also discuss the transparency and communication between companies and investors on the Republic platform, emphasizing the wealth of information available for assessment. Additionally, he explores the potential of blockchain technology in fractionalizing assets, lowering participation costs, and providing an effective tool for educating new investors. This episode is a must-listen for anyone interested in the future of investing, the impact of technology on private markets, and the inspiring journey of a visionary entrepreneur who is reshaping the landscape of accessibility and opportunity.
Have you ever wondered what it takes to revolutionize an industry and make a significant impact on society? In this thought-provoking episode of The Angel Next Door Podcast, we explore the world of entrepreneurship and the potential of innovative technologies to transform the way we invest and participate in private markets.
Our guest, Kendrick Nguyen, is the founder of Republic.com, an equity crowdfunding platform that aims to democratize access to private market investing. With a background in law and traditional finance, Kendrick's journey into the world of tech entrepreneurship was sparked by changes in securities laws related to crowdfunding in the United States.
In this episode, Kendrick shares his insights on the evolution of equity crowdfunding and its potential to encompass diverse investment options beyond tech companies. He discusses the challenges faced by Republic during its early days, competing with established platforms, and the importance of building a strong company-customer relationship. Kendrick and Marcia also discuss the transparency and communication between companies and investors on the Republic platform, emphasizing the wealth of information available for assessment. Additionally, he explores the potential of blockchain technology in fractionalizing assets, lowering participation costs, and providing an effective tool for educating new investors. This episode is a must-listen for anyone interested in the future of investing, the impact of technology on private markets, and the inspiring journey of a visionary entrepreneur who is reshaping the landscape of accessibility and opportunity.
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Marcia Dawood
Kendrick, welcome to the show.
Kendrick Nguyen
Thank you for having me. Marsha, a pleasure being here.
Marcia Dawood
Yeah, I am super excited to have you come and talk all about thingsrepublic.com dot. We have had several entrepreneurs come on the show who have raised money on equity crowdfunding platforms, including Republic. And I'm a huge fan, of course, because I think that the site is just super easy to navigate, and I love how easy it is for any new investor to be able to dip their toe in the water and kind of get started as they go on their investing journey. So maybe let's start by having you tell us a little bit about your background and how you ended up founding Republic.com dot.
Kendrick Nguyen
Thank you so much for the kind feedback and to dive into it right away. I can't believe, but it's been almost exactly eight years since we launched Republic.com. obviously it took a few months before that to build, but I have a rather untraditional background as a tech founder. I started out as a lawyer, born in Vietnam, grew up in California. Like many immigrant parents, my parents really wanted me to pick a career that they understood that they think would provide some stability in income. Right? And so lawyer, engineer, doctor, teachers, anything that they understood. So being a tech founder wasn't on the table and went to law school, became an attorney, worked in traditional finance and Rio route the financial recession. Shortly after that, I went back to academia for a short stint.
Kendrick Nguyen
And during that time, the regulatory framework within the United States on how private companies could engage with the retail public drastically changed the whole body of law. That regulation, crowdfunding is a component of that. And so I joined angelists, which benefited from the same laws, but for millionaires as accredited investor only. And when the SEC formalized the body of laws, ReGCF and Reg A, to allow for anyone to invest a little bit of money into private companies. That's when we left and launched, when I left Angela's and launched republic.
Marcia Dawood
Interesting. And the timing, right around that May 2016, when the SEC finally said, okay, we got everything situated from the Jobs act of 2012, and now we're going to let this go. But there really weren't a lot of platforms around at that time that were ready to be able to take investors. I think that's been one of the.
Kendrick Nguyen
Big challenges right at the outset, that is on May 16, the day that the law became active, I believe there were only two or three in Republic wasn't one of them. Because wefunder, startengine and seed invest have been longstanding platform many years in existence and have preparing for that day. I only left Angellist in April of 2016, so only had a month, 30 days before that day. So we didn't launch until late July 2016, which is eight years ago.
Marcia Dawood
So tell us how Republic got started and really what were some of the first visions for the platform and then its evolved into so much. Now I feel like theres so many neat things that you can look at and see, especially if youre a new investor.
Kendrick Nguyen
Im very fortunate in that my first job in tech was at Angelis. And many know of angel is to be that platform whereby people of wealth come to put 10,000, $20,000 or more into hot tech deal. But you gotta be accredited, proverbial as a millionaire, so to speak. And that was from 2013 to 2016. And that model in Angelist in particular is known for being a very impactful contributor to the venture ecosystem because it opens up, it allows founders to engage an untapped, previously untapped pocket of capital. The doctors, the lawyers who have a couple million dollars in savings, but up until now had not been able to invest into tech. But the learning through that experience was tremendous. And getting to know and work with naval and the early team.
Kendrick Nguyen
But I've always, having gotten a taste of that, seeing how dentists can now invest in tech immediately, in the back of my mind, I'm like, what about the 90% of the Bay Area? What about people like my parents and my siblings who immigrated there, but not of wealth, but they would love to put $50, $100 into technologies that they surrounded by so firm that root at angel is that gave rise to the passion to see a financial market, the private market in particular, they got to be much more accessible to everyone, rather than just the tiny pockets at the top.
Marcia Dawood
Absolutely. Yeah. We talk about it on this podcast, quite a bit about how anyone really now who has, I always caveat with who has an Internet connection and maybe a bank account, you need that too, or a credit card that they can be an investor. And over the years, as an angel investor, I would talk to people and they would say, oh, angel investing, it sounds really cool. And you get to see all these cool companies and talk to these entrepreneurs, and it's amazing. I can't do that, right, because it has to be just for the rich and well connected. And now this is opening up a whole new avenue. And to me, it's the way that people get started, it's the way that they find out about it, the way they learn.
Marcia Dawood
Is that pretty much how things have evolved at Republic.
Kendrick Nguyen
I agree completely. And I think it's just at the beginning, I think there's still a lot of not, if not misunderstanding assumptions about, quote unquote crowdfunding or equity crowdfunding. First of all, a lot of people still think that crowdfunding, we think of Indiegogo and Kickstarter, but most have gotten beyond that. But most people now, when the work equity crowdfunding or retail investing comes to mind, they think it's about only about investing into binary venture style tech companies that are illiquid only. There's a, of course, that's what we started out with. That's what the entire industry started out with, because this was pushed by the venture association and angel is and other market participants. The push to get Congress and the Obama administration to see this through was done initiated by the venture industry. So naturally, the first type of deals, and that's even up until now, it's been predominantly around tech companies.
Kendrick Nguyen
But it's what about revenue sharing? What about fixed income products? What about factionalized real estate? Can you imagine if my sister has a really successful vietnamese restaurant in Houston or in Charleston or Miami? That model is never going to be $100 million business, business. But let's say she's generating reliably half a million dollars in profit every single month in a really successful chain, and she wants to raise from her customers and send back a percentage of that profit on a monthly, quarterly basis. It's an entirely different form of investing and investor psychology. So in the same way that the diversity of choices and our relationship with things that we buy, I very much believe when it comes to ownership and investing, it will be comparable in choices and range. And that's why I think we still, in the early days of this wonderful transformation of the private markets.
Marcia Dawood
I couldn't agree more. And I love how revenue based financing, crowdfunding, the debt crowdfunding even, has started to come to the forefront a little bit more, we're starting to hear about it a little bit. But let's address one small, maybe large elephant in the room, which is that some traditional angel investors are not big fans of crowdfunding, which you kind of alluded to a minute ago. So why is that? And what are some of the things that have evolved and changed that would put people's mind at ease?
Kendrick Nguyen
It would be an easy answer for me to say that anything new, anything that disrupts status quo is going to get some pushback. And of course, there's some truth to that. Right? And the same was the case where Angelis that in the early days, I still remember the syndication model back in 20 13, 20 14, 20 15. I mean, there were visa who actively advise against it, many. And then fast forward, it just became now certainly no longer a negative signal at all. And for, I think the lack of understanding and the concerns, because when people don't understand something, they tend to have general concerns. And those concerns coming from lawyers, coming from investor, can create all kinds of misdirected or unintended consequences. When you take in 1000 or 10,000 customers as investors, there are longstanding assumption about the number of investors on the cap table, the relationship with those investors voting and whatever else.
Kendrick Nguyen
Now all of that, of course, are well addressed. And by now, now eight years out, is no longer a new thing. But it's still new to most attorneys. It's still new to most venture capitalists. They know that it's changing, but they don't know the details of it. So a lack of understanding oftentimes is misconstrued as concerns by founders, and that complicates the whole thing. But Marcia, how can it be a bad signal if you building a hardware product or a retail platform with services, and your services and products are so good that your customers are willing to part way with $100 or $300 not getting anything back? Just to say that I believe in this business and I want to be to ride this for the long term, how can that possibly be negative? I mean, that is the ultimate signal of a strong, committed company and customer relationship, isn't it? So I would put much of any of the so called concerns around it, or the negative optics is truly still the evolving understanding, but a lack of understanding around how this is being done. But by now, it's a turnkey solution.
Marcia Dawood
So you did mention a couple of things, like having too many people on the cap table has been a concern. The actual structure of the entity that's created, I guess, or however the money is put into the company through a safe note. All of those things, I think those are some of the things I've commonly heard, that what if there's an investor out of the hundreds of investors that have put in money, that it turns around and sues the company? So have. I mean, I'm sure that things have come up in the last eight years. So what are some of your thoughts on the one off?
Kendrick Nguyen
Yes. So, first and foremost, if a company or a founder does not want to deal with investor, that is fear. They want to take in the capital, whether it's an institutional investor or a retail investor. If you take in money but you really never want to deal with a VC, you don't want to get a phone call from them, but you feel like you must take VC see money. Okay, by all means don't take in money from your customer because you were taking on more investors. But if you most founders that you look at engagement with customer or even not yet customer, people who care about your company with a an excitement that is I can turn these a random person on the street into a potential customer and turn a customer into a repeat customer. And if you passionate, you don't need to have a perfect answer. But if you care about that process, then the process is exactly the same.
Kendrick Nguyen
You just have that much more engaged customer. The fear is not any less rational than saying that I don't want more customer because if someone buys my product, they're going to turn around and have a lawsuit. Yes, if they buy your product, they technically have a legal claim if they're very unhappy. So very much in that same way. But I do think that the entire process and the different ways, it's not a one size fit all but different ways to explain that someone who invests $20 you can structure in a way with limited information, right. Or more information, right. You can structure the entire cohort of retail investor into an SPV or a nominee or a save. So I don't want to go in depth into the legal nuances, risk me being my Boringen lawyer itself, but I can give the assurance that eight years out, I'm not aware of a single retail investor suing any of our by now 2500 companies in the Republic portfolio.
Kendrick Nguyen
And similar with angel is. So I feel pretty confident in saying that it's well managed enough that additional legal risk is not a concern that comes to mind for me as a founder or as the CEO of public.
Marcia Dawood
Yeah, that's a great way to put it. The other thing that I think the SEC did a nice job with is some of the guidelines that you as the platform were given about how communication happens. And I feel like it's very transparent on Republic. We'll just use Republic as an example. But just being able to see the communication, how questions are answered by the CEO's who are doing the fundraising. They can't have sidebar conversations with people without everyone seeing that information. And I think the gold sometimes of what you really want to know about a company you may be investing in is in that communication between the CEO and the people who are asking questions. Right.
Kendrick Nguyen
I agree entirely. I think that in fact, if there's any criticism I have for the current regulatory framework around it is that I think it is probably more. It requires even more disclosure than what we see in the UK, in Europe, that requests information that may not even be applicable to very early stage companies. But indeed, in addition to financial description update on an annual basis, the forum that communications between the company and a investor got to be reposted on it. The law is intended to provide a wealth of information for investors to assess. But you know what's interesting? We track how long an investor spend on the republic website before making an investment. Let me just pick a prior year because I don't have up to date information. It may have changed quite a bit because we have pushed through a lot of initiative to encourage users, prospective investors, to learn more.
Kendrick Nguyen
But it used to be that they would spend less than 1 minute on average on a deal page before making an investment. I mean, that is barely enough to just scan through the big font wording and headlines, not to read anything in depth. But that is so understanding that psychology we as a firm go, and as any firm should, and would go above what is required and try to understand and try to be a better partner in an evolving industry. Because I got to assume that many of those who make such a quick decision, maybe eight out of ten, don't actually have such deep expertise and read so fast and maybe making these decisions based on certain other signals. So we want to know what signals and are they correct. So it's a constant learning process. And that's another area that I have no doubt tomorrow will be better than today at Republic and for the industry at lush.
Marcia Dawood
That is so interesting. Let's talk about user interface for a minute, because that I know has been a problem, just because this was, this is relatively new. We're in still the very early days, right? So if somebody comes on to Republic and wants to, let's say, search for helping a cause or doing something like that, is that something that they can find, or how would they go about like looking for a something that they cared about and wanted to invest in?
Kendrick Nguyen
So we definitely are not a platform for nonprofits, but we very much believe in the business world of doing good and doing well, of building intentional capitalism. So I want to, because we do get questions from nonprofits asking or investors saying that candidate just donate a charitable. But in the business school, and that's how I do the same thing, which is whether I buy a fast food meal, I do mentally trying to remember, is this a restaurant that recently had headline news that don't align with my value. So of course when people make an investment, whether it's in climate sustainability, it may be in AI, it may be in asian founders or women founders, it may be, let's say the midwest only. We have those who only want to back texan companies with headquarters and team base out of there. And so these are all the different ways that we very much believe in. What drives investors, retail investor, into making an investment? What connects them to the company side by side with financial and potential return. We think that particularly for first time investor, that connection is critical and enabling them to find companies that they can relate to and maybe because they like the space you have pre existing know hows and insight and not just randomly see a headline that has Kim Kardashian has purchased this product must be amazing.
Kendrick Nguyen
Im going to put all of my money into it. So long winded way of saying that not only that, we do enable people to search by keywords and otherwise we go to Tagore companies that fit the main types so that it can be more easily searched and segmented by visitors to the republic platform.
Marcia Dawood
Nice. And Republic does have a lot more options than simply equity crowdfunding. Can you talk a little bit more about all of the other things that Republic has made available to investors?
Kendrick Nguyen
Yes, if I may in answering that question, draw a bit of a distinction in how we view we as a platform and within the market compared to perhaps how other firms may look at it. We look at Republic in the market as building, at the beginning of building a infrastructure that allows the retail public to understand and begin to participate in the private markets. We don't purport to say that we already run such an amazing, robust, tech only platform and we have every hot deals in the space. We do not. We don't purport to say that we are able to have all of the amazing faux restaurants and all the restaurant and revenue sharing we are in the process of. We are creating and introducing in the early days of each of these sub sectors. Another way of saying that is that we are an infrastructure firm and a lot of the verticals and the deals that we are onboarding, these investors and users are public in a way supporting the very first iteration of a larger private market rather than just a platform that does acts. Another way of looking at it is that in the early days of Amazon they are also ideating on, in addition to selling books, how to onboard coffee, grocery movies.
Kendrick Nguyen
Now all of these things seem quite mature, but I imagine in the mid nineties and the late nineties, you probably only see a dozen books and maybe two, three brands of coffee where the industry are still at that stage. So because we don't plan to just sell books, we've been ideating and introducing music, financing, sports, financing, documentary, factional real estate in the Middle east, fixed income. And the range runs the gamut of different things that people care about. To fine tune the legal product, to understand user base, and then to then curate that volume. So the diversity in range and choices is what I think we are known for, those who use as well, and they know that each of these verticals will grow in due time, in volume. But not all of them have 80 different deals of the same type just yet.
Marcia Dawood
Oh, and I love how you explained that in my book. I actually talk about, remember back in the eighties when people tried to buy a stock, how difficult it was to buy a public company stock. And nowadays we can go on e trade and in lightning seconds, we can buy and sell in the same second, almost. It's crazy how fast, right? And what you're saying is so true. It's going to take time, it's going to take iteration and. But it's like a whole new world out there. And to be able to have retail investors, really anyone, be able to partake in the private markets is just something that eight years ago we never even thought was possible.
Kendrick Nguyen
Trey and Marcia, can you imagine even buying things, commerce, if we take it back to the early nineties or before, whether a parent or a teenager, the number of things and the type of things that a family would purchase for fun and for need based there. I mean, there's no question in my mind. I think other people, and maybe you have the insight if at the time you were even at the age where you could be purchasing these things just yet. But I imagine I talked to my parents and yes, you buy the things you need and then you go to whatever the mall, your hometown that has it, assuming that you live in a city that has a mall, you can't just buy something that was produced in China for $3. And the next day it shows up and you're like, oh, as it turns out, plastic flip flops in the shape of a frog is not something that I care to buy again, but that range. I'm using an extreme example here. My friends in my Dubai, things like that. But what the Internet has enabled has added to commerce and turned it into e commerce, is enabling anyone, anywhere, to be a purchaser of globally produced products, products from any corner of the world.
Kendrick Nguyen
And it amplify commerce tremendously. I think what legal changes, and we may touch or may not defer to you on blockchain as a technology, will bring the same level of diversity and change, changes and choices to the retail public globally. I think in the next decades, plus two.
Marcia Dawood
Yeah, please expand on your thoughts on that blockchain.
Kendrick Nguyen
I think maybe this time compared to last year, it is less so. But there's no question that the past couple years, and even for many now, crypto is like FTX fraud meme coins nothing underneath may or may not be true about the meme coins and whatnot, but this is a technology that enable one to fractionalize any asset that is breaking it down to tiny pieces. It enable one to transact very fast and very cheaply, and it enable you to authenticate and change that authentication to a different individual in a way that can be validated at very low cost. It means a few things that I think will be transformative for the entire financial market, specifically the private markets, which is just take the Mona Lisa. Very few people in the world can afford to pay $100 million to buy a piece of art like that. If all of a sudden, if you fractionalize it down digitally represented into a million pieces over certain, you have almost everyone in the United States be able to spend $10 and buy a factional interest of the Mona Lisa. So the ability to bring people into a new industry and asset class by lowering the amount of participation and the cost of transaction necessarily means more capital coming into the industry. But Marsha, more than anything else, it means you can have what in my opinion is the most effective tool of educating, of onboarding someone to something new, in this case investing.
Kendrick Nguyen
There is no better way to learn for anyone in the US to put a dollar or two into something that you think this may be a good investment. I'm going to put $2 and if it doesn't work, learn from it. It is not a good way to expect people to spend $20,000 by becoming a sophisticated investor at the outset. So in the US, this technology, literally without it, Marsha, you cannot facilitate a private transaction less than $50 $20 because of the funding costs and everything. With digitized and on chain you can make dividend payments $0.20 each to a million people at an acceptable fee and we would be able to receive a dollar investment into a deal.
Marcia Dawood
Wow.
Kendrick Nguyen
It just, it takes accessibility due to lowering the cost a several magnitude degree forward. Similar to how the Internet simply makes the process of going and buying and selecting a product and getting into your home several order of magnitude more efficiently, simply.
Marcia Dawood
That's incredible. So the future for Republic could be so vast, so many things, right?
Kendrick Nguyen
Marsha? I think the future for how an average person in America look at owning things and investing in things I think would change. It will be almost as it will be so different 1012 years from now as I have nieces and nephews, they're like in elementary school and they can't imagine the world without Amazon or like movie streaming, I think is going to be that or more in the transformation and changing that reality. And for us, that's why another way of looking at Republic is that we are first and foremost, we are a web, a digital first financial firm in that we think that everything we do is with their eyes toward digitization, that is, making it more efficient with this technology. Compliant always, but implementing this technology for efficiency, not to put up another dogecoin or bitcoin or meme coin, just this technology.
Marcia Dawood
That's great. And the future is definitely bright. We have an awareness problem though, and we need more people to know about this and we need more people to realize that this is accessible to them. And just like you said, accessibility is becoming the name of the game. And I think the future is very interesting.
Kendrick Nguyen
I agree completely. And if I may use another analogy, AI, I'm sure for the Gen Z, the high school students, they think chat GPT is AI or first introduce AI when I know that AI has been a thing or a top topic since, I mean, at least the late 2000, like nearly 1520 years ago. But true mainstream adoption, where everyone knows about it, is truly only since Cha GPT right? So the technology works. It's been implemented in all different ways, and of course it's become smarter and more efficient. But I can tell you that my mother would not be able to tell you what exactly republic does. She definitely would necessarily be able to tell you what convertible note is on LLC. But she knows chat GPT, so she does. I mean, now she uses it and she talks about that chat GPT moment for our industry and I think is a what would give rise to that moment? Of course, I have my guesses and my estimates of what that would take, but there's no question on the horizon.
Kendrick Nguyen
But I don't know whether it's five months out or 15 months out.
Marcia Dawood
Right? Kendrick, thank you so much for coming on the show. This has been a fascinating conversation and I look forward to all of the amazing things that Republic will be doing.
Kendrick Nguyen
Thank you so much for having me and thank you for being such a champion for what I think is probably one of the most important technological development and industry of our generation. So thank you, Marcia.